8-K
Arrow Electronics, Inc. (ARW)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): February 4, 2021
ARROW ELECTRONICS INC
(Exact Name of Registrant as Specified in charter)
| New York | 1-4482 | 11-1806155 | |
|---|---|---|---|
| (State or other jurisdiction | (Commission | (IRS Employer | |
| of Incorporation) | File Number) | Identification No.) | |
| 9201 East Dry Creek Road, | Centennial, | CO | 80112 |
| --- | --- | --- | --- |
| (Address of principal executive offices) | (Zip Code) |
Registrant's telephone number, including area code: (303) 824-4000
Not Applicable
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
| ☐ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
|---|---|
| ☐ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| ☐ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
| ☐ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of the exchange on which registered |
|---|---|---|
| Common Stock, $1 par value | ARW | New York Stock Exchange |
Indicate by check whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
☐
ITEM 2.02 RESULTS OF OPERATIONS AND FINANCIAL CONDITION
On February 4, 2021, the Registrant issued a press release announcing its fourth quarter and fiscal year 2020 earnings. A copy of the press release is attached hereto as an Exhibit (99.1).
On February 4, 2021, the Registrant also issued a press release containing a fourth quarter and fiscal year 2020 CFO commentary related to its fourth quarter and fiscal year 2020 earnings. A copy of that press release is attached hereto as an Exhibit (99.2).
The information in this Current Report on Form 8-K and Exhibits 99.1 and 99.2 attached hereto is being furnished and shall not be deemed "filed" for any purpose, including for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended or the Exchange Act, whether made before or after the date hereof, regardless of any general incorporation language in such filing.
ITEM 9.01 FINANCIAL STATEMENTS AND EXHIBITS
(d) EXHIBITS
| Exhibit Number | Description |
|---|---|
| 99.1 | Earnings press release issued by Arrow Electronics, Inc. dated February 4, 2021. |
| 99.2 | CFO Commentary press release issued by Arrow Electronics, Inc., dated February 4, 2021. |
| 104 | Cover Page Interactive Data File (embedded within the Inline XBRL document) |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| ARROW ELECTRONICS, INC. | |||
|---|---|---|---|
| Date: | February 4, 2021 | By: | /s/ Carine Jean-Claude |
| Carine Jean-Claude | |||
| Vice President, Interim Chief Legal Officer |
Document
| ARROW ELECTRONICS, INC.<br><br>9201 E. DRY CREEK ROAD<br><br>CENTENNIAL, CO 80112<br><br>303-824-4000 | NEWS |
|---|
Exhibit 99.1
Arrow Electronics Reports Fourth-Quarter and Year-End 2020 Results
-- Fourth-Quarter Earnings Per Share of $3.08; Non-GAAP Earnings Per Share of $3.17 --
-- Full-Year Cash Provided by Operating Activities of $1.36 Billion --
CENTENNIAL, Colo.--(BUSINESS WIRE)-Feb. 4, 2021--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 RESULTS
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
•Consolidated sales of $7.625 billion to $8.225 billion, with global components sales of $5.825 billion to $6.125 billion, and global enterprise computing solutions sales of $1.8 billion to $2.1 billion
•Net income per share on a diluted basis of $2.02 to $2.18, and non-GAAP net income per share on a diluted basis1 of $2.17 to $2.33
•Average tax rate of approximately 24.5% percent compared to the long-term range of 23 to 25 percent
•Average diluted shares outstanding of 76 million
•Interest expense of approximately $31 million
•Expecting average USD-to-Euro exchange rate of $1.23 to €1; changes in foreign currencies to increase sales by approximately $235 million, and earnings per share on a diluted basis by $.12 compared to the first quarter of 2020
| First-Quarter 2021 Outlook | ||||
|---|---|---|---|---|
| Reported GAAP measure | Intangible amortization expense | Restructuring & integration charges | Non-GAAP measure | |
| Net income per diluted share | $2.02 to $2.18 | $.09 | $.06 | $2.17 to $2.33 |
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.
| ARROW ELECTRONICS, INC. | ||||||||
|---|---|---|---|---|---|---|---|---|
| CONSOLIDATED STATEMENTS OF OPERATIONS | ||||||||
| (In thousands except per share data) | ||||||||
| Quarter Ended | Year Ended | |||||||
| December 31, 2020 | December 31, 2019 | December 31, 2020 | December 31, 2019 | |||||
| (Unaudited) | (Unaudited) | |||||||
| Sales | $ | 8,454,192 | $ | 7,338,190 | $ | 28,673,363 | $ | 28,916,847 |
| Cost of sales | 7,530,506 | 6,515,247 | 25,482,233 | 25,618,466 | ||||
| Gross profit | 923,686 | 822,943 | 3,191,130 | 3,298,381 | ||||
| Operating expenses: | ||||||||
| Selling, general, and administrative expenses | 547,530 | 513,878 | 2,087,050 | 2,191,612 | ||||
| Depreciation and amortization | 48,404 | 50,051 | 189,058 | 189,790 | ||||
| Loss on disposition of businesses, net | — | 5,813 | — | 21,252 | ||||
| Impairments | — | — | 7,223 | 698,246 | ||||
| Restructuring, integration, and other charges | 6,340 | 15,093 | 13,288 | 89,785 | ||||
| 602,274 | 584,835 | 2,296,619 | 3,190,685 | |||||
| Operating income | 321,412 | 238,108 | 894,511 | 107,696 | ||||
| Equity in losses of affiliated companies | (839) | (610) | (531) | (2,765) | ||||
| Gain on investments, net | 8,531 | 3,967 | 5,348 | 11,831 | ||||
| Employee benefit plan expense, net | (1,172) | (21,500) | (2,859) | (24,849) | ||||
| Interest and other financing expense, net | (31,614) | (50,317) | (137,210) | (203,743) | ||||
| Income (loss) before income taxes | 296,318 | 169,648 | 759,259 | (111,830) | ||||
| Provision for income taxes | 59,342 | 57,460 | 172,795 | 88,338 | ||||
| Consolidated net income (loss) | 236,976 | 112,188 | 586,464 | (200,168) | ||||
| Noncontrolling interests | 905 | 175 | 2,026 | 3,919 | ||||
| Net income (loss) attributable to shareholders | $ | 236,071 | $ | 112,013 | $ | 584,438 | $ | (204,087) |
| Net income (loss) per share: | ||||||||
| Basic | $ | 3.12 | $ | 1.37 | $ | 7.49 | $ | (2.44) |
| Diluted | $ | 3.08 | $ | 1.36 | $ | 7.43 | $ | (2.44) |
| Weighted average shares outstanding: | ||||||||
| Basic | 75,701 | 81,613 | 77,992 | 83,568 | ||||
| Diluted | 76,574 | 82,493 | 78,635 | 83,568 | ||||
| ARROW ELECTRONICS, INC. | ||||||||
| --- | --- | --- | --- | |||||
| CONSOLIDATED BALANCE SHEETS | ||||||||
| (In thousands except par value) | ||||||||
| December 31, 2019 | ||||||||
| ASSETS | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents | 373,615 | $ | 300,103 | |||||
| Accounts receivable, net | 8,482,687 | |||||||
| Inventories | 3,477,120 | |||||||
| Other current assets | 266,249 | |||||||
| Total current assets | 12,526,159 | |||||||
| Property, plant, and equipment, at cost: | ||||||||
| Land | 7,793 | |||||||
| Buildings and improvements | 173,370 | |||||||
| Machinery and equipment | 1,481,525 | |||||||
| 1,662,688 | ||||||||
| Less: Accumulated depreciation and amortization | (859,578) | |||||||
| Property, plant, and equipment, net | 803,110 | |||||||
| Investments in affiliated companies | 86,942 | |||||||
| Intangible assets, net | 271,903 | |||||||
| Goodwill | 2,061,322 | |||||||
| Other assets | 651,360 | |||||||
| Total assets | 17,053,911 | $ | 16,400,796 | |||||
| LIABILITIES AND EQUITY | ||||||||
| Current liabilities: | ||||||||
| Accounts payable | 7,937,889 | $ | 7,046,221 | |||||
| Accrued expenses | 880,507 | |||||||
| Short-term borrowings, including current portion of long-term debt | 331,431 | |||||||
| Total current liabilities | 8,258,159 | |||||||
| Long-term debt | 2,640,129 | |||||||
| Other liabilities | 636,115 | |||||||
| Equity: | ||||||||
| Shareholders' equity: | ||||||||
| Common stock, par value 1: | ||||||||
| Authorized – 160,000 shares in both 2020 and 2019 | ||||||||
| Issued – 125,424 shares in both 2020 and 2019 | 125,424 | |||||||
| Capital in excess of par value | 1,150,006 | |||||||
| Treasury stock (50,581 and 44,804 shares in 2020 and 2019, respectively), at cost | (2,332,548) | |||||||
| Retained earnings | 6,131,248 | |||||||
| Accumulated other comprehensive loss | (262,211) | |||||||
| Total shareholders' equity | 4,811,919 | |||||||
| Noncontrolling interests | 54,474 | |||||||
| Total equity | 4,866,393 | |||||||
| Total liabilities and equity | 17,053,911 | $ | 16,400,796 |
All values are in US Dollars.
| ARROW ELECTRONICS, INC. | |||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| CONSOLIDATED STATEMENTS OF CASH FLOWS | |||||||||||||||||||||
| (In thousands) | |||||||||||||||||||||
| (Unaudited) | |||||||||||||||||||||
| Quarter Ended | |||||||||||||||||||||
| December 31, 2020 | December 31, 2019 | ||||||||||||||||||||
| Cash flows from operating activities: | |||||||||||||||||||||
| Consolidated net income | $ | 236,976 | $ | 112,188 | |||||||||||||||||
| Adjustments to reconcile consolidated net income to net cash provided by operations: | |||||||||||||||||||||
| Depreciation and amortization | 48,404 | 50,051 | |||||||||||||||||||
| Amortization of stock-based compensation | 6,686 | 6,321 | |||||||||||||||||||
| Equity in losses of affiliated companies | 839 | 610 | |||||||||||||||||||
| Deferred income taxes | (9,263) | 15,196 | |||||||||||||||||||
| Gain on investments, net | (8,531) | (3,840) | |||||||||||||||||||
| Loss on disposition of businesses, net | — | 5,813 | |||||||||||||||||||
| Pension settlement loss | — | 20,111 | |||||||||||||||||||
| Other | 1,016 | (155) | |||||||||||||||||||
| Change in assets and liabilities, net of effects of acquired and disposed businesses: | |||||||||||||||||||||
| Accounts receivable, net | (1,074,997) | (578,059) | |||||||||||||||||||
| Inventories | (16,248) | 40,448 | |||||||||||||||||||
| Accounts payable | 988,883 | 827,614 | |||||||||||||||||||
| Accrued expenses | 57,330 | 43,649 | |||||||||||||||||||
| Other assets and liabilities | (31,089) | (45,145) | |||||||||||||||||||
| Net cash provided by operating activities | 200,006 | 494,802 | |||||||||||||||||||
| Cash flows from investing activities: | |||||||||||||||||||||
| Cash paid on disposition of businesses | — | (11,769) | |||||||||||||||||||
| Acquisition of property, plant, and equipment | (34,030) | (30,111) | |||||||||||||||||||
| Cash paid for customer relationship intangible asset | — | (7,616) | |||||||||||||||||||
| Other | (627) | (4,127) | |||||||||||||||||||
| Net cash used for investing activities | (34,657) | (53,623) | |||||||||||||||||||
| Cash flows from financing activities: | |||||||||||||||||||||
| Change in short-term and other borrowings | (8,862) | (20,794) | |||||||||||||||||||
| Repayment of long-term bank borrowings, net | (135) | (308,047) | |||||||||||||||||||
| Proceeds from exercise of stock options | 15,074 | 5,201 | |||||||||||||||||||
| Repurchases of common stock | (98,985) | (100,009) | |||||||||||||||||||
| Net cash used for financing activities | (92,908) | (423,649) | |||||||||||||||||||
| Effect of exchange rate changes on cash | 74,155 | 20,319 | |||||||||||||||||||
| Net increase in cash and cash equivalents | 146,596 | 37,849 | |||||||||||||||||||
| Cash and cash equivalents at beginning of period | 227,019 | 262,254 | |||||||||||||||||||
| Cash and cash equivalents at end of period | $ | 373,615 | $ | 300,103 | |||||||||||||||||
| ARROW ELECTRONICS, INC. | |||||||||||||||||||||
| --- | --- | --- | --- | --- | |||||||||||||||||
| CONSOLIDATED STATEMENTS OF CASH FLOWS | |||||||||||||||||||||
| (In thousands) | |||||||||||||||||||||
| Year Ended | |||||||||||||||||||||
| December 31, 2020 | December 31, 2019 | ||||||||||||||||||||
| Cash flows from operating activities: | |||||||||||||||||||||
| Consolidated net income (loss) | $ | 586,464 | $ | (200,168) | |||||||||||||||||
| Adjustments to reconcile consolidated net income (loss) to net cash provided by operations: | |||||||||||||||||||||
| Depreciation and amortization | 189,058 | 189,790 | |||||||||||||||||||
| Amortization of stock-based compensation | 35,288 | 41,070 | |||||||||||||||||||
| Equity in losses of affiliated companies | 531 | 2,765 | |||||||||||||||||||
| Deferred income taxes | 29,713 | (50,288) | |||||||||||||||||||
| Impairments | 7,223 | 698,246 | |||||||||||||||||||
| Gain on investments, net | (5,333) | (11,462) | |||||||||||||||||||
| Loss on disposition of businesses, net | — | 21,252 | |||||||||||||||||||
| Pension settlement loss | — | 20,111 | |||||||||||||||||||
| Other | 5,059 | 10,659 | |||||||||||||||||||
| Change in assets and liabilities, net of effects of acquired and disposed businesses: | |||||||||||||||||||||
| Accounts receivable, net | (541,427) | 338,849 | |||||||||||||||||||
| Inventories | 244,325 | 383,058 | |||||||||||||||||||
| Accounts payable | 760,883 | (521,575) | |||||||||||||||||||
| Accrued expenses | 86,484 | (27,475) | |||||||||||||||||||
| Other assets and liabilities | (38,425) | (36,837) | |||||||||||||||||||
| Net cash provided by operating activities | 1,359,843 | 857,995 | |||||||||||||||||||
| Cash flows from investing activities: | |||||||||||||||||||||
| Cash paid on disposition of businesses | — | (13,094) | |||||||||||||||||||
| Acquisition of property, plant, and equipment | (123,585) | (143,191) | |||||||||||||||||||
| Cash paid for customer relationship intangible asset | (713) | (7,616) | |||||||||||||||||||
| Other | (14,496) | (9,682) | |||||||||||||||||||
| Net cash used for investing activities | (138,794) | (173,583) | |||||||||||||||||||
| Cash flows from financing activities: | |||||||||||||||||||||
| Change in short-term and other borrowings | (95,017) | (113,923) | |||||||||||||||||||
| Repayments of long-term bank borrowings, net | (411,497) | (405,007) | |||||||||||||||||||
| Redemption of notes | (209,366) | — | |||||||||||||||||||
| Proceeds from exercise of stock options | 21,037 | 16,911 | |||||||||||||||||||
| Repurchases of common stock | (483,735) | (404,203) | |||||||||||||||||||
| Settlement of forward-starting interest rate swap | (48,378) | — | |||||||||||||||||||
| Other | (141) | (147) | |||||||||||||||||||
| Net cash used for financing activities | (1,227,097) | (906,369) | |||||||||||||||||||
| Effect of exchange rate changes on cash | 79,560 | 12,733 | |||||||||||||||||||
| Net increase (decrease) in cash and cash equivalents | 73,512 | (209,224) | |||||||||||||||||||
| Cash and cash equivalents at beginning of period | 300,103 | 509,327 | |||||||||||||||||||
| Cash and cash equivalents at end of period | $ | 373,615 | $ | 300,103 | |||||||||||||||||
| ARROW ELECTRONICS, INC. | |||||||||||||||||||||
| --- | --- | --- | --- | --- | --- | --- | |||||||||||||||
| NON-GAAP SALES RECONCILIATION | |||||||||||||||||||||
| (In thousands) | |||||||||||||||||||||
| (Unaudited) | |||||||||||||||||||||
| Quarter Ended | |||||||||||||||||||||
| December 31, 2020 | December 31, 2019 | % Change | |||||||||||||||||||
| Consolidated sales, as reported | $ | 8,454,192 | $ | 7,338,190 | 15.2 | % | |||||||||||||||
| Impact of changes in foreign currencies | — | 161,114 | |||||||||||||||||||
| Impact of wind down | — | (19,375) | |||||||||||||||||||
| Non-GAAP consolidated sales | $ | 8,454,192 | $ | 7,479,929 | 13.0 | % | |||||||||||||||
| Global components sales, as reported | $ | 5,923,094 | $ | 4,738,993 | 25.0 | % | |||||||||||||||
| Impact of changes in foreign currencies | — | 92,052 | |||||||||||||||||||
| Impact of wind down | — | (19,375) | |||||||||||||||||||
| Non-GAAP global components sales | $ | 5,923,094 | $ | 4,811,670 | 23.1 | % | |||||||||||||||
| Americas components sales, as reported | $ | 1,625,458 | $ | 1,644,757 | (1.2) | % | |||||||||||||||
| Impact of changes in foreign currencies | — | (589) | |||||||||||||||||||
| Impact of wind down | — | (19,239) | |||||||||||||||||||
| Non-GAAP Americas components sales | $ | 1,625,458 | $ | 1,624,929 | — | % | |||||||||||||||
| Europe components sales, as reported | $ | 1,362,455 | $ | 1,189,016 | 14.6 | % | |||||||||||||||
| Impact of changes in foreign currencies | — | 79,652 | |||||||||||||||||||
| Impact of wind down | — | (136) | |||||||||||||||||||
| Non-GAAP Europe components sales | $ | 1,362,455 | $ | 1,268,532 | 7.4 | % | |||||||||||||||
| Asia components sales, as reported | $ | 2,935,181 | $ | 1,905,220 | 54.1 | % | |||||||||||||||
| Impact of changes in foreign currencies | — | 12,989 | |||||||||||||||||||
| Non-GAAP Asia components sales | $ | 2,935,181 | $ | 1,918,209 | 53.0 | % | |||||||||||||||
| Global ECS sales, as reported | $ | 2,531,098 | $ | 2,599,197 | (2.6) | % | |||||||||||||||
| Impact of changes in foreign currencies | — | 69,062 | |||||||||||||||||||
| Non-GAAP global ECS sales | $ | 2,531,098 | $ | 2,668,259 | (5.1) | % | |||||||||||||||
| Europe ECS sales, as reported | $ | 1,047,461 | $ | 959,449 | 9.2 | % | |||||||||||||||
| Impact of changes in foreign currencies | — | 68,905 | |||||||||||||||||||
| Non-GAAP Europe ECS sales | $ | 1,047,461 | $ | 1,028,354 | 1.9 | % | |||||||||||||||
| Americas ECS sales, as reported | $ | 1,483,637 | $ | 1,639,748 | (9.5) | % | |||||||||||||||
| Impact of changes in foreign currencies | — | 157 | |||||||||||||||||||
| Non-GAAP Americas ECS sales | $ | 1,483,637 | $ | 1,639,905 | (9.5) | % | |||||||||||||||
| ARROW ELECTRONICS, INC. | |||||||||||||||||||||
| --- | --- | --- | --- | --- | --- | --- | |||||||||||||||
| NON-GAAP SALES RECONCILIATION | |||||||||||||||||||||
| (In thousands) | |||||||||||||||||||||
| (Unaudited) | |||||||||||||||||||||
| Year Ended | |||||||||||||||||||||
| December 31, 2020 | December 31, 2019 | % Change | |||||||||||||||||||
| Consolidated sales, as reported | $ | 28,673,363 | $ | 28,916,847 | (0.8) | % | |||||||||||||||
| Impact of changes in foreign currencies | — | 119,002 | |||||||||||||||||||
| Impact of wind down and dispositions | — | (251,614) | |||||||||||||||||||
| Non-GAAP consolidated sales | $ | 28,673,363 | $ | 28,784,235 | (0.4) | % | |||||||||||||||
| Global components sales, as reported | $ | 20,502,687 | $ | 20,250,735 | 1.2 | % | |||||||||||||||
| Impact of changes in foreign currencies | — | 70,485 | |||||||||||||||||||
| Impact of wind down | — | (240,473) | |||||||||||||||||||
| Non-GAAP global components sales | $ | 20,502,687 | $ | 20,080,747 | 2.1 | % | |||||||||||||||
| Americas components sales, as reported | $ | 6,183,119 | $ | 7,167,295 | (13.7) | % | |||||||||||||||
| Impact of changes in foreign currencies | — | (4,758) | |||||||||||||||||||
| Impact of wind down | — | (189,963) | |||||||||||||||||||
| Non-GAAP Americas components sales | $ | 6,183,119 | $ | 6,972,574 | (11.3) | % | |||||||||||||||
| Europe components sales, as reported | $ | 4,987,534 | $ | 5,412,379 | (7.8) | % | |||||||||||||||
| Impact of changes in foreign currencies | — | 74,491 | |||||||||||||||||||
| Impact of wind down | — | (50,510) | |||||||||||||||||||
| Non-GAAP Europe components sales | $ | 4,987,534 | $ | 5,436,360 | (8.3) | % | |||||||||||||||
| Asia components sales, as reported | $ | 9,332,034 | $ | 7,671,061 | 21.7 | % | |||||||||||||||
| Impact of changes in foreign currencies | — | 752 | |||||||||||||||||||
| Non-GAAP Asia components sales | $ | 9,332,034 | $ | 7,671,813 | 21.6 | % | |||||||||||||||
| Global ECS sales, as reported | $ | 8,170,676 | $ | 8,666,112 | (5.7) | % | |||||||||||||||
| Impact of changes in foreign currencies | — | 48,517 | |||||||||||||||||||
| Impact of dispositions | — | (11,141) | |||||||||||||||||||
| Non-GAAP global ECS sales | $ | 8,170,676 | $ | 8,703,488 | (6.1) | % | |||||||||||||||
| Europe ECS sales, as reported | $ | 3,061,304 | $ | 3,034,087 | 0.9 | % | |||||||||||||||
| Impact of changes in foreign currencies | — | 65,787 | |||||||||||||||||||
| Impact of dispositions | — | (11,141) | |||||||||||||||||||
| Non-GAAP Europe ECS sales | $ | 3,061,304 | $ | 3,088,733 | (0.9) | % | |||||||||||||||
| Americas ECS sales, as reported | $ | 5,109,372 | $ | 5,632,025 | (9.3) | % | |||||||||||||||
| Impact of changes in foreign currencies | — | (17,270) | |||||||||||||||||||
| Non-GAAP Americas ECS sales | $ | 5,109,372 | $ | 5,614,755 | (9.0) | % | |||||||||||||||
| ARROW ELECTRONICS, INC. | |||||||||||||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | ||||
| NON-GAAP EARNINGS RECONCILIATION | |||||||||||||||||||||
| (In thousands except per share data) | |||||||||||||||||||||
| (Unaudited) | |||||||||||||||||||||
| Three months ended December 31, 2020 | |||||||||||||||||||||
| Reported<br>GAAP<br>measure | Intangible<br>amortization<br>expense | Restructuring<br>& Integration<br>charges | AFS Reserves & Recoveries | Digital Write Downs & Recoveries | Impact of Wind Down | Non-recurring tax items | Other(1) | Non-GAAP<br>measure | |||||||||||||
| Sales | $ | 8,454,192 | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | 8,454,192 | |||
| Gross Profit | 923,686 | — | — | — | — | (33) | — | — | 923,653 | ||||||||||||
| Operating income | 321,412 | 9,376 | 6,340 | (840) | — | (417) | — | — | 335,871 | ||||||||||||
| Income before income taxes | 296,318 | 9,376 | 6,340 | (840) | — | (412) | — | (8,531) | 302,251 | ||||||||||||
| Provision for income taxes | 59,342 | 2,405 | (918) | (201) | — | 102 | — | (2,053) | 58,677 | ||||||||||||
| Consolidated net income | 236,976 | 6,971 | 7,258 | (639) | — | (514) | — | (6,478) | 243,574 | ||||||||||||
| Noncontrolling interests | 905 | 148 | — | — | — | — | — | — | 1,053 | ||||||||||||
| Net income attributable to shareholders | $ | 236,071 | $ | 6,823 | $ | 7,258 | $ | (639) | $ | — | $ | (514) | $ | — | $ | (6,478) | $ | 242,521 | |||
| Net income per diluted share(7) | $ | 3.08 | $ | 0.09 | $ | 0.09 | $ | (0.01) | $ | — | $ | (0.01) | $ | — | $ | (0.08) | $ | 3.17 | |||
| Effective tax rate | 20.0 | % | 19.4 | % | |||||||||||||||||
| Three months ended December 31, 2019 | |||||||||||||||||||||
| Reported<br>GAAP<br>measure | Intangible<br><br>amortization<br><br>expense(2) | Restructuring<br><br>& Integration<br><br>charges(2) | AFS Reserves & Recoveries | Digital Write Downs & Recoveries | Impact of Wind Down(2) | Non-recurring tax items(8) | Other(3) | Non-GAAP<br>measure | |||||||||||||
| Sales | $ | 7,338,190 | $ | — | $ | — | $ | — | $ | — | $ | (19,375) | $ | — | $ | — | $ | 7,318,815 | |||
| Gross Profit | 822,943 | — | — | — | 1,117 | 5,388 | — | — | 829,448 | ||||||||||||
| Operating income | 238,108 | 14,311 | 16,350 | 2,850 | 1,117 | 10,912 | — | 1,002 | 284,650 | ||||||||||||
| Income before income taxes | 169,648 | 14,311 | 16,350 | 2,850 | 1,117 | 10,942 | — | 17,919 | 233,137 | ||||||||||||
| Provision for income taxes | 57,460 | 4,050 | 3,042 | 607 | 156 | (18,380) | 1,806 | 2,700 | 51,441 | ||||||||||||
| Consolidated net income | 112,188 | 10,261 | 13,308 | 2,243 | 961 | 29,322 | (1,806) | 15,219 | 181,696 | ||||||||||||
| Noncontrolling interests | 175 | 138 | — | — | — | — | — | — | 313 | ||||||||||||
| Net income attributable to shareholders | $ | 112,013 | $ | 10,123 | $ | 13,308 | $ | 2,243 | $ | 961 | $ | 29,322 | $ | (1,806) | $ | 15,219 | $ | 181,383 | |||
| Net income per diluted share(7) | $ | 1.36 | $ | 0.12 | $ | 0.16 | $ | 0.03 | $ | 0.01 | $ | 0.36 | $ | (0.02) | $ | 0.18 | $ | 2.20 | |||
| Effective tax rate | 33.9 | % | 22.1 | % | |||||||||||||||||
| ARROW ELECTRONICS, INC. | |||||||||||||||||||||
| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |
| NON-GAAP EARNINGS RECONCILIATION | |||||||||||||||||||||
| (In thousands except per share data) | |||||||||||||||||||||
| (Unaudited) | |||||||||||||||||||||
| Year ended December 31, 2020 | |||||||||||||||||||||
| Intangible<br>amortization<br>expense | Restructuring<br>& Integration<br>charges | AFS Reserves & Recoveries | Digital Write Downs & Recoveries | Impairments(4) | Impact of Wind Down | Non-recurring tax items(8) | Other(5) | Non-GAAP<br>measure | |||||||||||||
| Sales | 28,673,363 | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | 28,673,363 | ||
| Gross Profit | — | — | — | — | — | (11,204) | — | — | 3,179,926 | ||||||||||||
| Operating income | 38,417 | 13,288 | (1,796) | — | 7,223 | (14,728) | — | — | 936,915 | ||||||||||||
| Income before income taxes | 38,417 | 13,288 | (1,796) | — | 7,223 | (14,704) | — | (7,117) | 794,570 | ||||||||||||
| Provision for income taxes | 9,866 | 1,301 | (432) | — | 2,356 | (3,143) | 1,272 | (1,717) | 182,298 | ||||||||||||
| Consolidated net income | 28,551 | 11,987 | (1,364) | — | 4,867 | (11,561) | (1,272) | (5,400) | 612,272 | ||||||||||||
| Noncontrolling interests | 568 | — | — | — | — | — | — | — | 2,594 | ||||||||||||
| Net income attributable to shareholders | 584,438 | $ | 27,983 | $ | 11,987 | $ | (1,364) | $ | — | $ | 4,867 | $ | (11,561) | $ | (1,272) | $ | (5,400) | $ | 609,678 | ||
| Net income per diluted share(7) | 7.43 | $ | 0.36 | $ | 0.15 | $ | (0.02) | $ | — | $ | 0.06 | $ | (0.15) | $ | (0.02) | $ | (0.07) | $ | 7.75 | ||
| Effective tax rate | % | 22.9 | % | ||||||||||||||||||
| Year ended December 31, 2019 | |||||||||||||||||||||
| Intangible<br><br>amortization<br><br>expense(2) | Restructuring<br><br>& Integration<br><br>charges(2) | AFS Reserves & Recoveries | Digital Write Downs & Recoveries | Impairments(6) | Impact of Wind Down(2) | Non-recurring tax items(8) | Other(3) | Non-GAAP<br>measure | |||||||||||||
| Sales | 28,916,847 | $ | — | $ | — | $ | — | $ | — | $ | — | $ | (240,473) | $ | — | $ | — | $ | 28,676,374 | ||
| Gross Profit | — | — | 1,868 | 22,332 | — | (1,975) | — | — | 3,320,606 | ||||||||||||
| Operating income | 42,383 | 78,429 | 18,037 | 22,332 | 623,796 | 162,244 | — | 1,868 | 1,056,785 | ||||||||||||
| Income (loss) before income taxes | 42,383 | 78,429 | 18,037 | 22,332 | 623,796 | 162,356 | — | 10,921 | 846,424 | ||||||||||||
| Provision for income taxes | 11,913 | 19,540 | 4,339 | 5,390 | 64,246 | 12,631 | (1,696) | 750 | 205,451 | ||||||||||||
| Consolidated net income (loss) | 30,470 | 58,889 | 13,698 | 16,942 | 559,550 | 149,725 | 1,696 | 10,171 | 640,973 | ||||||||||||
| Noncontrolling interests | 558 | — | — | — | — | — | — | — | 4,477 | ||||||||||||
| Net income (loss) attributable to shareholders | (204,087) | $ | 29,912 | $ | 58,889 | $ | 13,698 | $ | 16,942 | $ | 559,550 | $ | 149,725 | $ | 1,696 | $ | 10,171 | 636,496 | |||
| Net income (loss) per diluted share(7) | (2.44) | $ | 0.36 | $ | 0.70 | $ | 0.16 | $ | 0.20 | $ | 6.70 | $ | 1.79 | $ | 0.02 | $ | 0.12 | $ | 7.55 | ||
| Effective tax rate | % | 24.3 | % | ||||||||||||||||||
| (1) Other includes gain on investments, net. | |||||||||||||||||||||
| (2) Amounts for restructuring, integration, and other charges, identifiable intangible asset amortization, loss on disposition of businesses, net, certain tax adjustments, and impairments related to the personal computer and mobility asset disposition business are included in “impact of wind down” above. | |||||||||||||||||||||
| (3) Other includes loss on disposition of businesses, net, gain on investments, net, interest related to uncertain tax position related to legislation changes, and pension settlement loss. | |||||||||||||||||||||
| (4) Impairments includes 7,223 in impairment charges related to various other long-lived assets unrelated to the personal computer and mobility asset disposition business. | |||||||||||||||||||||
| (5) Other includes gain on investments, net and pension settlement gain. | |||||||||||||||||||||
| (6) Impairments include goodwill impairments of 570,175, tradename impairments of 46,000, and 7,621 in impairment charges related to various other long-lived assets. | |||||||||||||||||||||
| (7) For the year ended December 31, 2019, the non-GAAP net income per diluted share calculation includes 752 thousand shares that were excluded from the GAAP net income per diluted share calculation. Additionally, in all periods presented the sum of the components for non-GAAP diluted EPS may not agree to totals, as presented, due to rounding. | |||||||||||||||||||||
| (8) Includes income tax (expense) benefit related to legislation changes and other non-recurring tax adjustments. |
All values are in US Dollars.
| ARROW ELECTRONICS, INC. | ||||||||
|---|---|---|---|---|---|---|---|---|
| SEGMENT INFORMATION | ||||||||
| (In thousands) | ||||||||
| (Unaudited) | ||||||||
| Quarter Ended | Year Ended | |||||||
| December 31, 2020 | December 31, 2019 | December 31, 2020 | December 31, 2019 | |||||
| Sales: | ||||||||
| Global components | $ | 5,923,094 | $ | 4,738,993 | $ | 20,502,687 | $ | 20,250,735 |
| Global ECS | 2,531,098 | 2,599,197 | 8,170,676 | 8,666,112 | ||||
| Consolidated | $ | 8,454,192 | $ | 7,338,190 | $ | 28,673,363 | $ | 28,916,847 |
| Operating income (loss): | ||||||||
| Global components | $ | 230,127 | $ | 149,794 | $ | 780,333 | $ | (10,199) |
| Global ECS (a) | 155,880 | 148,711 | 353,763 | 426,192 | ||||
| Corporate (b) | (64,595) | (60,397) | (239,585) | (308,297) | ||||
| Consolidated | $ | 321,412 | $ | 238,108 | $ | 894,511 | $ | 107,696 |
(a)Includes reserves and other adjustments of approximately $29.9 million primarily related to foreign tax and other loss contingencies for the year ended December 31, 2020. These reserves are principally associated with transactional taxes on activity from several prior years, not significant to any one year.
(b)Includes restructuring, integration, and other charges of $6.3 million and $13.3 million for the fourth quarter and year ended December 31, 2020 and $16.4 million and $79.0 million for the fourth quarter and year ended December 31, 2019, respectively. Also included are impairment charges of $2.3 million related to various long-lived assets for the year ended December 31, 2020 and a net loss on disposition of $1.0 million and $1.9 million for the fourth quarter and year ended December 31, 2019, respectively.
| NON-GAAP SEGMENT RECONCILIATION | ||||||||
|---|---|---|---|---|---|---|---|---|
| Quarter Ended | Year Ended | |||||||
| December 31, 2020 | December 31, 2019 | December 31, 2020 | December 31, 2019 | |||||
| Global components operating income (loss), as reported | $ | 230,127 | $ | 149,794 | $ | 780,333 | $ | (10,199) |
| Intangible assets amortization expense (a) | 7,011 | 7,135 | 28,664 | 26,594 | ||||
| Impairments (a) | — | — | — | 623,796 | ||||
| Impact of wind-down (a) | (417) | 10,912 | (14,728) | 161,664 | ||||
| AFS notes receivable reserve (recoveries) and inventory write-downs | (840) | 2,850 | (1,796) | 18,037 | ||||
| Digital inventory write-downs, net | — | 1,117 | — | 22,332 | ||||
| Global components non-GAAP operating income | $ | 235,881 | $ | 171,808 | $ | 792,473 | $ | 842,224 |
| Global ECS operating income, as reported | $ | 155,880 | $ | 148,711 | $ | 353,763 | $ | 426,192 |
| Intangible assets amortization expense | 2,365 | 7,176 | 9,753 | 15,789 | ||||
| Impairments | — | — | 4,918 | — | ||||
| Global ECS non-GAAP operating income | $ | 158,245 | $ | 155,887 | $ | 368,434 | $ | 441,981 |
(a)For the fourth quarter and year ended December 31, 2019, impact of wind down includes restructuring, integration, and other charges, identifiable intangible asset amortization, loss on disposition of businesses, net, and impairments related to the personal computer and mobility asset disposition business.
| Contact: | Steven O’Brien, |
|---|---|
| Vice President, Investor Relations | |
| 303-824-4544 | |
| Media Contact: | John Hourigan, |
| Vice President, Global Communications | |
| 303-824-4586 | |
| 12 | |
| --- |
cfocommentaryq42020
Fourth Quarter 2020 investor.arrow.com CFO Commentary As reflected in our earnings release, there are a number of items that impact the comparability of our results with those in the trailing quarter and prior quarter of last year. The discussion of our results may exclude these items to give you a better sense of our operating results. As always, the operating information we provide to you should be used as a complement to GAAP numbers. For a complete reconciliation between our GAAP and non-GAAP results, please refer to our earnings release and the earnings reconciliation found at the end of this document. The following reported and non-GAAP information included in this CFO commentary is unaudited and should be read in conjunction with the company’s 2020 Annual Report on form 10-K as filed with the Securities and Exchange Commission. Full-year 2020 cash provided by operating activities of $1.36 billion.
investor.arrow.com Fourth-Quarter 2020 CFO Commentary 2 Record fourth- quarter sales, net income, and earnings per share on a diluted basis. Fourth-Quarter Summary Record fourth-quarter sales were above the high end of our prior expectation as demand for electronic components and information technology solutions strengthened. Arrow is continuing to help customers and suppliers solve complex multi-region supply chain challenges. Customers are choosing to do more business with Arrow to drive growth, reduce time to market for their products, and help securely capture valuable insights from their data. Higher sales and focused execution produced record fourth-quarter net income and earnings per share. During the fourth quarter, demand for electronic components increased in all three regions compared to the prior quarters of 2020. Demand was exceptionally strong in the Asia region where Arrow’s long-term efforts to gain scale have led sales to double over the last five years. Strong transportation demand continued in all regions, and nearly all key industries showed improvement. Operational controls helped operating margin increase year over year. For the enterprise computing solutions business, work and learn from home drove demand for infrastructure software and security solutions, resulting in sales that were above the midpoint of our prior expectation. Operating income increased year over year, and operating margin returned to the highest level since 2017, aided by a more favorable mix of products and solutions for margins. Proactive working capital and balance sheet management resulted in return on working capital and return on invested capital increasing year over year in both the fourth quarter and the full year. Cash flows from operating activities totaled $200 million for the quarter and $1.36 billion for the year. In 2020, cash flows were used to reduce debt by $715 million and return a record $475 million to shareholders through our share repurchase program. At the end of 2020, remaining repurchase authorization totaled approximately $463 million.
investor.arrow.com Fourth-Quarter 2020 CFO Commentary 3 P&L Highlights* Q4 2020 Y/Y Change Y/Y Change Adjusted for Wind Down & Currency Q/Q Change Sales $8,454 15% 13% 17% Gross Profit Margin 10.9% (30) bps (50) bps flat Operating Income $321 35% 25% 35% Operating Margin 3.8% 60 bps 40 bps 50 bps Non-GAAP Operating Income $336 18% 14% 37% Non-GAAP Operating Margin 4.0% 10 bps flat 60 bps Net Income $236 111% 60% 42% Diluted EPS $3.08 126% 72% 45% Non-GAAP Net Income $243 34% 28% 50% Non-GAAP Diluted EPS $3.17 44% 37% 52% Consolidated Overview Fourth Quarter 2020 * $ in millions, except per share data; may reflect rounding. • Consolidated sales were $8.45 billion – Above the high end of the prior expectation of $7.45-$8.05 billion – Changes in foreign currencies positively impacted sales growth by $161 million year over year – The prior sales expectation included an anticipated $110 million benefit to growth; the weakening of the U.S. dollar within the quarter resulted in an additional $51 million benefit • Consolidated gross profit margin was 10.9% – Down 30 basis points year over year due to a higher mix of Asia components sales and customer mix in Europe components partially offset by higher enterprise computing solutions gross margin from product and solution mix • Operating income margin was 3.8% and non-GAAP operating income margin was 4.0% – Operating expenses as a percentage of sales were 7.0%, down 70 basis points year over year – Non-GAAP operating expenses as a percentage of sales were 7.0%, down 40 basis points year over year • Interest and other expense, net was $32 million – Slightly below our prior expectation of $33 million
investor.arrow.com Fourth-Quarter 2020 CFO Commentary 4 • Effective tax rate was 20.0%, and non-GAAP effective tax rate was 19.4% – Non-GAAP effective tax rate was below the prior expectation of 23.5% and the target long-term target range of 23% - 25% due to timing of discrete tax items • Diluted shares outstanding were 77 million – In line with the prior expectation • Diluted earnings per share were $3.08 – Above the prior expectation of $2.42 - $2.58 • Non-GAAP diluted earnings per share were $3.17 – Above the prior expectation of $2.57 - $2.73 – Changes in foreign currencies positively impacted earnings per share by approximately $.11 compared to the fourth quarter of 2019 – The prior earnings per share expectation included an anticipated $.07 million benefit to growth; the weakening of the U.S. dollar within the quarter resulted in an additional $.04 benefit 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, net income per share, return on working capital, and return on invested capital to GAAP financial measures is presented in the reconciliation tables included herein.
investor.arrow.com Fourth-Quarter 2020 CFO Commentary 5 $150 $165 $182 $204 $230 $172 $171 $177 $208 $236 GAAP Non-GAAP Q4-'19 Q1-'20 Q2-'20 Q3-'20 Q4-'20 $100 $120 $140 $160 $180 $200 $220 $240 Components Global Global components fourth-quarter sales increased 25% year over year. Operating Income ($ in millions) • Fourth-quarter sales increased 25% year over year – Sales increased 23% year over year adjusted for changes in foreign currencies and for the wind down of the PC and mobility asset disposition business • Lead times increased year over year and increased slightly compared to the third quarter • Backlog increased year over year • Book-to-bill was above parity in all regions • Operating margin of 3.9% increased 70 basis points year over year • Non-GAAP operating margin of 4.0% increased 40 basis points year over year – Margins increased in Asia, Americas, and Europe year over year • Return on working capital increased year over year
investor.arrow.com Fourth-Quarter 2020 CFO Commentary 6 • Fourth-quarter sales decreased 1% year over year – Sales were flat year over year adjusted for the wind down of the PC and mobility asset disposition business – Consumer products and industrial sales increased year over year – Computer/data processing, aerospace and defense, consumer and transportation sales increased significantly compared to the third quarter $1,645 $1,553 $1,489 $1,516 $1,625$1,626 $1,553 $1,489 $1,516 $1,625 GAAP Non-GAAP Q4-'19 Q1-'20 Q2-'20 Q3-'20 Q4-'20 $1,200 $1,300 $1,400 $1,500 $1,600 $1,700 $1,800 Components Americas Sales ($ in millions) Americas components sales decreased 1% year over year.
investor.arrow.com Fourth-Quarter 2020 CFO Commentary 7 $1,905 $1,688 $2,114 $2,595 $2,935 Q4-'19 Q1-'20 Q2-'20 Q3-'20 Q4-'20 $1,400 $1,600 $1,800 $2,000 $2,200 $2,400 $2,600 $2,800 $3,000 Components Asia • Fourth-quarter sales increased 54% year over year – Sales increased 53% year over year adjusted for changes in foreign currencies – Record fourth-quarter sales – Earlier onset of the COVID-19 pandemic and a rapid return to manufacturing operations drove strong demand for electronic components – Transportation, wireless, and power management sales increased significantly year over year and compared to the third quarter Asia components sales increased 54% year over year. Sales ($ in millions)
investor.arrow.com Fourth-Quarter 2020 CFO Commentary 8 $1,189 $1,310 $1,118 $1,197 $1,362 Q4-'19 Q1-'20 Q2-'20 Q3-'20 Q4-'20 $800 $900 $1,000 $1,100 $1,200 $1,300 $1,400 Components Europe Europe components sales increased 15% year over year. • Fourth-quarter sales increased 15% year over year – Sales increased 7% year over year adjusted for changes in foreign currencies and for the wind down of the PC and mobility asset disposition business – Transportation and lighting sales increased year over year – Transportation increased significantly compared to the third quarter Sales ($ in millions)
investor.arrow.com Fourth-Quarter 2020 CFO Commentary 9 $149 $42 $73 $83 $156$156 $45 $80 $85 $158 GAAP Non-GAAP Q4-'19 Q1-'20 Q2-'20 Q3-'20 Q4-'20 $20 $40 $60 $80 $100 $120 $140 $160 $180 Enterprise Computing Solutions Global • Fourth-quarter sales decreased 3% year over year – Sales decreased 5% year over year adjusted for changes in foreign currencies • Billings increased at a low-single-digit rate year over year • Operating income increased 5% year over year – Non-GAAP operating income increased 2% year over year • Operating margin of 6.2% increased 50 basis points year over year; non-GAAP operating margin of 6.3% increased 30 basis points year over year • Return on working capital remains favorable Enterprise computing solutions operating income increased 5% year over year. Operating Income ($ in millions)
investor.arrow.com Fourth-Quarter 2020 CFO Commentary 10 $1,640 $1,129 $1,223 $1,274 $1,484 Q4-'19 Q1-'20 Q2-'20 Q3-'20 Q4-'20 $600 $750 $900 $1,050 $1,200 $1,350 $1,500 $1,650 $1,800 Enterprise Computing Solutions Americas Enterprise Computing Solutions Americas sales decreased 10% year over year. Sales ($ in millions) • Fourth-quarter sales decreased 10% year over year – Growth in infrastructure software across the portfolio, security, storage, and industry- standard servers year over year – Proprietary servers and networking decreased year over year
investor.arrow.com Fourth-Quarter 2020 CFO Commentary 11 $959 $702 $662 $650 $1,047 Q4-'19 Q1-'20 Q2-'20 Q3-'20 Q4-'20 $400 $500 $600 $700 $800 $900 $1,000 $1,100 Enterprise Computing Solutions Europe • Fourth-quarter sales increased 9% year over year – Sales increased 2% year over year adjusted for changes in foreign currencies – Strong growth in services and industry- standard servers year over year – Growth in infrastructure software across the portfolio, security, storage, and networking year over year – Proprietary servers decreased year over year – Operating income increased year over year Enterprise Computing Solutions Europe sales increased 9% year over year. Sales ($ in millions)
investor.arrow.com Fourth-Quarter 2020 CFO Commentary 12 • Consolidated full-year sales were flat year over year adjusted for the wind down of the PC and mobility asset disposition business – Sales decreased 1% year over year as reported • GAAP gross margin decreased 30 basis points year over year; non-GAAP gross margin decreased 50 basis points year over year – Gross margin decreased principally due to higher mix of sales from the Asia components region • Reported operating income margin increased 270 basis points due to the wind down of the PC and mobility asset disposition business and an impairment of goodwill and other long-lived assets in 2019 by global components in the Americas and Asia-Pacific regions – Non-GAAP operating income margin decreased 40 basis points year over year – Lower operating expenses partially offset lower gross profit P&L Highlights* 2020 Y/Y Change Y/Y Change Adjusted for Wind Down, Dispositions, & Currency Sales $28,673 (1)% flat Gross Profit Margin 11.1% (30) bps (40) bps Non-GAAP Gross Profit Margin 11.1% (50) bps (50) bps Operating Income $895 731% 216% Operating Margin 3.1% 270 bps 210 bps Non-GAAP Operating Income $937 (11)% (12)% Non-GAAP Operating Margin 3.3% (40) bps (40) bps Net Income $584 NM NM Diluted EPS $7.43 NM NM Non-GAAP Net Income $610 (4)% (6)% Non-GAAP Diluted EPS $7.75 3% 1% Consolidated Overview Full-Year 2020 * $ in millions, except per share data; may reflect rounding • Interest and other expense, net was $137 million – Decreased $67 million year over year primarily due to lower debt balances and lower interest rates • Effective tax rate was 22.8% • Non-GAAP effective tax rate was 22.9% – Slightly below our long-term target range of 23% to 25% due to the timing of discrete items that were recognized during the fourth quarter
investor.arrow.com Fourth-Quarter 2020 CFO Commentary 13 Repurchased approximately $100 million of stock in the fourth quarter, bringing total cash returned to shareholders in 2020 to approximately $475 million. Cash Flow from Operations Cash flow from operating activities was $200 million in the fourth quarter and was $1.36 billion in 2020. Working Capital The company reports return on working capital ("ROWC") and ROWC (non-GAAP) to provide investors an additional method for assessing working capital. The company uses ROWC to measure economic returns to help the company evaluate the effectiveness of investments in the inventories we chose to buy and the business arrangements we have with our customers and suppliers. ROWC was 28.2% in the fourth quarter, up 880 basis points year over year, and was 19.7% in 2020, up 1760 basis points from 2019. ROWC (non-GAAP) was 29.5% in the fourth quarter, up 630 basis points year over year, and was 20.6% in 2020, up 40 basis points from 2019. Return on Invested Capital The company reports return on invested capital ("ROIC") and ROIC (non-GAAP) to provide investors an additional method for assessing operating income. Among other uses, the company uses ROIC to measure economic returns relative to our cost of capital in evaluating overall effectiveness of our business strategy. ROIC was 14.7% in the fourth quarter, up 650 basis points year over year, and was 9.7% in 2020, up 740 basis points from 2019. ROIC (non-GAAP) was 15.5% in the fourth quarter, up 400 basis points year over year, and was 10.2% in 2020, up 40 basis points from 2019. Share Buyback We repurchased approximately 1.1 million shares for $100 million in the fourth quarter. Total cash returned to shareholders in 2020 was approximately $475 million. Debt and Liquidity Net debt totaled $1.88 billion. Total liquidity was $3.6 billion when including cash of $374 million.
investor.arrow.com Fourth-Quarter 2020 CFO Commentary 14 Arrow Electronics Outlook Guidance We are expecting the average USD-to-Euro exchange rate for the first quarter of 2021 to be $1.23 to €1 compared to $1.10 to €1 in the first quarter of 2020. We estimate changes in foreign currencies to have positive impacts on growth of approximately $235 million on sales, and $.12 on earnings per share on a diluted basis compared to the first quarter of 2020. First-Quarter 2021 Guidance Consolidated Sales $7.625 billion to $8.225 billion Global Components $5.825 billion to $6.125 billion Global ECS $1.8 billion to $2.1 billion Diluted Earnings Per Share* $2.02 to $2.18 Non-GAAP Diluted Earnings Per Share* $2.17 to $2.33 Interest and other expense, net $31 million Diluted shares outstanding 76 million * Assumes an average tax rate of approximately 24.5% compared to the 23% to 25% long-term target range. First-Quarter 2021 Guidance Reconciliation Reported GAAP measure Intangible amortization expense Restructuring & integration charges Non-GAAP measure Net income per diluted share $2.02 to $2.18 $.09 $.06 $2.17 to $2.33 Quarter Closing Dates Beginning and ending dates may impact comparisons to prior periods Quarter Closing Dates First Second Third Fourth 2020 Mar. 28 Jun. 27 Sep. 26 Dec. 31 2021 Apr. 3 Jul. 3 Oct. 2 Dec. 31
investor.arrow.com Fourth-Quarter 2020 CFO Commentary 15 Risk Factors The discussion of the company’s business and operations should be read together with the risk factors contained in Item 1A of its 2020 Annual Report on Form 10-K, filed with the Securities and Exchange Commission, which describe various risks and uncertainties to which the company is or may become subject. If any of the described events occur, the company’s business, results of operations, financial condition, liquidity, or access to the capital markets could be materially adversely affected. 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.
investor.arrow.com Fourth-Quarter 2020 CFO Commentary 16 Certain Non-GAAP Financial Information The company believes that such non-GAAP financial information is useful to investors to assist in assessing and understanding the company’s operating performance. 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, net income per share on a diluted basis, return on working capital, and return on invested capital 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.
investor.arrow.com Fourth-Quarter 2020 CFO Commentary 17 Three months ended December 31, 2020 Reported GAAP measure Intangible amortization expense Restructuring & Integration charges AFS Reserves & Recoveries Digital Write Downs & Recoveries Impairments Impact of Wind Down Non-recurring tax items Other(1) Non-GAAP measure Sales $ 8,454,192 $ — $ — $ — $ — $ — $ — $ — $ — $ 8,454,192 Gross Profit 923,686 — — — — — (33) — — 923,653 Operating income 321,412 9,376 6,340 (840) — — (417) — — 335,871 Income before income taxes 296,318 9,376 6,340 (840) — — (412) — (8,531) 302,251 Provision for income taxes 59,342 2,405 (918) (201) — — 102 — (2,053) 58,677 Consolidated net income 236,976 6,971 7,258 (639) — — (514) — (6,478) 243,574 Noncontrolling interests 905 148 — — — — — — — 1,053 Net income attributable to shareholders $ 236,071 $ 6,823 $ 7,258 $ (639) $ — $ — $ (514) $ — $ (6,478) $ 242,521 Net income per diluted share(7) $ 3.08 $ 0.09 $ 0.09 $ (0.01) $ — $ — $ (0.01) $ — $ (0.08) $ 3.17 Effective tax rate 20.0 % 19.4 % Three months ended December 31, 2019 Reported GAAP measure Intangible amortization expense(2) Restructuring & Integration charges(2) AFS Reserves & Recoveries Digital Write Downs & Recoveries Impairments Impact of Wind Down(2) Non-recurring tax items(3) Other(4) Non-GAAP measure Sales $ 7,338,190 $ — $ — $ — $ — $ — $ (19,375) $ — $ — $ 7,318,815 Gross Profit 822,943 — — — 1,117 — 5,388 — — 829,448 Operating income 238,108 14,311 16,350 2,850 1,117 — 10,912 — 1,002 284,650 Income before income taxes 169,648 14,311 16,350 2,850 1,117 — 10,942 — 17,919 233,137 Provision for income taxes 57,460 4,050 3,042 607 156 — (18,380) 1,806 2,700 51,441 Consolidated net income 112,188 10,261 13,308 2,243 961 — 29,322 (1,806) 15,219 181,696 Noncontrolling interests 175 138 — — — — — — — 313 Net income attributable to shareholders $ 112,013 $ 10,123 $ 13,308 $ 2,243 $ 961 $ — $ 29,322 $ (1,806) $ 15,219 $ 181,383 Net income per diluted share(7) $ 1.36 $ 0.12 $ 0.16 $ 0.03 $ 0.01 $ — $ 0.36 $ (0.02) $ 0.18 $ 2.20 Effective tax rate 33.9 % 22.1 % Three months ended September 26, 2020 Reported GAAP measure Intangible amortization expense Restructuring & Integration credits AFS Reserves & Recoveries Digital Write Downs & Recoveries Impairments(5 ) Impact of wind down Non-recurring tax items Other(6) Non-GAAP measure Sales $ 7,231,260 $ — $ — $ — $ — $ — $ — $ — $ — $ 7,231,260 Gross Profit 788,590 — — — — — (475) — — 788,115 Operating income 238,182 9,352 (2,840) (233) — 2,305 (2,487) — — 244,279 Income before income taxes 211,103 9,352 (2,840) (233) — 2,305 (2,478) — (4,495) 212,714 Provision for income taxes 44,707 2,396 (665) (56) — 556 (583) 4,887 (1,090) 50,152 Consolidated net income 166,396 6,956 (2,175) (177) — 1,749 (1,895) (4,887) (3,405) 162,562 Noncontrolling interests 336 146 — — — — — — — 482 Net income attributable to shareholders $ 166,060 $ 6,810 $ (2,175) $ (177) $ — $ 1,749 $ (1,895) $ (4,887) $ (3,405) $ 162,080 Net income per diluted share(7) $ 2.13 $ 0.09 $ (0.03) $ — $ — $ 0.02 $ (0.02) $ (0.06) $ (0.04) $ 2.08 Effective tax rate 21.2 % 23.6 % (1)Other includes gain on investments, net. (2)Amounts for restructuring, integration, and other charges, identifiable intangible asset amortization, loss on disposition of businesses, net, certain tax adjustments, and impairments related to the personal computer and mobility asset disposition business are included in “impact of wind down” above. (3)Includes income tax expense related to legislation changes and other non-recurring tax adjustments. (4)Other includes loss on disposition of businesses, net, gain on investments, net, interest related to uncertain tax position related to legislation changes, and pension settlement loss. (5)Impairments includes $2,305 in impairment charges related to various other long-lived assets unrelated to the personal computer and mobility asset disposition business. (6) Other includes gain on investments, net and pension settlement gain. (7)The sum of the components for non-GAAP diluted EPS may not agree to totals, as presented, due to rounding. Earnings Reconciliation ($ in thousands, except per share data)
investor.arrow.com Fourth-Quarter 2020 CFO Commentary 18 Quarter Ended Year Ended December 31, 2020 December 31, 2019 December 31, 2020 December 31, 2019 Numerator: (unaudited) (unaudited) (unaudited) (unaudited) Consolidated operating income, as reported $ 321,412 $ 238,108 $ 894,511 $ 107,696 x4 x4 x1 x1 Annualized consolidated operating income, as reported $ 1,285,648 $ 952,432 $ 894,511 $ 107,696 Non-GAAP consolidated operating income $ 335,871 $ 284,650 $ 936,915 $ 1,056,785 x4 x4 x1 x1 Annualized non-GAAP consolidated operating income $ 1,343,484 $ 1,138,600 $ 936,915 $ 1,056,785 Denominator: Accounts receivable, net(1) $ 9,205,343 $ 8,482,687 $ 8,283,552 $ 8,229,824 Inventories(1) 3,287,308 3,477,120 3,351,088 3,638,159 Less: Accounts payable(1) 7,937,889 7,046,221 7,092,575 6,627,807 Working capital $ 4,554,762 $ 4,913,586 $ 4,542,065 $ 5,240,176 Return on working capital 28.2 % 19.4 % 19.7 % 2.1 % Return on working capital (non-GAAP) 29.5 % 23.2 % 20.6 % 20.2 % (1) The year ended balance is an average balance based on the addition of the account balance at the end of the five most recently-ended quarters and dividing by five. Return on Working Capital Reconciliation ($ in thousands)
investor.arrow.com Fourth-Quarter 2020 CFO Commentary 19 Quarter Ended Year Ended December 31, 2020 December 31, 2019 December 31, 2020 December 31, 2019 Numerator: (unaudited) (unaudited) (unaudited) (unaudited) Consolidated operating income, as reported $ 321,412 $ 238,108 $ 894,511 $ 107,696 Equity in losses of affiliated companies(1) (839) (610) (531) (2,765) Less: Noncontrolling interests (1) 905 175 2,026 3,919 Consolidated operating income, as adjusted 319,668 237,323 891,954 101,012 Less: Tax effect(2) 64,193 80,461 203,511 (82,903) After-tax consolidated operating income, as adjusted 255,475 156,862 688,443 183,915 x4 x4 x1 x1 Annualized after-tax consolidated operating income, as adjusted $ 1,021,900 $ 627,448 $ 688,443 $ 183,915 Non-GAAP consolidated operating income $ 335,871 $ 284,650 $ 936,915 $ 1,056,785 Equity in losses of affiliated companies(1) (839) (610) (531) (2,765) Less: Noncontrolling interests (1) 905 175 2,026 3,919 Non-GAAP consolidated operating income, as adjusted 334,127 283,865 934,358 1,050,101 Less: Tax Effect(3) 65,037 62,868 214,779 256,112 After-tax non-GAAP consolidated operating income, as adjusted 269,090 220,997 719,579 793,989 x4 x4 x1 x1 Annualized after-tax non-GAAP consolidated operating income, as adjusted $ 1,076,360 $ 883,988 $ 719,579 $ 793,989 Denominator: Average short-term borrowings, including current portion of long-term debt(4) $ 162,381 $ 344,137 $ 255,538 $ 270,475 Average long-term debt(4) 2,097,841 2,791,211 2,231,394 3,110,940 Average total equity(4) 4,993,362 4,805,320 4,850,535 5,062,226 Less: Average cash and cash equivalents 300,317 281,179 261,513 338,714 Invested capital $ 6,953,267 $ 7,659,489 $ 7,075,954 $ 8,104,927 Return on invested capital 14.7 % 8.2 % 9.7 % 2.3 % Return on invested capital (non-GAAP) 15.5 % 11.5 % 10.2 % 9.8 % (1) Operating income, as reported, and non-GAAP operating income is adjusted for noncontrolling interest and equity in losses of affiliated companies to include the pro-rata ownership of non-wholly owned subsidiaries. (2) The tax effect is calculated by applying the effective tax rate for the three months and year ended December 31, 2020 and 2019 to consolidated operating income, as adjusted less interest expense. (3) The tax effect is calculated by applying the non-GAAP effective tax rate for the three months and year ended December 31, 2020 and 2019 to non-GAAP consolidated operating income, as adjusted less interest expense. (4) The quarter ended average is based on the addition of the account balance at the end of the most recently-ended quarter to the account balance at the end of the prior quarter and dividing by two. The year ended average is based on the addition of the account balance at the end of the five most recently-ended quarters and dividing by five. Return on Invested Capital Reconciliation ($ in thousands)