Arrow Electronics Reports Second-Quarter 2019 Results

Arrow Electronics, Inc. (NYSE:ARW) today reported second-quarter 2019 sales of $7.34 billion, a decrease of 1 percent from sales of $7.39 billion in the second quarter of 2018. Second-quarter sales, as adjusted, increased 2 percent year over year. The company reported a second-quarter net loss of $549 million, or $(6.48) per share on a diluted basis, compared with net income of $170 million, or $1.92 per share on a diluted basis, in the second quarter of 2018. Excluding certain items¹, net income would have been $137 million, or $1.60 per share on a diluted basis, in the second quarter of 2019, compared with net income of $194 million, or $2.19 per share on a diluted basis, in the second quarter of 2018. In the second quarter of 2019, changes in foreign currencies negatively impacted growth by approximately $148 million or 2 percent on sales and $.06 or 2 percent on earnings per share on a diluted basis compared to the second quarter of 2018.

Global components second-quarter sales of $5.27 billion were flat year over year. Sales, as adjusted, increased 2 percent year over year. Europe components sales decreased 2 percent year over year. Sales in the region, as adjusted, increased 4 percent year over year. Asia-Pacific components sales increased 4 percent year over year. Americas components sales decreased 3 percent year over year. Global components second-quarter operating loss was $562 million. Second-quarter operating income, excluding amortization of intangibles expense, as adjusted, was $207 million.

“Despite facing challenging market conditions in the second quarter, and an ongoing inventory correction, we are encouraged by the significant progress we continue to make in executing our long-term strategy,” said Michael J. Long, chairman, president, and chief executive officer. “We are leveraging our integrated solutions and expanded reach to drive innovation forward for our customers, and remain committed to continuing to expand engineering services and lead the convergence of information technology with operational technology. We are confident that the steps we are taking today to strengthen our focus on the key technology areas of smart cities, smart homes, and smart connected vehicles, will not only enhance shareholder value, but also improve people's lives.”

Global enterprise computing solutions second-quarter sales of $2.07 billion decreased 2 percent year over year. Sales, as adjusted, increased 1 percent year over year. Europe enterprise computing solutions sales decreased 3 percent year over year. Sales in the region, as adjusted, increased 5 percent year over year. Americas enterprise computing solutions sales decreased 1 percent year over year. Sales in the region, as adjusted, were flat year over year. Global enterprise computing solutions second-quarter operating income was $98 million. Second-quarter operating income, excluding amortization of intangibles expense, as adjusted, totaled $101 million.

“Arrow is committed to capitalizing on opportunities available to us, and to that end, we continue to align and evolve our enterprise computing solutions business toward advanced, higher-value software-led solutions,” said Mr. Long. “We are pleased that our infrastructure software and security solutions again produced healthy growth on a year-over-year basis in the second quarter.”

“Second-quarter cash provided by operating activities was $405 million. As we advance our efforts to reduce working capital and use our strong, countercyclical cash flow to position the company for long-term profit acceleration when market conditions improve, we also remain focused on preserving near-term profitability. We have commenced our previously announced cost optimization program, and are executing on our plan to drive efficiencies while generating approximately $130 million in annualized cost savings,” said Chris Stansbury, senior vice president and chief financial officer. “We remain committed to returning excess cash to shareholders. Consistent with this commitment, we returned approximately $150 million to shareholders through our stock repurchase program during the second quarter. At the end of the quarter, we had approximately $539 million of remaining authorization under our share repurchase program.”

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

“Our third-quarter outlook excludes the financial results from the PC and mobility asset disposition business. As we look to the third quarter, we expect total sales to range between $6.850 billion and $7.250 billion, with global components sales between $4.925 billion and $5.125 billion, and global enterprise computing solutions sales between $1.925 billion and $2.125 billion. As a result of this outlook, we expect earnings per share on a diluted basis to range from $.97 to $1.09, and earnings per share on a diluted basis, excluding certain items¹, to range from $1.62 to $1.74 per share. Our guidance assumes interest expense will total approximately $54 million. Our guidance also assumes an average tax rate at the high end of the long-term range of 23.5 percent to 25.5 percent, and average diluted shares outstanding of approximately 85 million. We are expecting the average USD-to-Euro exchange rate for the third quarter to be approximately $1.12 to €1. We estimate changes in foreign currencies will have a negative impact on growth of approximately $90 million, or 1 percent on sales, and $.05, or 2 percent, on earnings per share on a diluted basis compared to the third quarter of 2018,” 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 guides innovation forward for over 200,000 leading technology manufacturers and service providers. With 2018 sales of $30 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 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, 2018.

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, gross profit, and operating expense on a non-GAAP basis adjusted for the impact of changes in foreign currencies (referred to as “impact of 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 “impact of dispositions”), the impact of the company's personal computer and mobility asset disposition business (referred to as "impact of wind down"), the impact of inventory reserves related to the digital business (referred to as "impact of digital inventory reserve"), and the impact of the notes receivable and inventory reserve related to the AFS business (referred to as "AFS notes receivable reserve" and "AFS inventory reserve," respectively). Operating income is adjusted to exclude identifiable intangible asset amortization, restructuring, integration, and other charges, and loss on disposition of businesses, net, AFS notes receivable and inventory reserve, digital inventory reserve, the impact of non-cash charges related to goodwill, tradenames, and property, plant and equipment, and the impact of wind down. Net income attributable to shareholders, and net income per basic and diluted share are adjusted to exclude identifiable intangible asset amortization, restructuring, integration, and other charges, and loss on disposition of businesses, net, AFS notes receivable and inventory reserve, digital inventory reserve, the impact of non-cash charges related to goodwill, tradenames, and property, plant and equipment, the impact of wind down, and the impact of U.S. tax reform. 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								Six Months Ended
		June 29, 2019				June 30, 2018				June 29, 2019				June 30, 2018
Sales		$	7,344,548			$	7,392,528			$	14,500,539			$	14,268,141
Cost of sales		6,529,639				6,459,708				12,823,942				12,466,377
Gross profit		814,909				932,820				1,676,597				1,801,764
Operating expenses:
Selling, general, and administrative expenses		599,212				580,388				1,155,288				1,143,357
Depreciation and amortization		46,982				46,422				94,508				93,669
Loss on disposition of businesses, net		—				—				866				1,562
Impairments		697,993				—				697,993				—
Restructuring, integration, and other charges		19,912				19,183				31,572				40,354
		1,364,099				645,993				1,980,227				1,278,942
Operating income (loss)		(549,190		)		286,827				(303,630		)		522,822
Equity in earnings (losses) of affiliated companies		382				517				(1,085		)		(156		)
Gain (loss) on investments, net		1,390				(2,563		)		6,738				(5,015		)
Employee benefit plan expense		1,139				1,257				2,278				2,488
Interest and other financing expense, net		51,563				60,803				103,544				105,982
Income (loss) before income taxes		(600,120		)		222,721				(403,799		)		409,181
Provision (benefit) for income taxes		(52,369		)		51,681				1,538				98,271
Consolidated net income (loss)		(547,751		)		171,040				(405,337		)		310,910
Noncontrolling interests		1,215				1,125				2,894				1,901
Net income (loss) attributable to shareholders		$	(548,966	)		$	169,915			$	(408,231	)		$	309,009
Net income (loss) per share:
Basic		$	(6.48	)		$	1.94			$	(4.80	)		$	3.52
Diluted		$	(6.48	)		$	1.92			$	(4.80	)		$	3.48
Weighted-average shares outstanding:
Basic		84,652				87,802				85,022				87,878
Diluted		84,652				88,652				85,022				88,841

ARROW ELECTRONICS, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands except par value)
(Unaudited)
		June 29, 2019				December 31, 2018
ASSETS
Current assets:
Cash and cash equivalents		$	269,989			$	509,327
Accounts receivable, net		7,976,603				8,945,463
Inventories		3,596,613				3,878,678
Other current assets		267,151				274,832
Total current assets		12,110,356				13,608,300
Property, plant, and equipment, at cost:
Land		7,873				7,882
Buildings and improvements		156,124				158,712
Machinery and equipment		1,443,901				1,425,933
		1,607,898				1,592,527
Less: Accumulated depreciation and amortization		(793,981		)		(767,827		)
Property, plant, and equipment, net		813,917				824,700
Investments in affiliated companies		86,157				83,693
Intangible assets, net		290,236				372,644
Goodwill		2,067,499				2,624,690
Other assets		656,204				270,418
Total assets		$	16,024,369			$	17,784,445
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable		$	6,245,068			$	7,631,879
Accrued expenses		853,735				912,292
Short-term borrowings, including current portion of long-term debt		279,158				246,257
Total current liabilities		7,377,961				8,790,428
Long-term debt		3,157,274				3,239,115
Other liabilities		666,419				378,536
Commitments and contingencies
Equity:
Shareholders’ equity:
Common stock, par value $1:
Authorized - 160,000 shares in both 2019 and 2018, respectively
Issued - 125,424 shares in both 2019 and 2018, respectively		125,424				125,424
Capital in excess of par value		1,136,649				1,135,934
Treasury stock (42,283 and 40,233 shares in 2019 and 2018, respectively), at cost		(2,139,743		)		(1,972,254		)
Retained earnings		5,927,104				6,335,335
Accumulated other comprehensive loss		(280,709		)		(299,449		)
Total shareholders’ equity		4,768,725				5,324,990
Noncontrolling interests		53,990				51,376
Total equity		4,822,715				5,376,366
Total liabilities and equity		$	16,024,369			$	17,784,445

ARROW ELECTRONICS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
		Quarter Ended
		June 29, 2019				June 30, 2018
Cash flows from operating activities:
Consolidated net income (loss)		$	(547,751	)		$	171,040
Adjustments to reconcile consolidated net income (loss) to net cash provided by (used for) operations:
Depreciation and amortization		46,982				46,422
Amortization of stock-based compensation		8,539				12,619
Equity in losses of affiliated companies		(382		)		(517		)
Deferred income taxes		(78,814		)		15,524
Impairments		697,993				—
(Gain) loss on investments, net		(1,390		)		2,563
Other		6,381				2,140
Change in assets and liabilities, net of effects of acquired and disposed businesses:
Accounts receivable		(54,436		)		(863,490		)
Inventories		143,740				(239,297		)
Accounts payable		193,832				451,093
Accrued expenses		(21,102		)		21,571
Other assets and liabilities		11,826				(29,440		)
Net cash provided by (used for) operating activities		405,418				(409,772		)
Cash flows from investing activities:
Cash consideration paid for acquired businesses, net of cash acquired		—				(96		)
Proceeds from disposition of businesses		9,460				—
Acquisition of property, plant, and equipment		(47,821		)		(31,816		)
Other		—				(3,500		)
Net cash used for investing activities		(38,361		)		(35,412		)
Cash flows from financing activities:
Change in short-term and other borrowings		(66,112		)		77,995
(Payments) proceeds from long-term bank borrowings, net		(216,046		)		157,948
Proceeds from exercise of stock options		2,691				993
Repurchases of common stock		(146,999		)		(20,038		)
Other		(147		)		(156		)
Net cash provided by (used for) financing activities		(426,613		)		216,742
Effect of exchange rate changes on cash		(22,354		)		10,317
Net decrease in cash and cash equivalents		(81,910		)		(218,125		)
Cash and cash equivalents at beginning of period		351,899				548,644
Cash and cash equivalents at end of period		269,989				330,519

ARROW ELECTRONICS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
		Six Months Ended
		June 29, 2019				June 30, 2018
Cash flows from operating activities:
Consolidated net income (loss)		$	(405,337	)		$	310,910
Adjustments to reconcile consolidated net income (loss) to net cash provided by (used for) operations:
Depreciation and amortization		94,508				93,669
Amortization of stock-based compensation		27,629				25,662
Equity in losses of affiliated companies		1,085				156
Deferred income taxes		(71,846		)		12,706
Impairments		697,993				—
(Gain) loss on investments, net		(6,738		)		5,015
Other		11,956				5,605
Change in assets and liabilities, net of effects of acquired and disposed businesses:
Accounts receivable		895,553				(73,647		)
Inventories		278,142				(499,917		)
Accounts payable		(1,346,176		)		(240,725		)
Accrued expenses		(71,394		)		(516		)
Other assets and liabilities		(28,956		)		(123,767		)
Net cash provided by (used for) operating activities		76,419				(484,849		)
Cash flows from investing activities:
Cash consideration paid for acquired businesses, net of cash acquired		—				(331,563		)
Proceeds from disposition of businesses		9,460				34,291
Acquisition of property, plant, and equipment		(81,636		)		(66,551		)
Other		2,940				(8,000		)
Net cash used for investing activities		(69,236		)		(371,823		)
Cash flows from financing activities:
Change in short-term and other borrowings		(173,356		)		59,613
Proceeds from long-term bank borrowings, net		118,977				759,334
Redemption of notes		—				(300,000		)
Proceeds from exercise of stock options		9,622				5,985
Repurchases of common stock		(200,924		)		(72,551		)
Other		(147		)		(156		)
Net cash provided by (used for) financing activities		(245,828		)		452,225
Effect of exchange rate changes on cash		(693		)		4,883
Net decrease in cash and cash equivalents		(239,338		)		(399,564		)
Cash and cash equivalents at beginning of period		509,327				730,083
Cash and cash equivalents at end of period		$	269,989			$	330,519

ARROW ELECTRONICS, INC.
NON-GAAP SALES RECONCILIATION
(In thousands)
(Unaudited)
		Quarter Ended
		June 29, 2019				June 30, 2018				% Change
Consolidated sales, as reported		$	7,344,548			$	7,392,528			(0.6	)%
Impact of changes in foreign currencies		—				(147,506		)
Impact of dispositions and wind down		(77,914		)		(113,445		)
Consolidated sales, as adjusted		$	7,266,634			$	7,131,577			1.9	%
Global components sales, as reported		$	5,270,935			$	5,284,364			(0.3	)%
Impact of changes in foreign currencies		—				(99,842		)
Impact of dispositions and wind down		(77,914		)		(100,372		)
Global components sales, as adjusted		$	5,193,021			$	5,084,150			2.1	%
Americas Components sales, as reported		$	1,876,799			$	1,937,882			(3.2	)%
Impact of changes in foreign currencies		—				(1,611		)
Impact of dispositions and wind down		(60,860		)		(73,962		)
Americas Components sales, as adjusted		$	1,815,939			$	1,862,309			(2.5	)%
Europe components sales, as reported		$	1,415,888			$	1,447,972			(2.2	)%
Impact of changes in foreign currencies		—				(81,728		)
Impact of dispositions and wind down		(17,054		)		(26,410		)
Europe components sales, as adjusted		$	1,398,834			$	1,339,834			4.4	%
Asia components sales, as reported		$	1,978,248			$	1,898,510			4.2	%
Impact of changes in foreign currencies		—				(16,503		)
Asia components sales, as adjusted		$	1,978,248			$	1,882,007			5.1	%
Global ECS sales, as reported		$	2,073,613			$	2,108,164			(1.6	)%
Impact of changes in foreign currencies		—				(47,664		)
Impact of dispositions		—				(13,073		)
Global ECS sales, as adjusted		$	2,073,613			$	2,047,427			1.3	%
Europe ECS sales, as reported		$	701,157			$	721,130			(2.8	)%
Impact of changes in foreign currencies		—				(38,339		)
Impact of dispositions		—				(13,073		)
Europe ECS sales, as adjusted		$	701,157			$	669,718			4.7	%
Americas ECS sales, as reported		$	1,372,456			$	1,387,034			(1.1	)%
Impact of changes in foreign currencies		—				(9,325		)
Americas ECS sales, as adjusted		$	1,372,456			$	1,377,709			(0.4	)%

ARROW ELECTRONICS, INC.
NON-GAAP SALES RECONCILIATION
(In thousands)
(Unaudited)
		Six Months Ended
		June 29, 2019				June 30, 2018				% Change
Consolidated sales, as reported		$	14,500,539			$	14,268,141			1.6	%
Impact of changes in foreign currencies		—				(344,336		)
Impact of dispositions and wind down		(172,109		)		(261,608		)
Consolidated sales, as adjusted		$	14,328,430			$	13,662,197			4.9	%
Global components sales, as reported		$	10,462,862			$	10,214,296			2.4	%
Impact of changes in foreign currencies		—				(229,563		)
Impact of dispositions and wind down		(160,968		)		(207,784		)
Global components sales, as adjusted		$	10,301,894			$	9,776,949			5.4	%
Americas Components sales, as reported		$	3,783,828			$	3,734,580			1.3	%
Impact of changes in foreign currencies		—				(4,138		)
Impact of dispositions and wind down		(123,726		)		(152,354		)
Americas Components sales, as adjusted		$	3,660,102			$	3,578,088			2.3	%
Europe components sales, as reported		$	2,919,254			$	2,926,358			(0.2	)%
Impact of changes in foreign currencies		—				(196,117		)
Impact of dispositions and wind down		(37,242		)		(55,430		)
Europe components sales, as adjusted		$	2,882,012			$	2,674,811			7.7	%
Asia components sales, as reported		$	3,759,780			$	3,553,358			5.8	%
Impact of changes in foreign currencies		—				(29,308		)
Asia components sales, as adjusted		$	3,759,780			$	3,524,050			6.7	%
Global ECS sales, as reported		$	4,037,677			$	4,053,845			(0.4	)%
Impact of changes in foreign currencies		—				(114,773		)
Impact of dispositions		(11,141		)		(53,824		)
Global ECS sales, as adjusted		$	4,026,536			$	3,885,248			3.6	%
Europe ECS sales, as reported		$	1,464,314			$	1,471,400			(0.5	)%
Impact of changes in foreign currencies		—				(94,054		)
Impact of dispositions		(11,141		)		(26,331		)
Europe ECS sales, as adjusted		$	1,453,173			$	1,351,015			7.6	%
Americas ECS sales, as reported		$	2,573,363			$	2,582,445			(0.4	)%
Impact of changes in foreign currencies		—				(20,719		)
Impact of dispositions		—				(27,493		)
Americas ECS sales, as adjusted		$	2,573,363			$	2,534,233			1.5	%

ARROW ELECTRONICS, INC.
NON-GAAP EARNINGS RECONCILIATION
(In thousands except per share data)
(Unaudited)
Three months ended June 29, 2019
		Reported GAAP measure			Intangible amortization expense			Restructuring & Integration charges			AFS Write Downs			Digital Write Downs			Impairments(1)			Impact of Wind Down(6)			Other(2)			Non-GAAP measure
Sales		$	7,344,548		$	—		$	—		$	—		$	—		$	—		$	(77,914	)	$	—		$	7,266,634
Gross Profit		814,909			—			—			1,868			20,114			—			4,305			—			841,196
Operating income		(549,190		)	8,665			19,906			15,851			20,114			623,085			104,219			—			242,650
Income before income taxes		(600,120		)	8,665			19,906			15,851			20,114			623,085			104,229			(1,390		)	190,340
Provision for income taxes		(52,369		)	2,463			4,865			3,910			4,962			64,246			24,730			(382		)	52,425
Consolidated net income		(547,751		)	6,202			15,041			11,941			15,152			558,839			79,499			(1,008		)	137,915
Noncontrolling interests		1,215			140			—			—			—			—			—			—			1,355
Net income attributable to shareholders		$	(548,966	)	$	6,062		$	15,041		$	11,941		$	15,152		$	558,839		$	79,499		$	(1,008	)	$	136,560
Net income per diluted share(5)		$	(6.48	)	$	0.07		$	0.18		$	0.14		$	0.18		$	6.60		$	0.94		$	(0.01	)	$	1.60
Effective tax rate		8.7		%																						27.5		%
Three months ended June 30, 2018
		Reported GAAP measure			Intangible amortization expense			Restructuring & Integration charges			AFS Write Downs			Digital Write Downs			Impairments			Impact of Wind Down(6)			Other(2)			Non-GAAP measure
Sales		$	7,392,528		$	—		$	—		$	—		$	—		$	—		$	(100,372	)	$	—		$	7,292,156
Gross Profit		932,820			—			—			—			—			—			(17,079		)	—			915,741
Operating income		286,827			9,161			11,654			—			—			—			9,482			—			317,124
Income before income taxes		222,721			9,161			11,654			—			—			—			9,536			2,563			255,635
Provision for income taxes		51,681			2,540			2,893			—			—			—			2,545			631			60,290
Consolidated net income		171,040			6,621			8,761			—			—			—			6,991			1,932			195,345
Noncontrolling interests		1,125			149			—			—			—			—			—			—			1,274
Net income attributable to shareholders		$	169,915		$	6,472		$	8,761		$	—		$	—		$	—		$	6,991		$	1,932		$	194,071
Net income per diluted share		$	1.92		$	0.07		$	0.10		$	—		$	—		$	—		$	0.08		$	0.02		$	2.19
Effective tax rate		23.2		%																						23.6		%

ARROW ELECTRONICS, INC.
NON-GAAP EARNINGS RECONCILIATION
(In thousands except per share data)
(Unaudited)
Six months ended June 29, 2019
		Reported GAAP measure			Intangible amortization expense			Restructuring & Integration charges			AFS Write Downs			Digital Write Downs			Impairments(1)			Impact of Wind Down(6)			Other(3)			Non-GAAP measure
Sales		$	14,500,539		$	—		$	—		$	—		$	—		$	—		$	(160,968	)	$	—		$	14,339,571
Gross Profit		1,676,597			—			—			1,868			20,114			—			(3,822		)	—			1,694,757
Operating income		(303,630		)	17,807			30,992			15,851			20,114			623,085			114,415			866			519,500
Income before income taxes		(403,799		)	17,807			30,992			15,851			20,114			623,085			114,572			(5,872		)	412,750
Provision for income taxes		1,538			5,003			7,576			3,910			4,962			64,246			27,258			(5,203		)	109,290
Consolidated net income		(405,337		)	12,804			23,416			11,941			15,152			558,839			87,314			(669		)	303,460
Noncontrolling interests		2,894			282			—			—			—			—			—			—			3,176
Net income attributable to shareholders		$	(408,231	)	$	12,522		$	23,416		$	11,941		$	15,152		$	558,839		$	87,314		$	(669	)	$	300,284
Net income per diluted share(5)		$	(4.80	)	$	0.15		$	0.28		$	0.14		$	0.18		$	6.57		$	1.03		$	(0.01	)	$	3.50
Effective tax rate		(0.4		)%																						26.5		%
Six months ended June 30, 2018
		Reported GAAP measure			Intangible amortization expense			Restructuring & Integration charges			AFS Write Downs			Digital Write Downs			Impairments			Impact of Wind Down(6)			Other(4)			Non-GAAP measure
Sales		$	14,268,141		$	—		$	—		$	—		$	—		$	—		$	(207,784	)	$	—		$	14,060,357
Gross Profit		1,801,764			—			—			—			—			—			(36,747		)	—			1,765,017
Operating income		522,822			19,877			28,560			—			—			—			14,828			1,562			587,649
Income before income taxes		409,181			19,877			28,560			—			—			—			14,928			6,577			479,123
Provision for income taxes		98,271			5,471			7,575			—			—			—			4,092			1,413			116,822
Consolidated net income		310,910			14,406			20,985			—			—			—			10,836			5,164			362,301
Noncontrolling interests		1,901			302			—			—			—			—			—			—			2,203
Net income attributable to shareholders		$	309,009		$	14,104		$	20,985		$	—		$	—		$	—		$	10,836		$	5,164		$	360,098
Net income per diluted share(5)		$	3.48		$	0.16		$	0.24		$	—		$	—		$	—		$	0.12		$	0.06		$	4.05
Effective tax rate		24.0		%																						24.4		%
(1) Impairments include goodwill impairments of $570,175, tradename impairments of $46,000, and $6,910 in impairment charges related to various other fixed assets.
(2) Other includes gain (loss) on investments, net
(3) Other includes loss on disposition of businesses, net and gain (loss) on investments, net and impact of Tax Act.
(4) Other includes loss on disposition of businesses, net and gain (loss) on investments, net.
(5) For the three months and six months ended June 29, 2019, the non-GAAP net income per diluted share calculation includes 649 thousand shares and 758 thousand shares, respectively, that were excluded from the GAAP net income per diluted share calculation. Additionally, in all periods presented the sum of the components for diluted EPS, as adjusted may not agree to totals, as presented, due to rounding.
(6) Amounts for restructuring, integration, and other charges, and identifiable intangible asset amortization related to the personal computer and mobility asset disposition business are included in “impact of wind down” above.

ARROW ELECTRONICS, INC.
SEGMENT INFORMATION
(In thousands)
(Unaudited)
		Quarter Ended								Six Months Ended
		June 29, 2019				June 30, 2018				June 29, 2019				June 30, 2018
Sales:
Global components		$	5,270,935			$	5,284,364			$	10,462,862			$	10,214,296
Global ECS		2,073,613				2,108,164				4,037,677				4,053,845
Consolidated		$	7,344,548			$	7,392,528			$	14,500,539			$	14,268,141
Operating income (loss):
Global components		$	(561,878	)		$	253,840			$	(327,346	)		$	483,386
Global ECS		98,388				109,417				185,106				193,223
Corporate (a)		(85,700		)		(76,430		)		(161,390		)		(153,787		)
Consolidated		$	(549,190	)		$	286,827			$	(303,630	)		$	522,822

(a)

Includes restructuring, integration, and other charges of $19.9 million and $31.6 million for the second quarter and first six months of 2019, and $19.2 million and $40.4 million for the second quarter and first six months of 2018, respectively.

NON-GAAP SEGMENT RECONCILIATION
		Quarter Ended								Six Months Ended
		June 29, 2019				June 30, 2018				June 29, 2019				June 30, 2018
Global components operating income, as reported		$	(561,878	)		$	253,840			$	(327,346	)		$	483,386
Intangible assets amortization expense (b)		5,807				5,900				12,060				11,695
Impairments		623,085				—				623,085				—
Impact of wind-down (b)		104,213				1,953				113,835				3,034
AFS notes receivable reserve		15,851				—				15,851				—
Digital inventory reserve		20,114				—				20,114				—
Global components operating income, as adjusted		$	207,192			$	261,693			$	457,599			$	498,115
Global ECS operating income, as reported		$	98,388			$	109,417			$	185,106			$	193,223
Intangible assets amortization expense		2,858				3,261				5,747				8,182
Global ECS operating income, as adjusted		$	101,246			$	112,678			$	190,853			$	201,405

(b)

Impact of wind down includes intangible asset amortization expense related to the personal computer and mobility asset disposition business. Impact of wind down excludes restructuring, integration, and other charges as they are reported on the corporate entity.

ARROW ELECTRONICS, INC.
NON-GAAP EARNINGS RECONCILIATIONS ADJUSTED FOR WIND DOWN
(In thousands except per share data)
(Unaudited)
Below are previously reported non-GAAP earnings reconciliations for the years 2017, 2018 and 2019 adjusted to exclude the personal computer and mobility asset disposition business (referred to as "impact of wind down").
Three months ended March 30, 2019
	Reported GAAP measure			Intangible amortization expense			Restructuring & Integration charges			AFS Write Downs			Digital Write Downs			Impairments(1)			Impact of Wind Down(8)			Other(2)			Non-GAAP measure
Sales	$	7,155,991		$	—		$	—		$	—		$	—		$	—		$	(83,054	)	$	—		7,072,937
Gross Profit	861,688			—			—			—			—			—			(8,127		)	—			853,561
Operating income	245,560			9,142			11,086			—			—			—			10,196			866			276,850
Income before income taxes	196,321			9,142			11,086			—			—			—			10,343			(4,482		)	222,410
Provision for income taxes	53,907			2,540			2,711			—			—			—			2,528			(4,821		)	56,865
Consolidated net income	142,414			6,602			8,375			—			—			—			7,815			339			165,545
Noncontrolling interests	1,679			142			—			—			—			—			—			—			1,821
Net income attributable to shareholders	$	140,735		$	6,460		$	8,375		$	—		$	—		$	—		$	7,815		$	339		$	163,724
Net income per diluted share(4)	$	1.63		$	0.07		$	0.10		$	—		$	—		$	—		$	0.09		$	—		$	1.90
Effective tax rate	27.5		%																						25.6		%

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			Impact of Tax Reform			Impact of Wind Down(8)			Other(5)			Non-GAAP measure
Sales		$	6,875,613		$	—		$	—		$	—		$	(107,412	)	$	—		$	6,768,201
Gross profit		868,944			—			—			—			(19,668		)	—			849,276
Operating income		235,995			10,716			16,906			—			5,346			1,562			270,525
Income before income taxes		186,460			10,716			16,906			—			5,392			4,014			223,488
Provision for income taxes		46,590			2,931			4,682			—			1,547			782			56,532
Consolidated net income		139,870			7,785			12,224			—			3,845			3,232			166,956
Noncontrolling interests		776			153			—			—			—			—			929
Net income attributable to shareholders		$	139,094		$	7,632		$	12,224		$	—		$	3,845		$	3,232		$	166,027
Net income per diluted share(4)		$	1.56		$	0.09		$	0.14		$	—		$	0.04		$	0.04		$	1.86
Effective tax rate		25.0		%																25.3		%
Three months ended June 30, 2018
		Reported GAAP measure			Intangible amortization expense			Restructuring & Integration charges			Impact of Tax Reform			Impact of Wind Down(8)			Other(3)			Non-GAAP measure
Sales		$	7,392,528		$	—		$	—		$	—		$	(100,372	)	$	—		$	7,292,156
Gross profit		932,820			—			—			—			(17,079		)	—			915,741
Operating income		286,827			9,161			11,654			—			9,482			—			317,124
Income before income taxes		222,721			9,161			11,654			—			9,536			2,563			255,635
Provision for income taxes		51,681			2,540			2,893			—			2,545			631			60,290
Consolidated net income		171,040			6,621			8,761			—			6,991			1,932			195,345
Noncontrolling interests		1,125			149			—			—			—			—			1,274
Net income attributable to shareholders		$	169,915		$	6,472		$	8,761		$	—		$	6,991		$	1,932		$	194,071
Net income per diluted share		$	1.92		$	0.07		$	0.10		$	—		$	0.08		$	0.02		$	2.19
Effective tax rate		23.2		%																23.6		%
Three months ended September 30, 2018
		Reported GAAP measure			Intangible amortization expense			Restructuring & Integration charges			Impact of Tax Reform			Impact of Wind Down(8)			Other(5)			Non-GAAP measure
Sales		$	7,490,445		$	—		$	—		$	—		$	(104,958	)	$	—		$	7,385,487
Gross profit		923,778			—			—			—			(17,397		)	—			906,381
Operating income		290,310			8,845			9,611			—			611			2,042			311,419
Income before income taxes		235,227			8,845			9,611			—			633			972			255,288
Provision for income taxes		57,054			2,539			2,454			—			304			240			62,591
Consolidated net income		178,173			6,306			7,157			—			329			732			192,697
Noncontrolling interests		1,640			145			—			—			—			—			1,785
Net income attributable to shareholders		$	176,533		$	6,161		$	7,157		$	—		$	329		$	732		$	190,912
Net income per diluted share		$	1.99		$	0.07		$	0.08		$	—		$	—		$	0.01		$	2.15
Effective tax rate		24.3		%																24.5		%
Three months ended December 31, 2018
		Reported GAAP measure			Intangible amortization expense			Restructuring & Integration charges			Impact of Tax Reform			Impact of Wind Down(8)			Other(6)			Non-GAAP measure
Sales		$	7,918,182		$	—		$	—		$	—		$	(102,965	)	$	—		$	7,815,217
Gross profit		975,370			—			—			—			(16,947		)	—			958,423
Operating income		334,380			9,493			11,126			—			4,471			—			359,470
Income before income taxes		264,965			9,493			11,126			—			4,114			11,886			301,584
Provision for income taxes		32,474			2,772			4,786			28,323			1,635			3,025			73,015
Consolidated net income		232,491			6,721			6,340			(28,323		)	2,479			8,861			228,569
Noncontrolling interests		1,838			142			—			—			—			—			1,980
Net income attributable to shareholders		$	230,653		$	6,579		$	6,340		$	(28,323	)	$	2,479		$	8,861		$	226,589
Net income per diluted share		$	2.63		$	0.08		$	0.07		$	(0.32	)	$	0.03		$	0.10		$	2.59
Effective tax rate		12.3		%																24.2		%

ARROW ELECTRONICS, INC.
NON-GAAP EARNINGS RECONCILIATION
(In thousands except per share data)
(Unaudited)
Twelve months ended December 31, 2018
		Reported GAAP measure			Intangible amortization expense			Restructuring & Integration charges			Impact of Tax Reform			Impact of Wind Down(8)			Other(7)			Non-GAAP measure
Sales		$	29,676,768		$	—		$	—		$	—		$	(415,707	)	$	—		$	29,261,061
Gross profit		3,700,912			—			—			—			(71,091		)	—			3,629,821
Operating income		1,147,512			38,215			49,297			—			19,910			3,604			1,258,538
Income before income taxes		909,373			38,215			49,297			—			19,675			19,435			1,035,995
Provision for income taxes		187,799			10,782			14,815			28,323			6,031			4,678			252,428
Consolidated net income		721,574			27,433			34,482			(28,323		)	13,644			14,757			783,567
Noncontrolling interests		5,379			589			—			—			—			—			5,968
Net income attributable to shareholders		$	716,195		$	26,844		$	34,482		$	(28,323	)	$	13,644		$	14,757		$	777,599
Net income per diluted share		$	8.10		$	0.30		$	0.39		$	(0.32	)	$	0.15		$	0.17		$	8.79
Effective tax rate		20.7		%																24.4		%
Twelve months ended December 31, 2017 (Adjusted)
		Reported GAAP measure			Intangible amortization expense			Restructuring & Integration charges			Impact of Tax Reform			Impact of Wind Down(8)			Other(7)			Non-GAAP measure
Sales		$	26,554,563		$	—		$	—		$	—		$	(387,953	)	$	—		$	26,166,610
Gross profit		3,356,968			—			—			—			(80,834		)	—			3,276,134
Operating income		945,736			38,684			71,707			—			10,045			21,000			1,087,172
Income before income taxes		693,917			38,684			71,707			—			10,254			103,828			918,390
Provision for income taxes		286,541			13,790			21,753			(124,748		)	6,597			40,070			244,003
Consolidated net income		407,376			24,894			49,954			124,748			3,657			63,758			674,387
Noncontrolling interests		5,200			701			—			—			—			—			5,901
Net income attributable to shareholders		$	402,176		$	24,193		$	49,954		$	124,748		$	3,657		$	63,758		$	668,486
Net income per diluted share		$	4.48		$	0.27		$	0.56		$	1.39		$	0.04		$	0.71		$	7.45
Effective tax rate		41.3		%																26.6		%
(1) Impairments for the three months ended June 29, 2019 include goodwill impairments of $570,175, tradename impairments of $46,000, and $6,910 in impairment charges related to various other fixed assets.
(2) Other includes loss on disposition of businesses, net and gain (loss) on investments, net and impact of Tax Act.
(3) Other includes gain (loss) on investments, net
(4) The sum of the components for diluted EPS, as adjusted may not agree to totals, as presented, due to rounding.
(5) Other includes gain (loss) on investments, net and loss on disposition of businesses, net.
(6) Other includes gain (loss) on investments, net and pension settlement.
(7) Other includes loss on disposition of businesses, net and gain (loss) on investments, net and pension settlement.
(8) Amounts for restructuring, integration, and other charges, and identifiable intangible asset amortization related to the personal computer and mobility asset disposition business are included in “impact of wind down” above.

 

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