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    Arrow Electronics, Inc.

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    Arrow Electronics Reports Second-Quarter Non-GAAP Earnings Per Share of $1.43

    July 29, 2014

    -- Margins Expand Over Prior Year --

    -- Cash Flow from Operations of $159 Million --

    ENGLEWOOD, Colo.--(BUSINESS WIRE)--Jul. 29, 2014-- Arrow Electronics, Inc. (NYSE:ARW) today reported second-quarter 2014 net income of $127.9 million, or $1.27 per share on a diluted basis, compared with net income of $89.9 million, or $.86 per share on a diluted basis in the second quarter of 2013. Excluding certain items1 in the second quarters of both 2014 and 2013, net income would have been $144.3 million, or $1.43 per share on a diluted basis, in the second quarter of 2014 compared with net income of $124.0 million, or $1.19 per share on a diluted basis, in the second quarter of 2013. Second-quarter sales of $5.68 billion increased 7 percent from sales of $5.31 billion in the prior year. Sales, as adjusted, increased 1 percent year over year.

    “We delivered strong results in the second quarter as we continued to accomplish our strategic objectives. Earnings per share of $1.43 and sales of $5.7 billion were above the midpoints of our guidance. Global components, as well as the software and services portions of enterprise computing solutions, again delivered growth. Business conditions for the hardware portion of enterprise computing solutions improved from the first quarter as we anticipated,” said Michael J. Long, chairman, president, and chief executive officer.

    Global components second-quarter sales of $3.57 billion increased 5 percent year over year. Sales in that segment, as adjusted, grew 2 percent year over year. Americas components sales increased 2 percent year over year. European components sales grew 9 percent year over year, or 3 percent as adjusted, marking the fifth consecutive quarter of year-over-year growth for the region on an as-adjusted basis. Components sales in the Asia-Pacific region increased 5 percent year over year.

    Global enterprise computing solutions second-quarter sales of $2.11 billion grew 10 percent year over year. Sales in that segment, as adjusted, declined 1 percent year over year. The Americas and Europe continued to experience growth in infrastructure, security and virtualization software product lines, offset by a decline in proprietary servers.

    “With $159 million in cash flow from operations in the second 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 $50 million to shareholders through our stock repurchase program.”

    SIX-MONTH RESULTS

    Arrow’s net income for the first six months of 2014 was $235.0 million, or $2.33 per share on a diluted basis, compared with net income of $167.8 million, or $1.58 per share on a diluted basis in the first six months of 2013. Excluding certain items1 in both the first six months of 2014 and 2013, net income would have been $268.3 million, or $2.66 per share on a diluted basis, in the first six months of 2014 compared with net income of $227.1 million, or $2.14 per share on a diluted basis, in the first six months of 2013. In the first six months of 2014, sales of $10.76 billion increased 6 percent from sales of $10.16 billion in the first six months of 2013.

    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 third quarter, we would expect market conditions for our global components and enterprise computing solutions businesses to remain consistent with the second quarter. We believe that total sales will be between $5.25 billion and $5.65 billion, with global components sales between $3.55 billion and $3.75 billion and global enterprise computing solutions sales between $1.7 billion and $1.9 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 $1.26 to $1.38 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 100 million,” 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 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 Form 10-Q for the quarterly period ended June 28, 2014, as well as 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), 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.

       

    ARROW ELECTRONICS, INC.

    (In thousands except per share data)

    (Unaudited)

    NON-GAAP SALES RECONCILIATION

     

    Quarter Ended

    June 28, 2014     June 29, 2013   % Change
         
    Consolidated sales, as reported $ 5,676,539 $ 5,306,085 7.0%

    Impact of changes in foreign currencies

    		- 62,739
    Impact of acquisitions   -   263,707
    Consolidated sales, as adjusted $ 5,676,539 $ 5,632,531 .8%

     
     
    Global components sales, as reported $ 3,569,344 $ 3,398,690 5.0%
    Impact of changes in foreign currencies - 41,407
    Impact of acquisitions   -   55,169
    Global components sales, as adjusted $ 3,569,344 $ 3,495,266 2.1%
     
    Europe components sales, as reported $ 984,927 $ 901,748 9.2%
    Impact of changes in foreign currencies - 43,290
    Impact of acquisitions   -   8,443
    Europe components sales, as adjusted $ 984,927 $ 953,481 3.3%
     
    Global ECS sales, as reported $ 2,107,195 $ 1,907,395 10.5%
    Impact of changes in foreign currencies - 21,332
    Impact of acquisitions   -   208,538
    Global ECS sales, as adjusted $ 2,107,195   $ 2,137,265 (1.4)%
       

     

     

    Six Months Ended

    June 28, 2014 June 29, 2013 % Change
     
    Consolidated sales, as reported $ 10,758,579 $ 10,155,714 5.9%
    Impact of changes in foreign currencies - 107,836
    Impact of acquisitions   -   521,972
    Consolidated sales, as adjusted $ 10,758,579 $ 10,785,522

    (.3)%

     
     
    Global components sales, as reported $ 6,990,525 $ 6,591,270 6.1%
    Impact of changes in foreign currencies - 70,314
    Impact of acquisitions   -   111,744
    Global components sales, as adjusted $ 6,990,525 $ 6,773,328 3.2%
     
    Europe components sales, as reported $ 1,973,860 $ 1,788,384 10.4%
    Impact of changes in foreign currencies - 75,687
    Impact of acquisitions   -   17,039
    Europe components sales, as adjusted $ 1,973,860 $ 1,881,110 4.9%
     
    Global ECS sales, as reported $ 3,768,054 $ 3,564,444 5.7%
    Impact of changes in foreign currencies - 37,522
    Impact of acquisitions   -   410,228
    Global ECS sales, as adjusted $ 3,768,054   $ 4,012,194 (6.1)%
     
       

    ARROW ELECTRONICS, INC.

    (In thousands except per share data)

    (Unaudited)

    NON-GAAP EARNINGS RECONCILIATION

     
     
    Quarter Ended Six Months Ended
    June 28, 2014   June 29, 2013 June 28, 2014   June 29, 2013
           
    Operating income, as reported $ 208,269 $ 155,875 $ 386,009 $ 293,427
    Intangible assets amortization expense 10,870 8,869 21,817 17,826
    Restructuring, integration, and other charges   9,632   30,224   21,246   51,834
    Operating income, as adjusted $ 228,771 $ 194,968 $ 429,072 $ 363,087
     
    Net income attributable to shareholders, as reported $ 127,884 $ 89,935 $ 235,004 $ 167,810
    Intangible assets amortization expense 8,867 7,029 17,774 14,145
    Restructuring, integration, and other charges 7,526 20,688 15,546 36,183
    Loss on prepayment of debt - - - 2,627
    Settlement of tax matters
    Income taxes - 5,362 - 5,362
    Interest (net of taxes)   -   939   -   939
    Net income attributable to shareholders, as adjusted $ 144,277 $ 123,953 $ 268,324 $ 227,066
     
    Net income per basic share, as reported $ 1.29 $ .87 $ 2.36 $ 1.61
    Intangible assets amortization expense .09 .07 .18 .14
    Restructuring, integration, and other charges .08 .20 .16 .35
    Loss on prepayment of debt - - - .03
    Settlement of tax matters
    Income taxes - .05 - .05
    Interest (net of taxes)   -   .01   -   .01
    Net income per basic share, as adjusted $ 1.45 $ 1.20 $ 2.69 $ 2.17
     
    Net income per diluted share, as reported $ 1.27 $ .86 $ 2.33 $ 1.58
    Intangible assets amortization expense .09 .07 .18 .13
    Restructuring, integration, and other charges .07 .20 .15 .34
    Loss on prepayment of debt - - - .02
    Settlement of tax matters
    Income taxes - .05 - .05
    Interest (net of taxes)   -   .01   -   .01
    Net income per diluted share, as adjusted $ 1.43 $ 1.19 $ 2.66 $ 2.14
     
     

    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.

    (In thousands except per share data)

    (Unaudited)

    SEGMENT INFORMATION

     
     
    Quarter Ended

    Six Months Ended

    June 28, 2014   June 29, 2013 June 28, 2014 June 29, 2013
    Sales:  
    Global components $ 3,569,344 $ 3,398,690 $ 6,990,525 $ 6,591,270
    Global ECS   2,107,195   1,907,395   3,768,054   3,564,444
    Consolidated $ 5,676,539 $ 5,306,085 $ 10,758,579 $ 10,155,714
     
    Operating income (loss):
    Global components $ 159,642 $ 140,158 $ 320,788 $ 268,438
    Global ECS 95,990 80,722 160,148 142,313
    Corporate (a)   (47,363 )   (65,005 )   (94,927 )   (117,324 )
    Consolidated $ 208,269 $ 155,875 $ 386,009 $ 293,427
     
        (a)   Includes restructuring, integration, and other charges of $9.6 million and $21.2 million for the second quarter and first six months of 2014 and $30.2 million and $51.8 million for the second quarter and first six months of 2013, respectively.
     
           

    NON-GAAP SEGMENT RECONCILIATION

     
    Quarter Ended

    Six Months Ended

    June 28, 2014     June 29, 2013 June 28, 2014   June 29, 2013
    Global components operating income, as reported $ 159,642 $ 140,158 $ 320,788   $ 268,438
    Intangible assets amortization expense   5,458   4,940   11,006   9,955
    Global components operating income, as adjusted $ 165,100 $ 145,098 $ 331,794 $ 278,393
     
    Global ECS operating income, as reported $ 95,990 $ 80,722 $ 160,148 $ 142,313
    Intangible assets amortization expense   5,412   3,929   10,811   7,871
    Global ECS operating income, as adjusted $ 101,402 $ 84,651 $ 170,959 $ 150,184
     
         

    ARROW ELECTRONICS, INC.

    CONSOLIDATED STATEMENTS OF OPERATIONS

    (In thousands except per share data)

    (Unaudited)

     
    Quarter Ended Six Months Ended
    June 28, 2014   June 29, 2013 June 28, 2014   June 29, 2013
       
     
    Sales $ 5,676,539 $ 5,306,085 $ 10,758,579 $ 10,155,714
    Costs and expenses:
    Cost of sales 4,929,018 4,616,513 9,307,230 8,824,070
    Selling, general, and administrative expenses 489,908 470,874 967,811 922,279
    Depreciation and amortization 39,712 32,599 76,283 64,104
    Restructuring, integration, and other charges   9,632   30,224   21,246   51,834
      5,468,270   5,150,210   10,372,570   9,862,287
    Operating income 208,269 155,875 386,009 293,427
    Equity in earnings of affiliated companies 1,181 1,360 2,598 3,343
    Loss on prepayment of debt - - - 4,277
    Interest and other financing expense, net   28,920   30,199   58,557   59,729
    Income before income taxes 180,530 127,036 330,050 232,764
    Provision for income taxes   52,470   37,000   94,798   64,770
    Consolidated net income 128,060 90,036 235,252 167,994
    Noncontrolling interests   176   101   248   184
    Net income attributable to shareholders $ 127,884 $ 89,935 $ 235,004 $ 167,810
    Net income per share:
    Basic $ 1.29 $ .87 $ 2.36 $ 1.61
    Diluted

    $

    		1.27 $ .86 $ 2.33 $ 1.58
    Weighted-average shares outstanding:
    Basic 99,449 103,225 99,695 104,542
    Diluted 100,562 104,024 100,980 105,892
     
       

    ARROW ELECTRONICS, INC.

    CONSOLIDATED BALANCE SHEETS

    (In thousands except par value)

     
    June 28, 2014   December 31, 2013
    (Unaudited)
    ASSETS
    Current assets:

    Cash and cash equivalents

    		$ 308,936 $ 390,602

    Accounts receivable, net

    		5,137,798 5,769,759
    Inventories 2,295,216 2,167,287
    Other current assets   280,436   258,122
    Total current assets   8,022,386   8,585,770
    Property, plant, and equipment, at cost:
    Land 24,023 24,051
    Buildings and improvements 144,780 142,583
    Machinery and equipment   1,163,463   1,113,987
    1,332,266 1,280,621
    Less: Accumulated depreciation and amortization   (690,835 )   (648,232 )
    Property, plant, and equipment, net   641,431   632,389
    Investments in affiliated companies 68,410 67,229
    Intangible assets, net 419,282 426,069
    Cost in excess of net assets of companies acquired 2,081,930 2,039,293
    Other assets   326,154   310,133
    Total assets $ 11,559,593 $ 12,060,883
    LIABILITIES AND EQUITY
    Current liabilities:
    Accounts payable $ 4,074,627 $ 4,503,200
    Accrued expenses 679,454 774,868
    Short-term borrowings, including current portion of

    long-term debt

    		  17,338   23,878
    Total current liabilities   4,771,419   5,301,946
     
    Long-term debt 2,103,960 2,226,132
    Other liabilities 376,069 347,977
    Equity:
    Shareholders' equity:
    Common stock, par value $1:
    Authorized – 160,000 shares in both 2014 and 2013
    Issued – 125,424 shares in both 2014 and 2013 125,424 125,424
    Capital in excess of par value 1,065,657 1,071,075
    Treasury stock (26,621 and 25,488 shares in 2014 and

    2013, respectively), at cost

    		(1,009,351 ) (920,528 )
    Retained earnings 3,913,713 3,678,709
    Accumulated other comprehensive income   207,858   225,552
    Total shareholders' equity 4,303,301 4,180,232
    Noncontrolling interests   4,844   4,596
    Total equity   4,308,145   4,184,828
    Total liabilities and equity $ 11,559,593 $ 12,060,883
     
       

    ARROW ELECTRONICS, INC.

    CONSOLIDATED STATEMENTS OF CASH FLOWS

    (In thousands)

    (Unaudited)

     
    Quarter Ended
    June 28, 2014     June 29, 2013
    Cash flows from operating activities:
    Consolidated net income $ 128,060 $ 90,036
    Adjustments to reconcile consolidated net income to net cash provided by operations:
    Depreciation and amortization 39,712 32,599
    Amortization of stock-based compensation 10,371 6,799
    Equity in earnings of affiliated companies (1,181 ) (1,360 )
    Deferred income taxes 5,338 (36 )
    Restructuring, integration, and other charges 7,526 20,688
    Excess tax benefits from stock-based compensation arrangements (386 ) (142 )
    Other (120 ) 654
    Change in assets and liabilities, net of effects of acquired businesses:
    Accounts receivable (306,793 ) (227,817 )
    Inventories (202,670 ) (34,489 )
    Accounts payable 449,225 343,706
    Accrued expenses 19,289 (415 )
    Other assets and liabilities   11,064   103,694
    Net cash provided by operating activities   159,435   333,917
    Cash flows from investing activities:
    Acquisition of property, plant, and equipment   (29,160 )   (26,810 )
    Net cash used for investing activities   (29,160 )   (26,810 )
    Cash flows from financing activities:
    Change in short-term and other borrowings (2,566 ) (13,397 )
    Repayment of long-term bank borrowings, net (35,000 ) (129,600 )
    Proceeds from exercise of stock options 2,179 1,695
    Excess tax benefits from stock-based compensation arrangements 386 142
    Repurchases of common stock   (50,310 )   (198,806 )
    Net cash used for financing activities   (85,311 )   (339,966 )
    Effect of exchange rate changes on cash   5,689   14,599
    Net increase (decrease) in cash and cash equivalents 50,653 (18,260 )
    Cash and cash equivalents at beginning of period   258,283   364,151
    Cash and cash equivalents at end of period $ 308,936 $ 345,891
     
     

    ARROW ELECTRONICS, INC.

    CONSOLIDATED STATEMENTS OF CASH FLOWS

    (In thousands)

    (Unaudited)

     

    Six Months Ended

    June 28, 2014     June 29, 2013
    Cash flows from operating activities:
    Consolidated net income $ 235,252 $ 167,994
    Adjustments to reconcile consolidated net income to net cash provided by operations:
    Depreciation and amortization 76,283 64,104
    Amortization of stock-based compensation 20,167 12,782
    Equity in earnings of affiliated companies (2,598 ) (3,343 )
    Deferred income taxes 15,979 19,548
    Restructuring, integration, and other charges 15,546 36,183
    Excess tax benefits from stock-based compensation arrangements (6,248 ) (6,617 )
    Other 1,372 2,250
    Change in assets and liabilities, net of effects of acquired businesses:
    Accounts receivable 597,926 161,163
    Inventories (130,669 ) (59,866 )
    Accounts payable (410,063 ) (124,091 )
    Accrued expenses (107,937 ) (173,852 )
    Other assets and liabilities   (21,538 )   58,258
    Net cash provided by operating activities   283,472   154,513
    Cash flows from investing activities:
    Cash consideration paid for acquired businesses (60,224 ) (9,382 )
    Acquisition of property, plant, and equipment (62,003 ) (53,561 )
    Other   -   (3,000 )
    Net cash used for investing activities   (122,227 )   (65,943 )
    Cash flows from financing activities:
    Change in short-term and other borrowings (9,904 ) (27,739 )
    Repayment of long-term bank borrowings, net (120,000 ) (85,300 )
    Net proceeds from note offering - 591,156
    Redemption of senior notes - (338,184 )
    Proceeds from exercise of stock options 18,321 12,295
    Excess tax benefits from stock-based compensation arrangements 6,248 6,617
    Repurchases of common stock   (138,811 )   (312,310 )
    Net cash used for financing activities   (244,146 )   (153,465 )
    Effect of exchange rate changes on cash   1,235   1,102
    Net decrease in cash and cash equivalents (81,666 )

    (63,793

    )

    Cash and cash equivalents at beginning of period   390,602   409,684
    Cash and cash equivalents at end of period $ 308,936 $ 345,891
     

    Source: Arrow Electronics, Inc.

    Arrow Electronics, Inc.
    Steven O’Brien, 303-824-4544
    Director, Investor Relations
    or
    Paul J. Reilly, 631-847-1872
    Executive Vice President, Finance and Operations, &
    Chief Financial Officer
    or
    Media Contact:
    John Hourigan, 303-824-4586
    Vice President, Global Communications

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