EX-99.1 2 q12018pressreleaseexhibit9.htm EXHIBIT 99.1

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

Exhibit 99.1
Arrow Electronics Reports First-Quarter 2018 Results
-- Record First-Quarter Sales, Gross Profit, Operating Income, and Earnings per Share --
-- First-Quarter Earnings Per Share of $1.56; Non-GAAP Earnings Per Share of $1.88 --
CENTENNIAL, Colo.--(BUSINESS WIRE)-May 3, 2018--Arrow Electronics, Inc. (NYSE:ARW) today reported first-quarter 2018 sales of $6.88 billion, an increase of 20 percent from sales of $5.74 billion in the first quarter of 2017. First-quarter net income of $139 million, or $1.56 per share on a diluted basis, compared with net income of $115 million, or $1.27 per share on a diluted basis, in the first quarter of 2017. Excluding certain items 1, net income would have been $168 million, or $1.88 per share on a diluted basis, in the first quarter of 2018, compared with net income of $132 million, or $1.46 per share on a diluted basis, in the first quarter of 2017. Excluding certain items 1, net income increased 27 percent year over year, and earnings per share on a diluted basis increased 29 percent year over year.
“We continue to expand our line card, our services, and the solutions we bring to the marketplace to capitalize on the exciting growth opportunities from IoT, industrial automation, and smart cities, homes, and vehicles,” said Michael J. Long, chairman, president, and chief executive officer. “We are delivering differentiated performance as evidenced by our fifth straight quarter of record results.”
Global components first-quarter sales of $4.93 billion increased 21 percent year over year. First-quarter sales, as adjusted, increased 16 percent year over year. Americas components sales increased 15 percent year over year. Sales in the region, as adjusted, increased 13 percent year over year. Asia-Pacific components sales increased 20 percent year over year. Europe components sales increased 32 percent year over year. Sales in the region, as adjusted, increased 16 percent year over year. Global components first-quarter operating income increased 32 percent year over year. “As we expected, we are capturing strong leverage on our growing sales,” said Mr. Long.
Global enterprise computing solutions first-quarter sales of $1.95 billion increased 16 percent year over year. First-quarter sales, as adjusted, increased 11 percent year over year. Americas enterprise computing solutions sales increased 9 percent year over year. Sales in the region, as adjusted, increased 12 percent year over year. Europe enterprise computing solutions sales increased 29 percent year over year. Sales in the region, as adjusted, increased 9 percent year over year. Global enterprise computing solutions first-quarter operating income grew 2 percent year over year and grew 1 percent year over year excluding amortization of intangibles expense. The divestiture of the systems integration business on March 2, 2018 resulted in an approximately $2 million unfavorable operating income comparison to the first quarter of 2017.
“Value-added resellers and managed service providers are moving their businesses to Arrow due to our leadership in newer technologies, including cloud, security, and software-defined data center solutions,” added Mr. Long.
“Return on invested capital increased year over year for the third straight quarter. First-quarter cash flow from operations was a seasonally negative $75 million. We expect the substantial investments we made to support our rapid growth, and our disciplined approach to working capital management, to drive further improvements in returns and cash flow in the coming quarters,” said Chris Stansbury, senior vice president and chief financial officer. “We remain committed to returning excess cash to shareholders. During the first quarter, we returned approximately $40 million to shareholders through our stock repurchase program. We had approximately $319 million of remaining authorization under our share repurchase program at the end of the first quarter.”
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 second quarter, we believe that total sales will be between $7 billion and $7.4 billion, with global components sales between $5 billion and $5.2 billion, and global enterprise computing solutions sales between $2 billion and $2.2 billion. As a result of this outlook, we expect earnings per share on a diluted basis, to be in the range of $1.78 to $1.90, and earnings per share on a diluted basis, excluding certain items 1, to be in the range of $2.08 to $2.20 per share. Our guidance assumes interest expense will be approximately $48 million. Our guidance also assumes an average tax rate of 23.5 percent to 25.5 percent and average diluted shares outstanding are expected to be approximately 89 million. We are expecting the average USD-to-Euro exchange rate for the second quarter to be approximately $1.23 to €1,” said Mr. Stansbury.
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 (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 150,000 original equipment manufacturers, value-added resellers, contract manufacturers, and commercial customers through a global network. The company maintains over 300 sales facilities and 45 distribution and value-added centers, serving over 80 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 Annual Report on Form 10-K for the year ended Dec. 31, 2017.
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, income, or expense on a non-GAAP basis adjusted for the impact of changes in foreign currencies and the impact of acquisitions/dispositions by adjusting the company's operating results, including the amortization expense related to acquired/disposed intangible assets, as if the acquisitions/dispositions had occurred at the beginning of the earliest period presented (referred to as "impact of acquisitions" and "impact of dispositions"). Operating income, net income attributable to shareholders, and net income per basic and diluted share are adjusted to exclude identifiable intangible amortization, restructuring, integration, and other charges, and 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/dispositions (including intangible assets amortization expense), and financing activities. 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.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands except per share data)
(Unaudited)
|  | Quarter Ended
|  | March 31, 2018 |  | April 1, 2017
|  |  |  | (adjusted)
Sales |  | $ | 6,875,613 |  |  | $ | 5,736,780 |
Cost of sales |  | 6,006,669 |  |  | 4,975,583 |
Gross profit |  | 868,944 |  |  | 761,197 |
Operating expenses: |  |  |  |
Selling, general, and administrative expenses |  | 562,969 |  |  | 515,526 |
Depreciation and amortization |  | 47,247 |  |  | 37,141 |
Loss on disposition of businesses, net |  | 1,562 |  |  | — |
Restructuring, integration, and other charges |  | 21,171 |  |  | 15,505 |
|  | 632,949 |  |  | 568,172 |
Operating income |  | 235,995 |  |  | 193,025 |
Equity in earnings (losses) of affiliated companies |  | (673 | ) |  | 925 |
Gain (loss) on investments, net |  | (2,452 | ) |  | 1,982 |
Post-retirement expense |  | 1,231 |  |  | 1,800 |
Interest and other financing expense, net |  | 45,179 |  |  | 38,249 |
Income before income taxes |  | 186,460 |  |  | 155,883 |
Provision for income taxes |  | 46,590 |  |  | 39,564 |
Consolidated net income |  | 139,870 |  |  | 116,319 |
Noncontrolling interests |  | 776 |  |  | 1,582 |
Net income attributable to shareholders |  | $ | 139,094 |  |  | $ | 114,737 |
Net income per share: |  |  |  |
Basic |  | $ | 1.58 |  |  | $ | 1.29 |
Diluted |  | $ | 1.56 |  |  | $ | 1.27 |
Weighted-average shares outstanding: |  |  |  |
Basic |  | 87,955 |  |  | 89,262 |
Diluted |  | 89,035 |  |  | 90,541 |

ARROW ELECTRONICS, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands except par value)
(Unaudited)
| March 31, 2018 |  | December 31, 2017
|  |  | (adjusted)
ASSETS |  |  |
Current assets: |  |  |
Cash and cash equivalents | $ | 548,644 |  |  | $ | 730,083 |
Accounts receivable, net | 7,378,453 |  |  | 8,125,588 |
Inventories | 3,572,714 |  |  | 3,302,518 |
Other current assets | 267,402 |  |  | 256,028 |
Total current assets | 11,767,213 |  |  | 12,414,217 |
Property, plant, and equipment, at cost: |  |  |  |  |
Land | 13,288 |  |  | 12,866 |
Buildings and improvements | 163,901 |  |  | 160,664 |
Machinery and equipment | 1,362,693 |  |  | 1,330,730 |
| 1,539,882 |  |  | 1,504,260 |
Less: Accumulated depreciation and amortization | (690,015 | ) |  | (665,785 | )
Property, plant, and equipment, net | 849,867 |  |  | 838,475 |
Investments in affiliated companies | 88,166 |  |  | 88,347 |
Intangible assets, net | 348,378 |  |  | 286,215 |
Goodwill | 2,703,542 |  |  | 2,470,047 |
Other assets | 367,639 |  |  | 361,966 |
Total assets | $ | 16,124,805 |  |  | $ | 16,459,267 |
LIABILITIES AND EQUITY |  |  |  |  |
Current liabilities: |  |  |  |  |
Accounts payable | $ | 6,110,752 |  |  | $ | 6,756,830 |
Accrued expenses | 806,122 |  |  | 841,675 |
Short-term borrowings, including current portion of long-term debt | 38,220 |  |  | 356,806 |
Total current liabilities | 6,955,094 |  |  | 7,955,311 |
Long-term debt | 3,533,050 |  |  | 2,933,045 |
Other liabilities | 487,847 |  |  | 572,971 |
Commitments and contingencies |  |  |  |  |
Equity: |  |  |  |  |
Shareholders' equity: |  |  |  |  |
Common stock, par value $1: |  |  |  |  |
Authorized - 160,000 shares in both 2018 and 2017 |  |  |  |  |
Issued - 125,424 shares in both 2018 and 2017 | 125,424 |  |  | 125,424 |
Capital in excess of par value | 1,105,108 |  |  | 1,114,167 |
Treasury stock (37,804 and 37,733 shares in 2018 and 2017, respectively), at cost | (1,787,653 | ) |  | (1,762,239 | )
Retained earnings | 5,758,234 |  |  | 5,596,786 |
Accumulated other comprehensive loss | (101,505 | ) |  | (124,883 | )
Total shareholders' equity | 5,099,608 |  |  | 4,949,255 |
Noncontrolling interests | 49,206 |  |  | 48,685 |
Total equity | 5,148,814 |  |  | 4,997,940 |
Total liabilities and equity | $ | 16,124,805 |  |  | $ | 16,459,267 |

ARROW ELECTRONICS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
| Quarter Ended
|  | March 31, 2018 |  | April 1, 2017
Cash flows from operating activities: |  |  |  | (adjusted)
Consolidated net income |  | $ | 139,870 |  |  | $ | 116,319 |
Adjustments to reconcile consolidated net income to net cash used for operations: |  |  |  |
Depreciation and amortization |  | 47,247 |  |  | 37,141 |
Amortization of stock-based compensation |  | 12,994 |  |  | 11,575 |
Equity in (earnings) losses of affiliated companies |  | 673 |  |  | (925 | )
Deferred income taxes |  | (2,818 | ) |  | 13,938 |
Other |  | 5,917 |  |  | 1,445 |
Change in assets and liabilities, net of effects of acquired and disposed businesses: |  |  |  |
Accounts receivable |  | 789,843 |  |  | 948,621 |
Inventories |  | (260,620 | ) |  | (38,185 | )
Accounts payable |  | (691,818 | ) |  | (982,355 | )
Accrued expenses |  | (22,087 | ) |  | (93,865 | )
Other assets and liabilities |  | (94,278 | ) |  | (34,599 | )
Net cash used for operating activities |  | (75,077 | ) |  | (20,890 | )
Cash flows from investing activities: |  |  |  |
Cash consideration paid for acquired businesses |  | (331,467 | ) |  | — |
Proceeds from disposition of businesses |  | 34,291 |  |  | — |
Acquisition of property, plant, and equipment |  | (34,735 | ) |  | (62,118 | )
Proceeds from sale of property, plant, and equipment |  | — |  |  | 7,886 |
Other |  | (4,500 | ) |  | — |
Net cash used for investing activities |  | (336,411 | ) |  | (54,232 | )
Cash flows from financing activities: |  |  |  |
Change in short-term and other borrowings |  | (18,382 | ) |  | 76,402 |
Proceeds from long-term bank borrowings, net |  | 601,386 |  |  | 62,500 |
Redemption of notes |  | (300,000 | ) |  | — |
Proceeds from exercise of stock options |  | 4,992 |  |  | 17,259 |
Repurchases of common stock |  | (52,513 | ) |  | (68,847 | )
Purchase of shares from noncontrolling interest |  | — |  |  | (23,350 | )
Net cash provided by financing activities |  | 235,483 |  |  | 63,964 |
Effect of exchange rate changes on cash |  | (5,434 | ) |  | (1,600 | )
Net decrease in cash and cash equivalents |  | (181,439 | ) |  | (12,758 | )
Cash and cash equivalents at beginning of period |  | 730,083 |  |  | 534,320 |
Cash and cash equivalents at end of period |  | $ | 548,644 |  |  | $ | 521,562 |

ARROW ELECTRONICS, INC.
NON-GAAP SALES RECONCILIATION
(In thousands)
(Unaudited)
| Quarter Ended |  |
| March 31, 2018 |  | April 1, 2017 |  | % Change
|  |  | (adjusted) |  |
Consolidated sales, as reported | $ | 6,875,613 |  |  | $ | 5,736,780 |  |  | 19.9 | %
Impact of changes in foreign currencies | — |  |  | 268,779 |  |  |
Impact of acquisitions | — |  |  | 37,298 |  |  |
Impact of dispositions | (27,493 | ) |  | (57,907 | ) |  |
Consolidated sales, as adjusted | $ | 6,848,120 |  |  | $ | 5,984,950 |  |  | 14.4 | %
Global components sales, as reported | $ | 4,929,932 |  |  | $ | 4,058,803 |  |  | 21.5 | %
Impact of changes in foreign currencies | — |  |  | 175,038 |  |  |
Impact of acquisitions | — |  |  | 20,588 |  |  |
Global components sales, as adjusted | $ | 4,929,932 |  |  | $ | 4,254,429 |  |  | 15.9 | %
Americas Components sales, as reported | $ | 1,796,698 |  |  | $ | 1,563,545 |  |  | 14.9 | %
Impact of changes in foreign currencies | — |  |  | 8,118 |  |  |
Impact of acquisitions | — |  |  | 20,588 |  |  |
Americas Components sales, as adjusted | $ | 1,796,698 |  |  | $ | 1,592,251 |  |  | 12.8 | %
Europe components sales, as reported | $ | 1,478,386 |  |  | $ | 1,118,279 |  |  | 32.2 | %
Impact of changes in foreign currencies | — |  |  | 157,602 |  |  |
Europe components sales, as adjusted | $ | 1,478,386 |  |  | $ | 1,275,881 |  |  | 15.9 | %
Asia components sales, as reported | $ | 1,654,848 |  |  | $ | 1,376,979 |  |  | 20.2 | %
Impact of changes in foreign currencies | — |  |  | 9,318 |  |  |
Asia components sales, as adjusted | $ | 1,654,848 |  |  | $ | 1,386,297 |  |  | 19.4 | %
Global ECS sales, as reported | $ | 1,945,681 |  |  | $ | 1,677,977 |  |  | 16.0 | %
Impact of changes in foreign currencies | — |  |  | 93,741 |  |  |
Impact of acquisitions | — |  |  | 16,710 |  |  |
Impact of dispositions | (27,493 | ) |  | (57,907 | ) |  |
Global ECS sales, as adjusted | $ | 1,918,188 |  |  | $ | 1,730,521 |  |  | 10.8 | %
Europe ECS sales, as reported | $ | 750,270 |  |  | $ | 583,334 |  |  | 28.6 | %
Impact of changes in foreign currencies | — |  |  | 87,855 |  |  |
Impact of acquisitions | — |  |  | 16,710 |  |  |
Impact of dispositions | — |  |  | (889 | ) |  |
Europe ECS sales, as adjusted | $ | 750,270 |  |  | $ | 687,010 |  |  | 9.2 | %
Americas ECS sales, as reported | $ | 1,195,411 |  |  | $ | 1,094,643 |  |  | 9.2 | %
Impact of changes in foreign currencies | — |  |  | 5,886 |  |  |
Impact of dispositions | (27,493 | ) |  | (57,018 | ) |  |
Americas ECS sales, as adjusted | $ | 1,167,918 |  |  | $ | 1,043,511 |  |  | 11.9 | %

ARROW ELECTRONICS, INC.
NON-GAAP EARNINGS RECONCILIATION
(In thousands except per share data)
(Unaudited)
Three months ended March 31, 2018
| Reported GAAP measure |  | Intangible amortization expense |  | Restructuring & Integration charges |  | Other* |  | Non-GAAP measure
Operating income | $ | 235,995 |  |  | $ | 13,520 |  |  | $ | 21,171 |  |  | $ | 1,562 |  |  | $ | 272,248 |
Income before income taxes | 186,460 |  |  | 13,520 |  |  | 21,171 |  |  | 4,014 |  |  | 225,165 |
Provision for income taxes | 46,590 |  |  | 3,604 |  |  | 5,535 |  |  | 782 |  |  | 56,511 |
Consolidated net income | 139,870 |  |  | 9,916 |  |  | 15,636 |  |  | 3,232 |  |  | 168,654 |
Noncontrolling interests | 776 |  |  | 153 |  |  | — |  |  | — |  |  | 929 |
Net income attributable to shareholders | $ | 139,094 |  |  | $ | 9,763 |  |  | $ | 15,636 |  |  | $ | 3,232 |  |  | $ | 167,725 |
Net income per diluted share | $ | 1.56 |  |  | $ | 0.11 |  |  | $ | 0.18 |  |  | $ | 0.04 |  |  | $ | 1.88 |
Effective tax rate | 25.0 | % |  |  |  |  |  |  |  | 25.1 | %
Three months ended April 1, 2017 (adjusted)
| Reported GAAP measure |  | Intangible amortization expense |  | Restructuring & Integration charges |  | Other** |  | Non-GAAP measure
Operating income | 193,025 |  |  | 12,900 |  |  | 15,505 |  |  | — |  |  | 221,430 |
Income before income taxes | 155,883 |  |  | 12,900 |  |  | 15,505 |  |  | (1,982 | ) |  | 182,306 |
Provision for income taxes | 39,564 |  |  | 4,561 |  |  | 4,997 |  |  | (765 | ) |  | 48,357 |
Consolidated net income | 116,319 |  |  | 8,339 |  |  | 10,508 |  |  | (1,217 | ) |  | 133,949 |
Noncontrolling interests | 1,582 |  |  | 251 |  |  | — |  |  | — |  |  | 1,833 |
Net income attributable to shareholders | $ | 114,737 |  |  | 8,088 |  |  | 10,508 |  |  | (1,217 | ) |  | 132,116 |
Net income per diluted share | $ | 1.27 |  |  | $ | 0.09 |  |  | $ | 0.12 |  |  | $ | (0.01 | ) |  | $ | 1.46 |
Effective tax rate | 25.4 | % |  |  |  |  |  |  |  | 26.5 | %
* Other includes loss on disposition of businesses and gain (loss) on investments, net.
** Other includes gain (loss) on investments, net.

ARROW ELECTRONICS, INC.
SEGMENT INFORMATION
(In thousands)
(Unaudited)
| Quarter Ended
| March 31, 2018 |  | April 1, 2017
Sales: |  |  | (adjusted)
Global components | $ | 4,929,932 |  |  | $ | 4,058,803 |
Global ECS | 1,945,681 |  |  | 1,677,977 |
Consolidated | $ | 6,875,613 |  |  | $ | 5,736,780 |
Operating income (loss): |  |  |
Global components | $ | 229,546 |  |  | $ | 173,533 |
Global ECS | 83,806 |  |  | 82,189 |
Corporate (a) | (77,357 | ) |  | (62,697 | )
Consolidated | $ | 235,995 |  |  | $ | 193,025 |

(a) | Includes restructuring, integration, and other charges of $21.2 million and $15.5 million for the first quarter of 2018 and 2017, respectively, as well as a net loss on the disposition of businesses of $1.6 million for the first quarter of 2018.

NON-GAAP SEGMENT RECONCILIATION
| Quarter Ended
| March 31, 2018 |  | April 1, 2017
|  |  | (adjusted)
Global components operating income, as reported | $ | 229,546 |  |  | $ | 173,533 |
Intangible assets amortization expense | 8,599 |  |  | 7,399 |
Global components operating income, as adjusted | $ | 238,145 |  |  | $ | 180,932 |
Global ECS operating income, as reported | $ | 83,806 |  |  | $ | 82,189 |
Intangible assets amortization expense | 4,921 |  |  | 5,501 |
Global ECS operating income, as adjusted | $ | 88,727 |  |  | $ | 87,690 |

Contact: Steven O’Brien,
Vice President, Investor Relations
303-824-4544
Media Contact: John Hourigan,
Vice President, Global Communications
303-824-4586