Arrow Electronics, Inc.
-- Record Fourth-Quarter and Full-Year Sales, Gross Profit, Operating Income, and Earnings Per Share --
-- Fourth-Quarter Earnings Per Share of $5.26; Non-GAAP Earnings Per Share of $5.37 --
CENTENNIAL, Colo.--(BUSINESS WIRE)-- Arrow Electronics, Inc. (NYSE:ARW) today reported fourth-quarter 2021 sales of $9.02 billion, an increase of 7 percent from sales of $8.45 billion in the fourth quarter of 2020. Fourth-quarter 2021 net income was $371 million, or $5.26 per share on a diluted basis, compared with net income of $236 million, or $3.08 per share on a diluted basis, in the fourth quarter of 2020.
Fourth-quarter 2021 non-GAAP1 sales increased 8 percent from 2020. Non-GAAP net income1 was $379 million, or $5.37 per share on a diluted basis, in the fourth quarter of 2021, compared with non-GAAP net income of $243 million, or $3.17 per share on a diluted basis, in the fourth quarter of 2020. In the fourth quarter of 2021, changes in foreign currencies had negative impacts on growth of approximately $73 million on sales and $.07 on earnings per share on a diluted basis compared to the fourth quarter of 2020.
“Our fourth quarter and full year results demonstrate how we are leveraging Arrow’s extensive experience, deep industry knowledge, and expertise in design, engineering, and supply chain to help customers manage through the current market challenges. Arrow is uniquely positioned in the market and customers new and old are increasingly turning to our team, enabling us to build on our relationships and do even more business,” said Michael J. Long, chairman, president, and chief executive officer. “Our organization has worked hard to capture these tremendous opportunities and deliver full-year earnings per share that were more than 75 percent higher than our previous record year.”
Global components fourth-quarter sales of $6.68 billion increased 13 percent year over year. Non-GAAP sales increased 14 percent year over year. Americas components sales increased 32 percent year over year. Asia-Pacific components sales were flat year over year. Europe components sales increased 17 percent year over year. Non-GAAP sales in the region increased 21 percent year over year. Global components fourth-quarter operating income was $430 million. Fourth-quarter non-GAAP operating income was $437 million.
“Our past investments in Arrow’s sales, engineering and supply chain services combined with the current, favorable pricing environment are proving effective for global components,” continued Mr. Long. “As a result of our focused execution, global components delivered the highest margin levels in decades.”
Global enterprise computing solutions fourth-quarter sales of $2.34 billion decreased 8 percent year over year. Non-GAAP sales decreased 6 percent year over year. Europe enterprise computing solutions sales decreased 6 percent year over year. Non-GAAP sales in the region decreased 3 percent year over year. Americas enterprise computing sales decreased 9 percent year over year. Global enterprise computing solutions fourth-quarter operating income was $155 million. Fourth-quarter non-GAAP operating income was $157 million.
“Global enterprise computing solutions is poised for continued success in 2022 as the need for a trusted partner to help customers navigate IT complexity and security has never been greater,” said Mr. Long.
FULL-YEAR RESULTS
Full-year 2021 sales of $34.48 billion increased 20 percent from sales of $28.67 billion in 2020. Net income for 2021 was $1.11 billion, or $15.10 per share on a diluted basis, compared with net income of $584 million, or $7.43 per share on a diluted basis, in 2020.
Full-year 2021 non-GAAP sales increased 19 percent year over year. Non-GAAP net incomewas $1.14 billion, or $15.50 per share on a diluted basis, in 2021 compared with non-GAAP net income of $610 million, or $7.75 per share on a diluted basis, in 2020. In 2021, changes in foreign currencies had positive impacts on growth of approximately $403 million on sales, and $.14 on earnings per share on a diluted basis compared to 2020.
“We delivered on our commitment to return cash to shareholders while reducing leverage ratios, having returned approximately $250 million through Arrow’s stock repurchase program during the fourth quarter and approximately $900 million throughout 2021, the most we have ever returned in a single year,” said Chris Stansbury, senior vice president and chief financial officer. “These repurchases reflect our confidence in the business and Arrow’s growth potential. With return on invested capital and return on working capital each at record levels, we are pleased to utilize our cash to further enhance shareholder value.”
1 A reconciliation of non-GAAP financial measures, including sales, sales for each segment and in each region, gross profit, operating income, income before income taxes, provision for income taxes, net income, net income attributable to shareholders, and net income per share, to GAAP financial measures is presented in the reconciliation tables included herein.
FIRST-QUARTER 2022 OUTLOOK
First-Quarter 2022 Outlook
Reported GAAP measure
Intangible amortization expense
Restructuring & integration charges
Non-GAAP measure
Net income per diluted share
$4.32 to $4.48
$.10
$.02
$4.44 to $4.60
Please refer to the CFO commentary, which can be found at investor.arrow.com, as a supplement to the company’s earnings release.
Arrow Electronics guides innovation forward for over 220,000 leading technology manufacturers and service providers. With 2021 sales of $34 billion, Arrow develops technology solutions that improve business and daily life. Learn more at fiveyearsout.com.
Information Relating to Forward-Looking Statements
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 first quarter of fiscal 2022, 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 & 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 coronavirus 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 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.
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, gross profit, operating income, income before income taxes, provision for income taxes, net income, and net income per basic and diluted share.
The company provides non-GAAP sales, gross profit, operating income, income before income taxes, provision for income taxes, net income, net income per share on a diluted basis, effective tax rate, 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, impact of the wind down of the company’s personal computer and mobility asset disposition business (referred to as “wind down”), gains and losses on investments, the impact of certain tax adjustments, and pension settlement gains and losses.
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 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.
A reconciliation of the company’s non-GAAP financial information to GAAP is set forth in the tables below.
ARROW ELECTRONICS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands except per share data)
Quarter Ended
Year Ended
December 31, 2021
December 31, 2020
(Unaudited)
Sales
$
9,016,077
8,454,192
34,477,018
28,673,363
Cost of sales
7,819,699
7,530,506
30,274,653
25,482,233
Gross profit
1,196,378
923,686
4,202,365
3,191,130
Operating expenses:
Selling, general, and administrative expenses
632,496
547,530
2,435,030
2,087,050
Depreciation and amortization
48,196
48,404
195,120
189,058
Impairments
—
4,482
7,223
Restructuring, integration, and other charges
3,754
6,340
10,911
13,288
684,446
602,274
2,645,543
2,296,619
Operating income
511,932
321,412
1,556,822
894,511
Equity in earnings (losses) of affiliated companies
1,323
(839
)
3,508
(531
Gain on investments, net
2,046
8,531
12,951
5,348
Employee benefit plan expense, net
(1,256
(1,172
(5,180
(2,859
Interest and other financing expense, net
(34,719
(31,614
(131,727
(137,210
Income before income taxes
479,326
296,318
1,436,374
759,259
Provision for income taxes
107,838
59,342
325,906
172,795
Consolidated net income
371,488
236,976
1,110,468
586,464
Noncontrolling interests
280
905
2,271
2,026
Net income attributable to shareholders
371,208
236,071
1,108,197
584,438
Net income per share:
Basic
5.34
3.12
15.29
7.49
Diluted
5.26
3.08
15.10
7.43
Weighted average shares outstanding:
69,556
75,701
72,472
77,992
70,550
76,574
73,385
78,635
CONSOLIDATED BALANCE SHEETS
(In thousands except par value)
ASSETS
Current assets:
Cash and cash equivalents
222,194
373,615
Accounts receivable, net
11,123,946
9,205,343
Inventories
4,201,965
3,287,308
Other current assets
345,218
286,633
Total current assets
15,893,323
13,152,899
Property, plant, and equipment, at cost:
Land
5,736
7,940
Buildings and improvements
186,097
207,614
Machinery and equipment
1,523,919
1,553,371
1,715,752
1,768,925
Less: Accumulated depreciation and amortization
(1,032,941
(969,320
Property, plant, and equipment, net
682,811
799,605
Investments in affiliated companies
63,695
76,358
Intangible assets, net
195,029
233,819
Goodwill
2,080,371
2,115,469
Other assets
620,311
675,761
Total assets
19,535,540
17,053,911
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable
9,617,084
7,937,889
Accrued expenses
1,326,386
1,034,361
Short-term borrowings, including current portion of long-term debt
382,619
158,633
Total current liabilities
11,326,089
9,130,883
Long-term debt
2,244,443
2,097,940
Other liabilities
624,162
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
Capital in excess of par value
1,189,845
1,165,850
Treasury stock (57,358 and 50,581 shares in 2021 and 2020, respectively), at cost
(3,629,265
(2,776,821
Retained earnings
7,787,948
6,679,751
Accumulated other comprehensive loss
(191,657
(104,885
Total shareholders' equity
5,282,295
5,089,319
58,551
59,633
Total equity
5,340,846
5,148,952
Total liabilities and equity
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
Cash flows from operating activities:
Adjustments to reconcile consolidated net income to net cash provided by operations:
Amortization of stock-based compensation
6,511
6,686
Equity in (earnings) losses of affiliated companies
(1,323
839
Deferred income taxes
15,395
(9,263
(2,013
(8,531
Other
757
1,016
Change in assets and liabilities, net of effects of acquired and disposed businesses:
(1,846,887
(1,074,997
(378,839
(16,248
1,630,583
988,883
217,358
57,330
Other assets and liabilities
(33,333
(31,089
Net cash provided by operating activities
27,893
200,006
Cash flows from investing activities:
Acquisition of property, plant, and equipment
(20,766
(34,030
389
(627
Net cash used for investing activities
(20,377
(34,657
Cash flows from financing activities:
Change in short-term and other borrowings
28,924
(8,862
Repayment of long-term bank borrowings, net
(289,922
(135
Net proceeds from note offerings
495,134
Proceeds from exercise of stock options
2,044
15,074
Repurchases of common stock
(250,000
(98,985
Settlement of forward-starting interest rate swap
24,896
Net cash provided by (used for) financing activities
11,076
(92,908
Effect of exchange rate changes on cash
(12,330
74,155
Net increase in cash and cash equivalents
6,262
146,596
Cash and cash equivalents at beginning of period
215,932
227,019
Cash and cash equivalents at end of period
Consolidated net income (loss)
36,117
35,288
(3,508
531
24,749
29,713
(12,833
(5,333
3,947
5,059
(2,109,159
(541,427
(960,605
244,325
1,766,912
760,883
391,941
86,484
(28,648
(38,425
418,983
1,359,843
(83,051
(123,585
Proceeds from sale of property, plant, and equipment
22,171
Cash paid for customer relationship intangible asset
(713
762
(14,496
(60,118
(138,794
12,938
(95,017
Repayments of long-term bank borrowings, net
(687
(411,497
Redemption of notes
(130,860
(209,366
Net proceeds from note offering
46,982
21,037
(911,548
(483,735
(48,378
(159
(141
Net cash used for financing activities
(463,304
(1,227,097
(46,982
79,560
Net increase (decrease) in cash and cash equivalents
(151,421
73,512
Cash and cash equivalents at beginning of year
300,103
Cash and cash equivalents at end of year
NON-GAAP SALES RECONCILIATION
% Change
Consolidated sales, as reported
6.6
%
Impact of changes in foreign currencies
(73,179
Non-GAAP consolidated sales
8,381,013
7.6
Global components sales, as reported
6,679,577
5,923,094
12.8
(37,035
Non-GAAP global components sales
5,886,059
13.5
Americas components sales, as reported
2,137,386
1,625,458
31.5
(821
Non-GAAP Americas components sales
1,624,637
31.6
Asia components sales, as reported
2,948,594
2,935,181
0.5
5,886
Non-GAAP Asia components sales
2,941,067
0.3
Europe components sales, as reported
1,593,597
1,362,455
17.0
(42,100
Non-GAAP Europe components sales
1,320,355
20.7
Global ECS sales, as reported
2,336,500
2,531,098
(7.7
) %
(36,144
Non-GAAP global ECS sales
2,494,954
(6.4
Americas ECS sales, as reported
1,356,598
1,483,637
(8.6
4,320
Non-GAAP Americas ECS sales
1,487,957
(8.8
Europe ECS sales, as reported
979,902
1,047,461
(40,464
Non-GAAP Europe ECS sales
1,006,997
(2.7
20.2
403,039
29,076,402
18.6
26,357,517
20,502,687
28.6
261,066
20,763,753
26.9
7,827,866
6,183,119
26.6
(396
6,182,723
12,280,805
9,332,034
65,991
9,398,025
30.7
6,248,846
4,987,534
25.3
195,471
5,183,005
20.6
8,119,501
8,170,676
(0.6
141,973
8,312,649
(2.3
4,878,954
5,109,372
(4.5
41,974
5,151,346
(5.3
3,240,547
3,061,304
5.9
99,999
3,161,303
2.5
NON-GAAP EARNINGS RECONCILIATION
Three months ended December 31, 2021
Restructuring & Integration charges
AFS Reserves & Recoveries
Impact of Wind Down
Other(1)
Gross Profit
9,086
524,772
(2,046
490,120
2,337
854
(492
110,537
6,749
2,900
(1,554
379,583
143
423
6,606
379,160
Net income per diluted share(4)
0.09
0.04
(0.02
5.37
Effective tax rate
22.5
22.6
Three months ended December 31, 2020
(33
923,653
9,376
(840
(417
335,871
(412
302,251
2,405
(918
(201
102
(2,053
58,677
6,971
7,258
(639
(514
(6,478
243,574
148
1,053
6,823
242,521
(0.01
(0.08
3.17
20.0
19.4
Year ended December 31, 2021
Non-recurring tax items
Other(3)
36,930
1,609,145
(12,770
1,475,927
9,457
2,341
1,078
(3,073
335,709
27,473
8,570
3,404
(9,697
1,140,218
590
2,861
26,883
1,137,357
0.37
0.12
0.05
0.13
15.50
22.7
Year ended December 31, 2020
Non-recurring tax items(2)
(11,204
3,179,926
38,417
(1,796
(14,728
936,915
Income (loss) before income taxes
(14,704
(7,117
794,570
9,866
1,301
(432
2,356
(3,143
1,272
(1,717
182,298
28,551
11,987
(1,364
4,867
(11,561
(1,272
(5,400
612,272
568
2,594
Net income (loss) attributable to shareholders
27,983
609,678
Net income (loss) per diluted share(4)
0.36
0.15
0.06
(0.15
0.02
(0.07
7.75
22.8
22.9
(1) Other includes gain on investments, net.
(2) Includes income tax (expense) benefit related to legislation changes and other non-recurring tax adjustments.
(3) Other includes gain on investments, net and pension settlement gain.
(4) In all periods presented the sum of the components for non-GAAP diluted EPS may not agree to totals, as presented, due to rounding.
SEGMENT INFORMATION
Sales:
Global components
Global ECS
Consolidated
Operating income (loss):
Global components (a)
430,415
230,127
1,432,187
780,333
Global ECS (b)
154,852
155,880
390,103
353,763
Corporate (c)
(73,335
(64,595
(265,468
(239,585
(a)
Global components operating income for the years 2021 and 2020 includes $12.5 million and $2.4 million, respectively, related to proceeds from legal settlements.
(b)
Global ECS operating income for 2020 includes reserves and other adjustments of approximately $29.9 million primarily related to foreign tax and other loss contingencies for the year ended. These reserves are principally associated with transactional taxes on activity from several prior years, not significant to any one year.
(c)
Corporate operating income includes restructuring, integration, and other charges of $3.8 million and $10.9 million for the fourth quarter and year ended December 31, 2021, respectively, and $6.3 million and $13.3 million for the fourth quarter and year ended December 31, 2020, respectively. Also included are impairment charges of $2.3 million related to various long-lived assets for the year ended December 31, 2021.
NON-GAAP SEGMENT RECONCILIATION
Global components operating income (loss), as reported
Intangible assets amortization expense (a)
6,942
7,011
27,915
28,664
Impairments (a)
Impact of wind-down (a)
AFS notes receivable reserve (recoveries) and inventory write-downs
Global components non-GAAP operating income
437,357
235,881
1,464,584
792,473
Global ECS operating income, as reported
Intangible assets amortization expense
2,144
2,365
9,015
9,753
4,918
Global ECS non-GAAP operating income
156,996
158,245
399,118
368,434
Category: Investor Relations
Contact: Steven O’Brien, Vice President, Investor Relations 303-824-4544
Media Contact: John Hourigan, Vice President, Global Communications 303-824-4586