Arrow Electronics, Inc.
-- Fourth-Quarter Earnings Per Share of $5.66; Non-GAAP Earnings Per Share of $5.69 -- -- Announces Additional $1 Billion Share Repurchase Authorization --
CENTENNIAL, Colo.--(BUSINESS WIRE)-- In the FIRST-QUARTER 2023 OUTLOOK section, the final bullet has been updated. Also, in the First-Quarter 2023 GAAP to non-GAAP Outlook Reconciliation table, in the Global components sales, constant currency line, the second % change column has been updated.
The updated release reads:
ARROW ELECTRONICS REPORTS FOURTH-QUARTER AND FULL-YEAR 2022 RESULTS
Arrow Electronics, Inc. (NYSE:ARW) today reported fourth-quarter 2022 sales of $9.32 billion, an increase of 3 percent year over year, and an increase of 8 percent year over year on a constant currency basis1.Fourth-quarter 2022 net income was $349 million, or $5.66 per share on a diluted basis, compared with net income of $371 million, or $5.26 per share on a diluted basis, in the fourth quarter of 2021. Non-GAAP net income1 was $351 million, or $5.69 per share on a diluted basis, in the fourth quarter of 2022, compared with non-GAAP net income of $379 million, or $5.37 per share on a diluted basis, in the fourth quarter of 2021. In the fourth quarter of 2022, changes in foreign currencies had negative impacts on growth of approximately $357 million on sales and $0.19 on earnings per share on a diluted basis compared to the fourth quarter of 2021.
“I am pleased to report that this was another great quarter. Both our global components and global enterprise computing solutions businesses performed well in market conditions that remain challenging,” said Sean Kerins, Arrow's president and chief executive officer. “Our dedicated team helped us deliver strong quarterly sales, gross profit, operating income, and earnings per share.”
Global components fourth-quarter sales of $6.83 billion reflected an increase of 2 percent year over year, and an increase of 6 percent year over year on a constant currency basis. Americas components fourth-quarter sales increased 9 percent year over year. Europe components fourth-quarter sales increased 23 percent year over year, and increased 38 percent year over year on a constant currency basis. Asia-Pacific components fourth-quarter sales decreased 14 percent year over year. Global components fourth-quarter operating income was $443 million and fourth-quarter non-GAAP operating income was $449 million.
“Demand for electronic components and associated design, engineering and supply chain services generally remained healthy in the Americas and Europe regions, but we experienced softer demand in Asia, particularly in China. We are proud to service a variety of industries and provide products from a diverse group of suppliers to a diverse group of customers around the world,” said Mr. Kerins.
Global enterprise computing solutions (“ECS”) fourth-quarter sales of $2.50 billion reflected an increase of 7 percent year over year, and an increase of 12 percent year over year on a constant currency basis. Europe enterprise computing solutions fourth-quarter sales increased 11 percent year over year, and increased 24 percent year over year on a constant currency basis. Americas enterprise computing fourth-quarter sales increased 4 percent year over year. Global enterprise computing solutions fourth-quarter operating income was $155 million. Fourth-quarter non-GAAP operating income was $156 million.
“Hardware supply constraints are easing, and demand remained strong for most of our key technology categories. We continue to see strength in cloud, IT-as-a-Service and enterprise software adoption, and we were pleased with the results of the business,” said Mr. Kerins.
“Enhancing shareholder value remains a top priority," said Raj Agrawal, senior vice president and chief financial officer. “Our strong financial returns and the effective management of our balance sheet have enabled us to deliver on our commitment to return cash to shareholders by repurchasing $300 million of shares during the fourth quarter. We are also pleased to announce that our Board of Directors has approved an additional $1 billion to our repurchase authorization2. Returning cash to shareholders through our stock repurchase plan remains one of our priorities, and this new authorization reflects that commitment."
FULL-YEAR RESULTS
Full-year 2022 sales of $37.12 billion increased 8 percent year over year, and increased 11 percent year over year on a constant currency basis. Net income for 2022 was $1.43 billion, or $21.80 per share on a diluted basis, compared with net income of $1.11 billion, or $15.10 per share on a diluted basis, for 2021. Non-GAAP net incomewas $1.47 billion, or $22.38 per share on a diluted basis, in 2022 compared with non-GAAP net income of $1.14 billion, or $15.50 per share on a diluted basis, for 2021. In 2022, changes in foreign currencies had negative impacts on growth of approximately $1.18 billion on sales, and $0.53 on earnings per share on a diluted basis compared to 2021.
“In 2022, we delivered the best financial results in the history of the company. Throughout the year, we continued to make investments to support our customer needs, and we continued to grow and generate strong shareholder returns in the process,” said Mr. Kerins. “We continue to have confidence in the business and Arrow’s long-term growth potential.”
1 A reconciliation of non-GAAP financial measures to GAAP financial measures is presented in the reconciliation tables included herein. 2 See additional information related to the company's share repurchase program located at page 3 of this press release.
FIRST-QUARTER 2023 OUTLOOK
First-Quarter 2023 GAAP to non-GAAP Outlook Reconciliation
NON-GAAP SALES RECONCILIATION
Quarter Ended
(in billions)
April 1, 2023
April 2, 2022
% Change
December 31, 2022
Global components sales, GAAP
$6.55 - 6.85
$
7.20
(9)% - (5)%
6.83
(4%) - 0%
Impact of changes in foreign currencies
—
(0.13
)
0.13
Global components sales, constant currency
7.07
(7)% - (3)%
6.96
(6%) - (2)%
Global ECS sales, GAAP
$1.78 - 2.08
1.88
(5%) - 11%
2.50
(29)% - (17)%
(0.05
0.05
Global ECS sales, constant currency
1.83
(3%) - 14%
2.55
(30)% - (18)%
NON-GAAP EARNINGS RECONCILIATION
Reported GAAP measure
Intangible amortization expense
Restructuring & integration charges
Non-GAAP measure
Net income per diluted share
$4.24 to $4.44
$0.10
$0.06
$4.40 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. The company uses its website as a tool to disclose important information about the company and comply with its disclosure obligations under Regulation Fair Disclosure.
Arrow Electronics guides innovation forward for over 210,000 leading technology manufacturers and service providers. With 2022 sales of $37 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 2023, 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 expectations regarding customer and market demand and trends, supply chain constraints, business strategy, and shareholder returns. 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: unfavorable economic conditions; disruptions or inefficiencies in the supply chain, including any potential adverse effects of the ongoing global COVID-19 pandemic; political instability; impacts of military conflict, including the conflict in Ukraine; industry conditions; changes in product supply, pricing and customer demand; competition; other vagaries in the global components and the global enterprise computing solutions markets; deteriorating economic conditions, including economic recession, inflation, tax rates, foreign currency exchange rates, or the availability of capital; the effects of natural or man-made catastrophic events; changes in relationships with key suppliers; increased profit margin pressure; changes in legal and regulatory matters; non-compliance with certain regulations, such as export, antitrust, 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 most recent Annual Report on Form 10-K, as well as in other filings the company makes 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. The company provides non-GAAP sales, gross profit, operating income, income before income taxes, provision for income taxes, consolidated net income, noncontrolling interests, net income attributable to shareholders, effective tax rate 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" or "on a constant currency basis") by re-translating prior-period results at current-period foreign exchange rates, identifiable intangible asset amortization, restructuring, integration, and other charges, pension settlement loss and net gains and losses on investments. Management believes that providing this additional information is useful to the reader to better assess and understand the company’s operating performance and future prospects in the same manner as management, especially when comparing results with previous periods. Management typically monitors the business as adjusted for these items, in addition to GAAP results, to understand and compare operating results across accounting periods, for internal budgeting purposes, for short- and long-term operating plans, and to evaluate the company's financial performance. However, analysis of results on a non-GAAP basis should be used as a complement to, in conjunction with, and not as a substitute for, data presented in accordance with GAAP.
Share Repurchase Program
The expansion of our share repurchase program occurred on January 31, 2023 and will permit the company to continue repurchasing shares of its common stock as market and business conditions warrant through open market purchases, privately negotiated transactions or otherwise in accordance with applicable federal securities laws, including through Rule 10b5-1 trading plans and under Rule 10b-18 of the Securities and Exchange Act of 1934, as amended. Repurchases may continue from time to time, as conditions permit, until the number of shares authorized to be repurchased have been acquired, or until the authorization to repurchase is terminated, whichever occurs first, and the company has no obligation to repurchase any amount under the program.
ARROW ELECTRONICS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands except per share data)
Year Ended
December 31, 2021
(Unaudited)
Sales
9,323,023
9,016,077
37,124,422
34,477,018
Cost of sales
8,117,028
7,819,699
32,287,797
30,274,653
Gross profit
1,205,995
1,196,378
4,836,625
4,202,365
Operating expenses:
Selling, general, and administrative expenses
635,090
632,496
2,567,008
2,435,030
Depreciation and amortization
45,595
48,196
187,382
195,120
Restructuring, integration, and other charges
2,714
3,754
13,741
15,393
683,399
684,446
2,768,131
2,645,543
Operating income
522,596
511,932
2,068,494
1,556,822
Equity in earnings of affiliated companies
2,938
1,323
7,664
3,508
Gain (loss) on investments, net
8,356
2,046
(2,857
12,951
Employee benefit plan expense, net
(889
(1,256
(3,503
(5,180
Interest and other financing expense, net
(62,221
(34,719
(185,648
(131,727
Income before income taxes
470,780
479,326
1,884,150
1,436,374
Provision for income taxes
116,719
107,838
448,992
325,906
Consolidated net income
354,061
371,488
1,435,158
1,110,468
Noncontrolling interests
4,659
280
8,274
2,271
Net income attributable to shareholders
349,402
371,208
1,426,884
1,108,197
Net income per share:
Basic
5.71
5.34
22.01
15.29
Diluted
5.66
5.26
21.80
15.10
Weighted-average shares outstanding:
61,175
69,556
64,838
72,472
61,739
70,550
65,453
73,385
CONSOLIDATED BALANCE SHEETS
(In thousands except par value)
ASSETS
Current assets:
Cash and cash equivalents
176,915
222,194
Accounts receivable, net
12,322,717
11,123,946
Inventories
5,319,369
4,201,965
Other current assets
521,339
345,218
Total current assets
18,340,340
15,893,323
Property, plant, and equipment, at cost:
Land
5,691
5,736
Buildings and improvements
184,211
186,097
Machinery and equipment
1,583,661
1,523,919
1,773,563
1,715,752
Less: Accumulated depreciation and amortization
(1,177,107
(1,032,941
Property, plant, and equipment, net
596,456
682,811
Investments in affiliated companies
65,112
63,695
Intangible assets, net
159,137
195,029
Goodwill
2,027,626
2,080,371
Other assets
574,511
620,311
Total assets
21,763,182
19,535,540
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable
10,460,419
9,617,084
Accrued expenses
1,339,302
1,326,386
Short-term borrowings, including current portion of long-term debt
589,883
382,619
Total current liabilities
12,389,604
11,326,089
Long-term debt
3,182,964
2,244,443
Other liabilities
579,261
624,162
Equity:
Shareholders' equity:
Common stock, par value $1:
Authorized – 160,000 shares in both 2022 and 2021
Issued – 125,424 shares in both 2022 and 2021
125,424
Capital in excess of par value
1,208,708
1,189,845
Treasury stock (66,175 and 57,358 shares in 2022 and 2021, respectively), at cost
(4,637,345
(3,629,265
Retained earnings
9,214,832
7,787,948
Accumulated other comprehensive loss
(365,262
(191,657
Total shareholders' equity
5,546,357
5,282,295
64,996
58,551
Total equity
5,611,353
5,340,846
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
7,921
6,511
(2,938
(1,323
Deferred income taxes
(14,518
15,395
Gain on investments, net
(8,356
(2,013
Other
939
757
Change in assets and liabilities:
(801,426
(1,846,887
(154,022
(378,839
779,217
1,630,583
(90,566
217,358
Other assets and liabilities
(7,220
(33,333
Net cash provided by operating activities
108,687
27,893
Cash flows from investing activities:
Acquisition of property, plant, and equipment
(24,056
(20,766
320
389
Net cash used for investing activities
(23,736
(20,377
Cash flows from financing activities:
Change in short-term and other borrowings
(17,700
28,924
Repayments of long-term bank borrowings, net
(5,018
(289,922
Net proceeds from note offerings
495,134
Proceeds from exercise of stock options
906
2,044
Repurchases of common stock
(324,233
(250,000
Settlement of forward-starting interest rate swap
24,896
Net cash provided by (used for) financing activities
(346,045
11,076
Effect of exchange rate changes on cash
104,024
(12,330
Net increase (decrease) in cash and cash equivalents
(157,070
6,262
Cash and cash equivalents at beginning of period
333,985
215,932
Cash and cash equivalents at end of period
Adjustments to reconcile consolidated net income to net cash provided by (used for) operations:
42,930
36,117
Equity in (earnings) losses of affiliated companies
(7,664
(3,508
(13,050
24,749
Loss (gain) on investments, net
2,857
(12,833
3,612
8,429
(1,430,400
(2,109,159
(1,165,785
(960,605
945,819
1,766,912
102,193
391,941
(136,129
(28,648
Net cash provided by (used for) operating activities
(33,077
418,983
(78,836
(83,051
Proceeds from sale of property, plant, and equipment
22,171
Proceeds from collections of notes receivable
21,125
762
(57,711
(60,118
258,816
12,938
Proceeds from (repayments of) long-term bank borrowings, net
1,233,250
(687
Redemption of notes
(350,000
(130,860
Net proceeds from note offering
17,340
46,982
(1,049,487
(911,548
(137
(159
Net cash provided by (used for) used for financing activities
109,782
(463,304
(64,273
(46,982
(45,279
(151,421
Cash and cash equivalents at beginning of year
373,615
Cash and cash equivalents at end of year
Consolidated sales, as reported
3.4
%
(356,580
Consolidated sales, constant currency
8,659,497
7.7
Global components sales, as reported
6,827,029
6,679,577
2.2
(246,723
6,432,854
6.1
Americas components sales, as reported
2,326,995
2,137,386
8.9
(3,093
Americas components sales, constant currency
2,134,293
9.0
Asia components sales, as reported
2,543,294
2,948,594
(13.7
) %
(71,987
Asia components sales, constant currency
2,876,607
(11.6
Europe components sales, as reported
1,956,740
1,593,597
22.8
(171,643
Europe components sales, constant currency
1,421,954
37.6
Global ECS sales, as reported
2,495,994
2,336,500
6.8
(109,857
2,226,643
12.1
Americas ECS sales, as reported
1,404,224
1,356,598
3.5
(10,277
Americas ECS sales, constant currency
1,346,321
4.3
Europe ECS sales, as reported
1,091,770
979,902
11.4
(99,580
Europe ECS sales, constant currency
880,322
24.0
(1,178,364
33,298,654
11.5
28,788,003
26,357,517
9.2
(811,975
25,545,542
12.7
9,592,547
7,827,866
22.5
(9,068
7,818,798
22.7
11,567,482
12,280,805
(5.8
(141,010
12,139,795
(4.7
7,627,974
6,248,846
22.1
(661,897
5,586,949
36.5
8,336,419
8,119,501
2.7
(366,389
7,753,112
7.5
4,847,027
4,878,954
(0.7
(25,737
4,853,217
(0.1
3,489,392
3,240,547
(340,652
2,899,895
20.3
Three months ended December 31, 2022
Restructuring & Integration charges
Other(1)
8,170
533,480
473,308
2,056
472
(2,003
117,244
6,114
2,242
(6,353
356,064
127
4,786
5,987
351,278
Net income per diluted share(5)
0.10
0.04
(0.10
5.69
Effective tax rate (3)
24.8
Three months ended December 31, 2021
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
0.09
(0.02
5.37
22.6
Year ended December 31, 2022
34,692
2,116,927
1,935,440
8,848
2,931
708
461,479
25,844
10,810
2,149
1,473,961
525
8,799
25,319
1,465,162
0.39
0.17
0.03
22.38
23.8
Year ended December 31, 2021
Restructuring & Integration charges (4)
Other(2)
36,930
1,609,145
Income (loss) before income taxes
(12,770
1,475,927
9,457
3,419
(3,073
335,709
Consolidated net income (loss)
27,473
11,974
(9,697
1,140,218
590
2,861
26,883
1,137,357
Net income (loss) per diluted share(5)
0.37
0.16
15.50
(1)
Other includes (gain) loss on investments, net.
(2)
Other includes gain on investments, net and pension settlement gain.
(3)
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.
(4)
Restructuring & Integration charges include impairment related to various long-lived assets.
(5)
The sum of components for diluted EPS, as adjusted, may not agree to totals, as presented, due to rounding.
SEGMENT INFORMATION
Sales:
Global components
Global ECS
Consolidated
Operating income (loss):
Global components (a)
442,702
430,415
1,961,125
1,432,187
154,775
154,852
408,519
390,103
Corporate (b)
(74,881
(73,335
(301,150
(265,468
(a)
Global components operating income for year ended December 31, 2021 includes $12.5 million related to proceeds from legal settlements and $4.5 million in restructuring, integration, and other charges.
(b)
Corporate operating income includes restructuring, integration, and other charges of $2.7 million and $13.7 million for the fourth quarter and year ended December 31, 2022, respectively, and $3.8 million and $10.9 million for the fourth quarter and year ended December 31, 2021, respectively.
NON-GAAP SEGMENT RECONCILIATION
Global components operating income, as reported
Intangible assets amortization expense
6,702
6,942
27,005
27,915
4,482
Global components non-GAAP operating income
449,404
437,357
1,988,130
1,464,584
Global ECS operating income, as reported
1,468
2,144
7,687
9,015
Global ECS non-GAAP operating income
156,243
156,996
416,206
399,118
Contact: Richard Seidlitz, Vice President, Principal Accounting Officer 303-305-4936
Media Contact: John Hourigan, Vice President, Public Affairs and Corporate Marketing 303-824-4586