Arrow Electronics, Inc. today reported first-quarter 2020 sales of $6.38 billion, a decrease of 11 percent from sales of $7.16 billion in the first quarter of 2019. First-quarter sales, as adjusted, decreased 9 percent year over year. First-quarter net income of $50 million, or $.61 per share on a diluted basis, compared with net income of $141 million, or $1.63 per share on a diluted basis, in the first quarter of 2019. Excluding certain items, net income would have been $79 million, or $0.97 per share on a diluted basis, in the first quarter of 2020, compared with net income of $164 million, or $1.90 per share on a diluted basis, in the first quarter of 2019. Net income and diluted earnings per share in the first quarter of 2020 included charges related to foreign tax and other loss contingencies totaling approximately $33 million and $.41, respectively. In the first quarter of 2020, changes in foreign currencies negatively impacted growth by approximately $42 million or 1 percent on sales and $.02 or 1 percent on earnings per share on a diluted basis compared to the first quarter of 2019.
“Arrow maintains a firm commitment to our design, engineering, marketing and supply chain services, which play an essential role for our stakeholders as they navigate the unprecedented challenges associated with the COVID-19 pandemic,” said Michael J. Long, chairman, president, and chief executive officer. “I am grateful to our dedicated teams in all regions who have been working with urgency to ensure our customers and suppliers are well equipped to continue their business operations in the current environment. In addition to enabling secure work-from-home environments, Arrow is supporting the medical community’s life-saving efforts by providing critical electronic components and data management hardware and software.”
Global components first-quarter sales of $4.55 billion decreased 12 percent year over year. Sales, as adjusted, decreased 10 percent year over year. Asia-Pacific components sales decreased 5 percent year over year. Europe components sales decreased 13 percent year over year. Sales in the region, as adjusted, decreased 10 percent year over year. Americas components sales decreased 19 percent year over year. Sales in the region, as adjusted, decreased 16 percent year over year. Global components first-quarter operating income was $165 million. First-quarter operating income, excluding amortization of intangibles expense, as adjusted, was $171 million.
“Despite production stoppages, border closures and stay-at-home orders, our global components team demonstrated unwavering focus on our customers’ needs in the production of vital electronic equipment, delivering first-quarter financial performance consistent with pre-pandemic expectations,” continued Mr. Long. “We view global components financial results as a testament to the efforts of our team and our long-held belief that doing good is also good for business.”
Global enterprise computing solutions first-quarter sales of $1.83 billion decreased 7 percent year over year. Sales, as adjusted, decreased 6 percent year over year. Europe enterprise computing solutions sales decreased 8 percent year over year. Sales in the region, as adjusted, decreased 5 percent year over year. Americas enterprise computing solutions sales decreased 6 percent year over year. Global enterprise computing solutions first-quarter operating income was $42 million. First-quarter operating income, excluding amortization of intangibles expense, as adjusted, was $45 million. Operating income in the first quarter of 2020 included charges related to foreign tax and other loss contingencies of approximately $30 million.
“In connection with our shift from provisioning complex hybrid cloud solutions to rapidly enabling the massive migration to an at-home workforce, Arrow reported global enterprise computing solutions sales near the high-end of our prior expectations,” said Mr. Long.
“Looking ahead to the second half of the year, we anticipate a cautious, measured return to normal business activity, and Arrow is well positioned to continue benefiting from the robust cash flow our business generates. First-quarter cash provided by operating activities was $467 million thanks to our disciplined working capital management, including our new EMEA asset securitization program, and efficiencies from our previously announced cost optimization program,” said Chris Stansbury, senior vice president and chief financial officer. “Our liquidity position is the best in our company’s history, with more than $3.1 billion of undrawn committed borrowing capacity in addition to cash on hand.”
SECOND-QUARTER 2020 OUTLOOK
- Consolidated sales of $6.075 billion to $6.675 billion, with global components sales of $4.4 billion to $4.7 billion, and global enterprise computing solutions sales of $1.675 billion to $1.975 billion
- Earnings per share on a diluted basis of $.98 to $1.14, and earnings per share on a diluted basis, excluding certain items of $1.38 to $1.54 per share
- Average tax rate of approximately 24 percent compared to the long-term range of 23 to 25 percent
- Average diluted shares outstanding of 81 million
- Interest expense of approximately $40 million
- Expect average USD-to-Euro exchange rate of $1.10 to €1
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