The Globe and Mail

Go to the Globe and Mail homepage

Jump to main navigationJump to main content

Press release from Business Wire

Arrow Electronics Reports Record First-Quarter Results

<p class='bwalignc'> Non-GAAP Earnings Per Share of $1.24 </p>

Wednesday, April 27, 2011

Arrow Electronics Reports Record First-Quarter Results08:00 EDT Wednesday, April 27, 2011 MELVILLE, N.Y. (Business Wire) -- Arrow Electronics, Inc. (NYSE: ARW) today reported first-quarter 2011 net income of $136.3 million ($1.18 and $1.16 per share on a basic and diluted basis, respectively) on sales of $5.22 billion, compared with net income of $87.0 million ($.72 and $.71 per share on a basic and diluted basis, respectively) on sales of $4.24 billion in the first quarter of 2010. The company's results for the first quarters of 2011 and 2010 include a number of items outlined below 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 April 2, 2011 would have been $146.0 million ($1.27 and $1.24 per share on a basic and diluted basis, respectively) and net income for the quarter ended April 3, 2010 would have been $92.6 million ($.77 and $.76 per share on a basic and diluted basis, respectively). Pro forma for acquisitions and excluding the impact of foreign exchange, sales increased 10% year over year. “Our growth strategy and the related momentum we built throughout the second half of 2009 and 2010 have carried over into the first quarter of 2011, with the Arrow team generating the strongest first-quarter results in our history. Revenue and earnings per share came in well ahead of our expectations, driven by strength in both of our business segments,” said Michael J. Long, chairman, president, and chief executive officer. “We are focused on accelerating the growth in our core businesses, while expanding our geographic reach, product portfolio, and services capabilities. We are very optimistic about the long-term outlook for our businesses around the globe and believe there is immense opportunity in the technology industry.” “Acquisitions were accretive to EPS and are tracking to our projections. Gross profit margin, operating expense as a percentage of sales, and operating income margin for our legacy businesses all showed significant improvement compared to last year,” said Paul J. Reilly, executive vice president, finance and operations and chief financial officer. “Our returns this quarter again demonstrated our unwavering commitment to creating shareholder value. Return on working capital and return on invested capital advanced 240 basis points and 190 basis points, respectively, to nearly 32% and to 14%.” Global components sales of $3.89 billion increased 24 percent year over year. “We saw outstanding performance in all of our regions, with our core business showing very robust growth trends ahead of normal seasonality. Our recent acquisitions have complemented the core and are also driving growth in new markets and product sets. We are excited about the opportunities that lay ahead for global components and would expect to continue to outgrow the market with the strong start we have in 2011,” Mr. Long said. Global enterprise computing solutions (“ECS”) sales of $1.34 billion increased 21 percent year over year, representing a record level of first-quarter revenue. “Sales were in line with the high end of normal seasonality, and we saw excellent year-over-year growth in industry-standard servers, storage, and services. We remain very optimistic about the outlook for the ECS business, as we have diversified into a number of faster growing markets, such as security, networking, and virtualization, and are well positioned to capitalize on the next wave of IT spending growth,” said Mr. Long. The company's results for the first quarters of 2011 and 2010 include the items outlined below that impact their comparability: restructuring, integration, and other charges of $9.6 million ($7.2 million net of related taxes or $.06 per share on both a basic and diluted basis) in 2011 and $7.4 million ($5.5 million net of related taxes or $.05 per share on a both basic and diluted basis) in 2010; the company recorded a charge of $5.9 million ($3.6 million net of related taxes or $.03 per share on both a basic and diluted basis) in connection with the settlement of a legal matter in 2011; and the company recognized a gain on bargain purchase of $1.8 million ($1.1 million net of related taxes or $.01 per share on both a basic and diluted basis) related to the acquisition of Nu Horizons Electronics in 2011. GUIDANCE “Looking ahead, we believe that total second-quarter sales will be between $5.55 and $5.95 billion, with global components sales between $4.0 and $4.2 billion and global enterprise computing solutions sales between $1.55 and $1.75 billion. Earnings per share, on a diluted basis, excluding any charges, are expected to be in the range of $1.30 to $1.40,” said Mr. Reilly. Please refer to the CFO commentary as a supplement to the company's earnings release, which can be found at www.arrow.com/investor. 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 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 primarily out of the company's efficiency enhancement initiatives, acquisitions, and settlement of certain legal 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 April 2,2011   April 3,2010 (Unaudited)   Operating income, as reported $ 219,168 $ 145,270 Restructuring, integration, and other charges 9,607 7,437 Settlement of legal matter   5,875   - Operating income, as adjusted $ 234,650 $ 152,707   Net income attributable to shareholders, as reported $ 136,309 $ 87,046 Restructuring, integration, and other charges 7,199 5,545 Settlement of legal matter 3,609 - Gain on bargain purchase   (1,078 )   - Net income attributable to shareholders, as adjusted $ 146,039 $ 92,591   Net income per basic share, as reported $ 1.18 $ .72 Restructuring, integration, and other charges .06 .05 Settlement of legal matter .03 - Gain on bargain purchase   (.01 )   - Net income per basic share, as adjusted $ 1.27 $ .77   Net income per diluted share, as reported $ 1.16 $ .71 Restructuring, integration, and other charges .06 .05 Settlement of legal matter .03 - Gain on bargain purchase   (.01 )   - Net income per diluted share, as adjusted $ 1.24 $ .76   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) (Unaudited)   Quarter Ended April 2,2011     April 3,2010   Sales $ 5,223,003 $ 4,235,366 Costs and expenses: Cost of sales 4,500,495 3,697,433 Selling, general and administrative expenses 464,920 366,749 Depreciation and amortization 22,938 18,477 Restructuring, integration, and other charges 9,607 7,437 Settlement of legal matter   5,875   -   5,003,835   4,090,096 Operating income 219,168 145,270 Equity in earnings of affiliated companies 1,213 1,148 Gain on bargain purchase 1,755 - Interest and other financing expense, net   25,767   19,086 Income before income taxes 196,369 127,332 Provision for income taxes   59,872   40,291 Consolidated net income 136,497 87,041 Noncontrolling interests   188   (5 ) Net income attributable to shareholders $ 136,309 $ 87,046 Net income per share: Basic $ 1.18 $ .72 Diluted $ 1.16 $ .71 Average number of shares outstanding: Basic 115,215 120,223 Diluted 117,428 121,906   ARROW ELECTRONICS, INC. CONSOLIDATED BALANCE SHEETS (In thousands except par value)   April 2,   December 31, 2011 2010 (Unaudited) ASSETS Current assets: Cash and cash equivalents $ 521,302 $ 926,321 Accounts receivable, net 4,124,118 4,102,870 Inventories 2,074,970 1,908,953 Other current assets   181,524   147,690 Total current assets   6,901,914   7,085,834 Property, plant and equipment, at cost: Land 24,340 24,213 Buildings and improvements 144,253 136,732 Machinery and equipment   901,062   863,773 1,069,655 1,024,718 Less: Accumulated depreciation and amortization   (539,674 )   (519,178 ) Property, plant and equipment, net   529,981   505,540 Investments in affiliated companies 60,308 59,455 Cost in excess of net assets of companies acquired 1,381,474 1,336,351 Other assets   705,798   613,358 Total assets $ 9,579,475 $ 9,600,538 LIABILITIES AND EQUITY Current liabilities: Accounts payable $ 3,220,826 $ 3,644,988 Accrued expenses 630,789 637,045 Short-term borrowings, including current portion of long-term debt   449,914   61,210 Total current liabilities   4,301,529   4,343,243   Long-term debt 1,558,577 1,761,203 Other liabilities 251,886 244,897 Equity: Shareholders' equity: Common stock, par value $1: Authorized – 160,000 shares in 2011 and 2010 Issued – 125,382 and 125,337 shares in 2011 and 2010, respectively 125,382 125,337 Capital in excess of par value 1,050,598 1,063,461 Treasury stock (9,969 and 10,690 shares in 2011 and 2010, respectively), at cost (308,330 ) (318,494 ) Retained earnings 2,310,456 2,174,147 Foreign currency translation adjustment 290,793 207,914 Other   (4,843 )   (1,170 ) Total shareholders' equity 3,464,056 3,251,195 Noncontrolling interests   3,427   - Total equity   3,467,483   3,251,195 Total liabilities and equity $ 9,579,475 $ 9,600,538   ARROW ELECTRONICS, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) (Unaudited)   Quarter Ended April 2,2011   April 3,2010 Cash flows from operating activities: Consolidated net income $ 136,497 $ 87,041 Adjustments to reconcile consolidated net income to net cash used for operations: Depreciation and amortization 22,938 18,477 Amortization of stock-based compensation 10,357 8,467 Amortization of deferred financing costs and discount on notes 717 558 Equity in earnings of affiliated companies (1,213 ) (1,148 ) Deferred income taxes (1,057 ) 15,091 Restructuring, integration, and other charges 7,199 5,545 Settlement of legal matter 3,609 - Gain on bargain purchase (1,078 ) - Excess tax benefits from stock-based compensation arrangements (5,728 ) (1,762 ) Change in assets and liabilities, net of effects of acquired businesses: Accounts receivable 278,549 8,094 Inventories 37,981 (99,247 ) Accounts payable (574,003 ) (272,909 ) Accrued expenses (43,109 ) (26,951 ) Other assets and liabilities   (51,328 )   (23,473 ) Net cash used for operating activities   (179,669 )   (282,217 )   Cash flows from investing activities: Cash consideration paid for acquired businesses (379,013 ) (3,060 ) Acquisition of property, plant and equipment (18,177 ) (27,514 ) Proceeds from sale of properties   -   6,806 Net cash used for investing activities   (397,190 )   (23,768 )   Cash flows from financing activities: Change in short-term and other borrowings (3,900 ) 14,160 Net proceeds from revolving credit facility borrowings 190,800 - Proceeds from exercise of stock options 27,150 1,579 Excess tax benefits from stock-based compensation arrangements 5,728 1,762 Repurchases of common stock   (46,447 )   (6,185 ) Net cash provided by financing activities   173,331   11,316   Effect of exchange rate changes on cash   (1,491 )   (32,287 ) Net decrease in cash and cash equivalents (405,019 ) (326,956 ) Cash and cash equivalents at beginning of period   926,321   1,137,007 Cash and cash equivalents at end of period $ 521,302 $ 810,051   ARROW ELECTRONICS, INC. SEGMENT INFORMATION (In thousands) (unaudited)   Quarter Ended April 2,2011   April 3,2010   Sales: Global components $ 3,886,600 $ 3,128,022 Global ECS   1,336,403   1,107,344 Consolidated $ 5,223,003 $ 4,235,366   Operating income (loss): Global components $ 228,881 $ 154,108 Global ECS 39,080 23,913 Corporate (a)   (48,793 )   (32,751 ) Consolidated $ 219,168 $ 145,270 (a)   Includes restructuring, integration, and other charges of $9.6 million and $7.4 million for the first quarters of 2011 and 2010, respectively. Also included in the first quarter of 2011 is a charge of $5.9 million related to the settlement of a legal matter. 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