Arrow Electronics Reports Fourth-Quarter and Year-End 2020 Results
February 04, 2021 at 08:00 AM EST
Arrow Electronics, Inc. (NYSE:ARW) today reported fourth-quarter 2020 sales of $8.45 billion, an increase of 15 percent from sales of $7.34 billion in the fourth quarter of 2019. Fourth-quarter 2020 non-GAAP1 sales increased 13 percent from 2019. Fourth-quarter 2020 net income was $236 million, or $3.08 per share on a diluted basis, compared with net income of $112 million, or $1.36 per share on a diluted basis, in the fourth quarter of 2019. Non-GAAP net income1 was $243 million, or $3.17 per share on a diluted basis, in the fourth quarter of 2020, compared with net income of $181 million, or $2.20 per share on a diluted basis, in the fourth quarter of 2019. In the fourth quarter of 2020, changes in foreign currencies had positive impacts on growth of approximately $161 million on sales and $.11 on earnings per share on a diluted basis compared to the fourth quarter of 2019.
“Arrow’s talented team works hard every day to help customers and suppliers overcome design, engineering, and supply chain challenges – and this commitment was more evident than ever in 2020. Despite the uncertain environment, Arrow drove exceptional financial performance and built on our reputation as a trusted partner for customers and suppliers, with innovative products and solutions,” said Michael J. Long, chairman, president, and chief executive officer. “It was a remarkable accomplishment to end the year with record fourth-quarter sales, net income, and earnings per share.”
Global components fourth-quarter sales of $5.92 billion increased 25 percent year over year. Non-GAAP sales increased 23 percent year over year. Asia-Pacific components sales increased 54 percent year over year. Non-GAAP sales in the region increased 53 percent year over year. Europe components sales increased 15 percent year over year. Non-GAAP sales in the region increased 7 percent year over year. Americas components sales decreased 1 percent year over year. Non-GAAP sales in the region remained flat year over year. Global components fourth-quarter operating income was $230 million. Fourth-quarter non-GAAP operating income was $236 million.
“We have long discussed the potential to pioneer value-added distribution in Asia, and our belief that Arrow is well-positioned to increase the scale of our Asia components business leading to higher profit levels. We also saw a compelling opportunity for global components to accelerate profit growth and expansion as soon as demand from end-customers stabilizes and improves,” continued Mr. Long. “Our focused execution delivered on both accounts, despite the ongoing COVID-19 pandemic.”
Global enterprise computing solutions fourth-quarter sales of $2.53 billion decreased 3 percent year over year. Non-GAAP sales decreased 5 percent year over year. Europe enterprise computing solutions sales increased 9 percent year over year. Non-GAAP sales in the region increased 2 percent year over year. Americas enterprise computing sales decreased 10 percent year over year. Global enterprise computing solutions fourth-quarter operating income was $156 million. Fourth-quarter non-GAAP operating income was $158 million.
“Global enterprise computing solutions is starting off 2021 on solid footing having returned to operating income growth in the fourth quarter on higher operating margins,” concluded Mr. Long.
Full-year 2020 sales of $28.67 billion decreased 1 percent from sales of $28.92 billion in 2019. Full-year 2020 non-GAAP sales remained flat year over year. Net income for 2020 was $584 million, or $7.43 per share on a diluted basis, compared with net loss of $204 million, or $(2.44) per share on a diluted basis, in 2019. Non-GAAP net income was $610 million, or $7.75 per share on a diluted basis, in 2020 compared with non-GAAP net income of $636 million, or $7.55 per share on a diluted basis, in 2019. In 2020, changes in foreign currencies had positive impacts on growth of approximately $119 million on sales, and $.12 on earnings per share on a diluted basis compared to 2019.
“We experienced substantial demand volatility throughout 2020, but our flexible business model allowed us to further improve our financial foundation over the course of the year,” said Chris Stansbury, senior vice president and chief financial officer. “Fourth-quarter and full-year 2020 cash flow provided by operating activities were $200 million and $1.36 billion, respectively, and return on invested capital increased year over year for the third consecutive quarter. We remain committed to returning excess cash to shareholders and returned approximately $100 million to shareholders through our stock repurchase program during the fourth quarter, and approximately $475 million in 2020, the most we have ever returned in a single year, all while reducing debt by $715 million.”
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 2021 OUTLOOK
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 180,000 leading technology manufacturers and service providers. With 2020 sales of $29 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 2021, 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, the speed and effectiveness of COVID-19 vaccine and treatment developments and deployment, potential mutations of 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, changes in legal, tax 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 Form 10-K 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, operating income, net income attributable to shareholders, and net income per basic and diluted share.
The company provides non-GAAP 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 on a diluted basis which are 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 dispositions by adjusting the company’s operating results for businesses disposed, as if the dispositions had occurred at the beginning of the earliest period presented (referred to as "dispositions"), the impact of the company’s personal computer and mobility asset disposition business (referred to as "wind down"), the impact of inventory write-downs and recoveries related to the digital business (referred to as “digital inventory write-downs, net”), and the impact of notes receivable reserves and recoveries and inventory write-downs related to the AFS business (referred to as “AFS notes receivable reserves and recoveries” and “AFS inventory write-downs”, respectively). Non-GAAP operating income excludes identifiable intangible asset amortization, restructuring, integration, and other charges, loss on disposition of businesses, net, AFS notes receivable reserves and recoveries and inventory write-downs, digital inventory write-downs, net, the impact of non-cash charges related to goodwill, trade names, and long-lived assets, and the impact of wind down. Net income attributable to shareholders, and net income per basic and diluted share as adjusted to exclude identifiable intangible asset amortization, restructuring, integration, and other charges, loss on disposition of businesses, net, AFS notes receivable reserves and recoveries and inventory write-downs, digital inventory write-downs, net, gains and losses on investments, net, the impact of non-cash charges related to goodwill, trade names, and long-lived assets, certain tax adjustments, pension settlement gain (loss) and the impact of wind down. A reconciliation of the company’s non-GAAP financial information to GAAP is set forth in the tables below.
Management believes that providing this additional information is useful to the reader, as a supplement to the GAAP measures, to better assess and understand the company's operating performance, especially when comparing results with previous periods. Management typically monitors these non-GAAP measures in addition to GAAP results to understand and compare operating results across accounting periods for forecasting purposes, operating plans, and evaluating our financial performance. However, analysis of results on a non-GAAP basis should be used as a complement to, and in conjunction with, data presented in accordance with GAAP.