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Press release from Business Wire

Arrow Electronics Reports Record Quarterly and Annual Earnings Per Share

<p class='bwalignc'> -- FOURTH QUARTER NON-GAAP EARNINGS PER SHARE OF $1.29 -- </p> <p class='bwalignc'> -- FOURTH QUARTER CASH FLOW FROM OPERATIONS IN EXCESS OF $460 MILLION -- </p>

Wednesday, February 02, 2011

Arrow Electronics Reports Record Quarterly and Annual Earnings Per Share08:00 EST Wednesday, February 02, 2011 MELVILLE, N.Y. (Business Wire) -- Arrow Electronics, Inc. (NYSE:ARW) today reported fourth-quarter 2010 net income of $157.9 million ($1.37 and $1.34 per share on a basic and diluted basis, respectively) on sales of $5.24 billion, compared with net income of $63.1 million ($.53 and $.52 per share on a basic and diluted basis, respectively) on sales of $4.20 billion in the fourth quarter of 2009. Cash flow from operations for the quarter ended December 31, 2010 was $462 million. Arrow's net income for 2010 was $479.6 million ($4.06 and $4.01 per share on a basic and diluted basis, respectively) on sales of $18.74 billion, compared with net income of $123.5 million ($1.03 per share on both a basic and diluted basis) on sales of $14.68 billion in 2009. Cash flow from operations for the year ended December 31, 2010 was $221 million. The company's results for 2010 and 2009 include a number of items that impact their comparability. A complete reconciliation of these items is provided under the heading “Certain Non-GAAP Financial Information.” Excluding those items, on a non-GAAP basis, net income for the quarter ended December 31, 2010, would have been $151.6 million ($1.31 and $1.29 per share on a basic and diluted basis, respectively) and net income for the quarter ended December 31, 2009, would have been $77.5 million ($.65 and $.64 per share on a basic and diluted basis, respectively). For 2010, net income would have been $493.5 million ($4.18 and $4.13 per share on a basic and diluted basis, respectively) and $202.5 million ($1.69 and $1.68 per share on a basic and diluted basis, respectively) for 2009. “We finished 2010 with a very strong close, reporting record revenue and earnings per share and extremely strong cash flow generation in a period of substantial growth,” said Michael J. Long, chairman, president, and chief executive officer. “Our organic strategy is simple – gain profitable market share, optimize gross profit and increase operational efficiency; and our M&A strategy is to expand our services portfolio and increase our addressable market. We have been successful in all of these areas throughout 2010, which has resulted in enhanced shareholder value.” “Our results clearly demonstrate that we emerged from the downturn as an even stronger company,” said Paul J. Reilly, executive vice president, finance and operations and chief financial officer. “Going forward, we expect to continue to deliver strong results as we gain share in the markets we serve, create opportunities for Arrow in new markets, and execute on our sales excellence strategy.” Global components fourth quarter sales of $3.34 billion increased 29 percent year over year. “In global components, our teams in every region continue to maximize our global reach and leverage our unmatched technology line card, while continually improving go-to-market efficiency. Over the last 12 months, we saw exceptionally strong sales growth in all regions. During this time, we also experienced noteworthy expansion in key vertical markets and again demonstrated good improvements in our working capital management,” Mr. Long said. Global enterprise computing solutions (“ECS”) fourth quarter sales of $1.89 billion increased 18 percent year over year. “In the face of challenging market conditions at the beginning of the year, the ECS team delivered strong performance in 2010 and had an exceptional fourth quarter. There is no question that growth has returned to this business and we are well positioned heading into 2011. By gaining market share, expanding our line card, and acquiring strategic businesses, ECS is transforming its business model into one with a more dynamic and diversified customer and supplier base,” Mr. Long said. The company's results for 2010 and 2009 include the items outlined below that impact their comparability: restructuring, integration, and other charges of $6.1 million ($5.5 million net of related taxes or $.05 per share on both a basic and diluted basis) in the fourth quarter of 2010 and $24.7 million ($14.5 million net of related taxes or $.12 per share on a both basic and diluted basis) in the fourth quarter of 2009; restructuring, integration, and other charges of $33.5 million ($24.6 million net of related taxes or $.21 per share on both a basic and diluted basis) in 2010 and $105.5 million ($75.7 million net of related taxes or $.63 per share on a both basic and diluted basis) in 2009; a net reduction of the provision for income taxes of $9.4 million ($.08 per share on a basic and diluted basis, respectively) and a reduction in interest expense of $3.8 million ($2.3 million net of related taxes or $.02 per share on both a basic and diluted basis) in the fourth quarter and full year 2010 primarily related to the settlement of certain income tax matters covering multiple years; and a loss on prepayment of debt of $1.6 million ($1.0 million net of related taxes or $.01 per share on both a basic and diluted basis) in 2010 and $5.3 million ($3.2 million net of related taxes or $.03 per share on both a basic and diluted basis) in 2009. GUIDANCE “Looking ahead, we believe that total first quarter sales will be between $4.75 and $5.15 billion, with global components sales between $3.55 and $3.75 billion and global enterprise computing solutions sales between $1.2 and $1.4 billion. Earnings per share, on a diluted basis, excluding any charges, are expected to be in the range of $1.06 to $1.16,” said Mr. Reilly. The company's first quarter guidance does not include the pending acquisition of the RF, Wireless & Power Division of Richardson Electronics, Ltd. Arrow Electronics (www.arrow.com) is a global provider of products, services and solutions to industrial and commercial users of electronic components and enterprise computing solutions. Headquartered in Melville, N.Y., Arrow serves as a supply channel partner for over 1,200 suppliers and 115,000 original equipment manufacturers, contract manufacturers and commercial customers through a global network of more than 340 locations in 52 countries. Certain Non-GAAP Financial Information In addition to disclosing results that are determined in accordance with Generally Accepted Accounting Principles (“GAAP”), the company provides certain non-GAAP financial information relating to operating income, net income attributable to shareholders and net income per basic and diluted share, each as adjusted for certain charges, credits and losses that the company believes impact the comparability of its results of operations. These charges, credits and losses arise out of the company's efficiency enhancement initiatives, acquisitions, prepayment of debt, and certain legal and tax matters. A reconciliation of the company's non-GAAP financial information to GAAP is set forth in the table 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 the charges, credits and losses 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, 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. EARNINGS RECONCILIATION (In thousands except per share data)     Quarter Ended December 31,     Years Ended December 31, 2010   2009 2010   2009 (Unaudited)   Operating income, as reported $ 231,795 $ 115,296 $ 750,775 $ 272,787 Restructuring, integration, and other charges   6,070   24,661   33,494   105,514 Operating income, as adjusted $ 237,865 $ 139,957 $ 784,269 $ 378,301   Net income attributable to shareholders, as reported $ 157,889 $ 63,093 $ 479,630 $ 123,512 Restructuring, integration, and other charges 5,459 14,452 24,605 75,720 Loss on prepayment of debt - - 964 3,228 Impact of settlement of tax matters Income tax (9,404 ) - (9,404 ) - Interest (net of taxes)   (2,312 )   -   (2,312 )   - Net income attributable to shareholders, as adjusted $ 151,632 $ 77,545 $ 493,483 $ 202,460   Net income per basic share, as reported $ 1.37 $ .53 $ 4.06 $ 1.03 Restructuring, integration, and other charges .05 .12 .21 .63 Loss on prepayment of debt - - .01 .03 Impact of settlement of tax matters Income tax (.08 ) - (.08 ) - Interest (net of taxes)   (.02 )   -   (.02 )   - Net income per basic share, as adjusted $ 1.31 $ .65 $ 4.18 $ 1.69   Net income per diluted share, as reported $ 1.34 $ .52 $ 4.01 $ 1.03 Restructuring, integration, and other charges .05 .12 .21 .63 Loss on prepayment of debt - - .01 .03 Impact of settlement of tax matters Income tax (.08 ) - (.08 ) - Interest (net of taxes)   (.02 )   -   (.02 )   - Net income per diluted share, as adjusted $ 1.29 $ .64 $ 4.13 $ 1.68     The sum of the components for basic and diluted net income per share, as adjusted, may not agree to totals, as presented, due to rounding.   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 ECS markets, changes in relationships with key suppliers, increased profit margin pressure, the effects of additional actions taken to become more efficient or lower costs, 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.   ARROW ELECTRONICS, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands except per share data)   Quarter Ended December 31,     Years Ended December 31, 2010   2009 2010 2009 (Unaudited)       Sales $ 5,238,162 $ 4,202,985 $ 18,744,676 $ 14,684,101 Costs and expenses: Cost of sales 4,554,758 3,706,342 16,326,069 12,933,207 Selling, general and administrative expenses 423,634 339,921 1,556,986 1,305,566 Depreciation and amortization 21,905 16,765 77,352 67,027 Restructuring, integration, and other charges   6,070   24,661   33,494   105,514   5,006,367   4,087,689   17,993,901   14,411,314 Operating income 231,795 115,296 750,775 272,787 Equity in earnings of affiliated companies 1,803 1,498 6,369 4,731 Loss on prepayment of debt - - 1,570 5,312 Interest and other financing expense, net   19,209   25,135   76,571   83,285 Income before income taxes 214,389 91,659 679,003 188,921 Provision for income taxes   56,500   28,548   199,378   65,416 Consolidated net income 157,889 63,111 479,625 123,505 Noncontrolling interests   -   18   (5 )   (7 ) Net income attributable to shareholders $ 157,889 $ 63,093 $ 479,630 $ 123,512 Net income per share: Basic $ 1.37 $ .53 $ 4.06 $ 1.03 Diluted $ 1.34 $ .52 $ 4.01 $ 1.03 Average number of shares outstanding: Basic 115,530 119,968 117,997 119,800 Diluted 117,542 121,369 119,577 120,489     ARROW ELECTRONICS, INC. CONSOLIDATED BALANCE SHEETS (In thousands except par value)     December 31, 2010     2009   ASSETS Current assets: Cash and cash equivalents $ 926,321 $ 1,137,007 Accounts receivable, net 4,102,870 3,136,141 Inventories 1,908,953 1,397,668 Other current assets   147,690   168,812 Total current assets   7,085,834   5,839,628 Property, plant and equipment, at cost: Land 24,213 23,584 Buildings and improvements 136,732 137,539 Machinery and equipment   863,773   779,105 1,024,718 940,228 Less: Accumulated depreciation and amortization   (519,178 )   (479,522 ) Property, plant and equipment, net   505,540   460,706 Investments in affiliated companies 59,455 53,010 Cost in excess of net assets of companies acquired 1,336,351 926,296 Other assets   613,358   482,726 Total assets $ 9,600,538 $ 7,762,366 LIABILITIES AND EQUITY Current liabilities: Accounts payable $ 3,644,988 $ 2,763,237 Accrued expenses 637,045 445,914 Short-term borrowings, including current portion of long-term debt   61,210   123,095 Total current liabilities   4,343,243   3,332,246   Long-term debt 1,761,203 1,276,138 Other liabilities 244,897 236,685   Equity: Shareholders' equity: Common stock, par value $1: Authorized – 160,000 shares in 2010 and 2009 Issued – 125,337 and 125,287 shares in 2010 and 2009, respectively 125,337 125,287 Capital in excess of par value 1,063,461 1,056,704 Treasury stock (10,690 and 5,459 shares in 2010 and 2009, respectively), at cost (318,494 ) (179,152 ) Retained earnings 2,174,147 1,694,517 Foreign currency translation adjustment 207,914 229,019 Other   (1,170 )   (9,415 ) Total shareholders' equity 3,251,195 2,916,960 Noncontrolling interests   -   337 Total equity   3,251,195   2,917,297 Total liabilities and equity $ 9,600,538 $ 7,762,366     ARROW ELECTRONICS, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands)     Quarter Ended December 31, 2010     2009 (Unaudited)   Cash flows from operating activities: Consolidated net income $ 157,889 $ 63,111 Adjustments to reconcile consolidated net income to net cash provided by operations: Depreciation and amortization 21,905 16,765 Amortization of stock-based compensation 9,621 13,798 Amortization of deferred financing costs and discount on notes 652 632 Equity in earnings of affiliated companies (1,803 ) (1,498 ) Deferred income taxes (11,894 ) (2,620 ) Restructuring, integration, and other charges 5,459 14,452 Non-cash impact of tax matters (11,716 ) - Excess tax benefits from stock-based compensation arrangements (182 ) (10 ) Change in assets and liabilities, net of effects of acquired businesses: Accounts receivable (454,275 ) (411,488 ) Inventories 98,294 (44,472 ) Accounts payable 555,345 462,122 Accrued expenses (575 ) 65,940 Other assets and liabilities   93,321   23,804 Net cash provided by operating activities   462,041   200,536   Cash flows from investing activities: Cash consideration paid for acquired businesses (127,086 ) (170,064 ) Acquisition of property, plant and equipment   (28,881 )   (22,494 ) Net cash used for investing activities   (155,967 )   (192,558 )   Cash flows from financing activities: Change in short-term and other borrowings 10,677 (16,135 ) Repayments of long-term bank borrowings, net (360,400 ) - Net proceeds from note offering 494,325 - Proceeds from exercise of stock options 4,861 1,165 Excess tax benefits from stock-based compensation arrangements 182 10 Repurchases of common stock   (42,384 )   (155 ) Net cash provided by (used for) financing activities   107,261   (15,115 )   Effect of exchange rate changes on cash   3,262   (6,626 ) Net increase (decrease) in cash and cash equivalents 416,597 (13,763 ) Cash and cash equivalents at beginning of period   509,724   1,150,770 Cash and cash equivalents at end of period $ 926,321 $ 1,137,007     ARROW ELECTRONICS, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands)     Years Ended December 31, 2010     2009   Cash flows from operating activities: Consolidated net income $ 479,625 $ 123,505 Adjustments to reconcile consolidated net income to net cash provided by operations: Depreciation and amortization 77,352 67,027 Amortization of stock-based compensation 34,613 33,017 Amortization of deferred financing costs and discount on notes 2,338 2,313 Equity in earnings of affiliated companies (6,369 ) (4,731 ) Deferred income taxes 17,133 19,313 Restructuring, integration, and other charges 24,605 75,720 Non-cash impact of tax matters (11,716 ) - Loss on prepayment of debt 964 3,228 Excess tax benefits from stock-based compensation arrangements (1,922 ) 1,731 Change in assets and liabilities, net of effects of acquired businesses: Accounts receivable (805,637 ) 2,302 Inventories (497,294 ) 286,626 Accounts payable 799,142 304,295 Accrued expenses 88,675 (92,587 ) Other assets and liabilities   19,263   28,096 Net cash provided by operating activities   220,772   849,855   Cash flows from investing activities: Cash consideration paid for acquired businesses (587,087 ) (170,064 ) Acquisition of property, plant and equipment (112,254 ) (121,516 ) Proceeds from sale of properties 16,971 1,153 Other   -   (272 ) Net cash used for investing activities   (682,370 )   (290,699 )   Cash flows from financing activities: Change in short-term and other borrowings 9,775 (48,144 ) Repurchase/repayment of senior notes (69,545 ) (135,658 ) Net proceeds from note offering 494,325 297,430 Proceeds from exercise of stock options 8,057 4,234 Excess tax benefits from stock-based compensation arrangements 1,922 (1,731 ) Repurchases of common stock   (173,650 )   (2,478 ) Net cash provided by financing activities   270,884   113,653   Effect of exchange rate changes on cash   (19,972 )   12,926 Net increase (decrease) in cash and cash equivalents (210,686 ) 685,735 Cash and cash equivalents at beginning of year   1,137,007   451,272 Cash and cash equivalents at end of year $ 926,321 $ 1,137,007     ARROW ELECTRONICS, INC. SEGMENT INFORMATION (In thousands)     Quarter Ended December 31, Years Ended December 31, 2010   2009 2010   2009 (Unaudited)     Sales: Global components $ 3,343,711 $ 2,593,384 $ 13,168,381 $ 9,751,305 Global ECS   1,894,451   1,609,601   5,576,295   4,932,796 Consolidated $ 5,238,162 $ 4,202,985 $ 18,744,676 $ 14,684,101   Operating income (loss): Global components $ 181,928 $ 103,268 $ 715,333 $ 318,866 Global ECS 89,074 68,902 191,489 167,748 Corporate (a)   (39,207 )   (56,874 )   (156,047 )   (213,827 ) Consolidated $ 231,795 $ 115,296 $ 750,775 $ 272,787   (a)   Includes restructuring, integration, and other charges of $6.1 million and $33.5 million for the quarter and year ended December 31, 2010 and $24.7 million and $105.5 million for the quarter and year ended December 31, 2009, respectively. Arrow Electronics, Inc.Michael Taunton, 631-847-5680Vice President & TreasurerorPaul J. Reilly, 631-847-1872Executive Vice President, Finance and Operations & Chief Financial OfficerorMedia:John Hourigan, 303-824-4586Director, Corporate Communications