The Globe and Mail

Go to the Globe and Mail homepage

Jump to main navigationJump to main content

Globe Investor

News Sources

Take control of your investments with the latest investing news and analysis

Press release from Business Wire

Arrow Electronics Reports Record 2011 Non-GAAP EPS Increased 26% Year over Year to $5.19 Per Share

<p class='bwalignc'> -- Record Fourth Quarter Non-GAAP Earnings Per Share of $1.38 -– </p>

Wednesday, February 01, 2012

Arrow Electronics Reports Record 2011 Non-GAAP EPS Increased 26% Year over Year to $5.19 Per Share08:00 EST Wednesday, February 01, 2012 ENGLEWOOD, Colo. (Business Wire) -- Arrow Electronics, Inc. (NYSE:ARW) today reported fourth-quarter 2011 net income of $174.1 million ($1.55 and $1.53 per share on a basic and diluted basis, respectively) on sales of $5.44 billion, compared with 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 in the fourth quarter of 2010. Arrow's net income for 2011 was $598.8 million ($5.25 and $5.17 per share on a basic and diluted basis, respectively) on sales of $21.39 billion, compared with net income of $479.6 million ($4.06 and $4.01 per share on a basic and diluted basis, respectively) on sales of $18.74 billion in 2010. Cash flow from operations for the year ended December 31, 2011 was $121 million. The company's results for 2011 and 2010 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, 2011, would have been $157.3 million ($1.40 and $1.38 per share on a basic and diluted basis, respectively) and 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). For 2011, net income would have been $601.4 million ($5.27 and $5.19 per share on a basic and diluted basis, respectively) and $493.5 million ($4.18 and $4.13 per share on a basic and diluted basis, respectively) for 2010. “This has again been an exceptional year for Arrow Electronics as we set new financial records and successfully executed on our strategy to drive growth in our core global components and global ECS businesses as well as in high-margin lifecycle services,” said Michael J. Long, chairman, president, and chief executive officer. “As we look forward to 2012, I'm confident that we will continue to make strong progress on our journey to be one of the world's premier electronics companies and to guide innovation forward. The future holds great promise for us and we are well positioned to achieve even greater levels of success.” “We again reported industry-leading earnings per share, returns, and operating margins in the fourth quarter and full year 2011,” said Paul J. Reilly, executive vice president, finance and operations and chief financial officer. “We continue to deliver to and exceed our overarching goals of growing sales faster than the market, growing earnings at a faster rate than sales, generating returns well in excess of our cost of capital, and being cash flow positive.” Global components fourth-quarter sales of $3.44 billion increased 3 percent year over year. “The global components team did an admirable job of growing the legacy businesses in a market that was expected to decline in 2011, and set records for annual sales and operating income. In 2011 we executed on our strategy to expand the portfolio and increase our addressable market,” Mr. Long said. Global enterprise computing solutions (“ECS”) fourth-quarter sales of $2.0 billion increased 5 percent year over year. “We had a remarkable year in ECS as the organization also set records for sales and operating income. Over the course of the year, we made significant progress on our strategy to differentiate Arrow ECS and solidified our industry-leading position,” said Mr. Long. The company's results for the fourth quarters of 2011 and 2010 include the items outlined below that impact their comparability: restructuring, integration, and other charges of $14.1 million ($11.2 million net of related taxes or $.10 per share on both a basic and diluted basis) in the fourth quarter of 2011 and $6.1 million ($5.5 million net of related taxes or $.05 per share on a both basic and diluted basis) in the fourth quarter of 2010; an adjustment to the gain on bargain purchase recorded in the first quarter of 2011 of $.7 million ($.4 million net of related taxes) in the fourth quarter of 2011; a loss on prepayment of debt of $.9 million ($.5 million net of related taxes) in the fourth quarter of 2011; a net reduction of the provision for income taxes of $28.9 million ($.26 and $.25 per share on a basic and diluted basis, respectively) in the fourth quarter of 2011 principally due to a reversal of a valuation allowance on certain international deferred tax assets; and a net reduction of the provision for income taxes of $9.4 million ($.08 per share on both a basic and diluted basis) 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 of 2010 primarily related to the settlement of certain income tax matters covering multiple years. The company's results for 2011 and 2010 include the items outlined below that impact their comparability: restructuring, integration, and other charges of $37.8 million ($28.1 million net of related taxes or $.25 and $.24 per share on a basic and diluted basis, respectively) in 2011 and $33.5 million ($24.6 million net of related taxes or $.21 per share on a both basic and diluted basis) in 2010; 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; a gain on a bargain purchase of $1.1 million ($.7 million net of related taxes or $.01 per share on both a basic and diluted basis) in 2011; a loss on prepayment of debt of $.9 million ($.5 million net of related taxes) in 2011 and $1.6 million ($1.0 million net of related taxes or $.01 per share on both a basic and diluted basis) in 2010; a net reduction of the provision for income taxes of $28.9 million ($.25 per share on both a basic and diluted basis) in 2011 principally due to a reversal of a valuation allowance on certain international deferred tax assets; and a net reduction of the provision for income taxes of $9.4 million ($.08 per share on both a basic and diluted basis) 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 2010 primarily related to the settlement of certain income tax matters covering multiple years. GUIDANCE “Looking ahead to the first quarter, we believe that total sales will be between $4.67 and $5.07 billion, with global component sales between $3.35 and $3.55 billion and global enterprise computing solutions sales between $1.32 and $1.52 billion. Earnings per share, on a diluted basis, excluding any charges, are expected to be in the range of $1.01 to $1.13 per share. Our guidance assumes that the average Euro to USD exchange rate for the first quarter is 1.31 to 1,” 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. Arrow serves as a supply channel partner for more than 120,000 original equipment manufacturers, contract manufacturers and commercial customers through a global network of more than 390 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 settlement of 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, Year Ended December 31, 2011     2010 2011   2010 (unaudited)   Operating income, as reported $ 232,183 $ 231,795 $ 908,843 $ 750,775 Restructuring, integration, and other charges 14,135 6,070 37,811 33,494 Settlement of legal matter   -   -   5,875   - Operating income, as adjusted $ 246,318 $ 237,865 $ 952,529 $ 784,269   Net income attributable to shareholders, as reported $ 174,088 $ 157,889 $ 598,810 $ 479,630 Restructuring, integration, and other charges 11,223 5,459 28,054 24,605 Settlement of legal matter - - 3,609 - Gain/(adjustment) on bargain purchase 410 - (668 ) - Loss on prepayment of debt 549 - 549 964 Reversal of valuation allowance on international deferred tax assets (28,928 ) - (28,928 ) - Impact of settlements on tax matters Income tax - (9,404 ) - (9,404 ) Interest (net of taxes)   -   (2,312 )   -   (2,312 ) Net income attributable to shareholders, as adjusted $ 157,342 $ 151,632 $ 601,426 $ 493,483   Net income per basic share, as reported $ 1.55 $ 1.37 $ 5.25 $ 4.06 Restructuring, integration, and other charges .10 .05 .25 .21 Settlement of legal matter - - .03 - Gain/(adjustment) on bargain purchase - - (.01 ) - Loss on prepayment of debt - - - .01 Reversal of valuation allowance on international deferred tax assets (.26 ) - (.25 ) - Impact of settlements on tax matters Income tax - (.08 ) - (.08 ) Interest (net of taxes)   -   (.02 )   -   (.02 ) Net income per basic share, as adjusted $ 1.40 $ 1.31 $ 5.27 $ 4.18   Net income per diluted share, as reported $ 1.53 $ 1.34 $ 5.17 $ 4.01 Restructuring, integration, and other charges .10 .05 .24 .21 Settlement of legal matter - - .03 - Gain/(adjustment) on bargain purchase - - (.01 ) - Loss on prepayment of debt - - - .01 Reversal of valuation allowance on international deferred tax assets (.25 ) - (.25 ) - Impact of settlements on tax matters Income tax - (.08 ) - (.08 ) Interest (net of taxes)   -   (.02 )   -   (.02 ) Net income per diluted share, as adjusted $ 1.38 $ 1.29 $ 5.19 $ 4.13         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,   Year Ended December 31, 2011     2010   2011   2010 (unaudited)     Sales $ 5,440,473 $ 5,238,162 $ 21,390,264 $ 18,744,676   Costs and expenses: Cost of sales 4,695,664 4,554,758 18,441,661 16,326,069 Selling, general and administrative expenses 469,757 423,634 1,892,592 1,556,986 Depreciation and amortization 28,734 21,905 103,482 77,352 Restructuring, integration, and other charges 14,135 6,070 37,811 33,494 Settlement of legal matter   -   -   5,875   -   5,208,290   5,006,367   20,481,421   17,993,901 Operating income 232,183 231,795 908,843 750,775 Equity in earnings of affiliated companies 1,936 1,803 6,736 6,369 Gain/(adjustment) on bargain purchase (667 ) - 1,088 - Loss on prepayment of debt 895 - 895 1,570 Interest and other financing expense, net   28,443   19,209   105,971   76,571 Income before income taxes 204,114 214,389 809,801 679,003 Provision for income taxes   29,984   56,500   210,485   199,378 Consolidated net income 174,130 157,889 599,316 479,625 Noncontrolling interests   42   -   506   (5 ) Net income attributable to shareholders $ 174,088 $ 157,889 $ 598,810 $ 479,630 Net income per share: Basic $ 1.55 $ 1.37 $ 5.25 $ 4.06 Diluted $ 1.53 $ 1.34 $ 5.17 $ 4.01 Average number of shares outstanding: Basic 112,024 115,530 114,025 117,997 Diluted 113,878 117,542 115,932 119,577           ARROW ELECTRONICS, INC. CONSOLIDATED BALANCE SHEETS (In thousands except par value)   December 31, 2011                   2010 ASSETS Current assets: Cash and cash equivalents $ 396,887 $ 926,321 Accounts receivable, net 4,482,117 4,102,870 Inventories 1,963,910 1,908,953 Other current assets   181,677   147,690 Total current assets   7,024,591   7,085,834 Property, plant and equipment, at cost: Land 23,790 24,213 Buildings and improvements 147,215 136,732 Machinery and equipment   934,558   863,773 1,105,563 1,024,718 Less: Accumulated depreciation and amortization   (549,334 )   (519,178 ) Property, plant and equipment, net   556,229   505,540 Investments in affiliated companies 60,579 59,455   Intangible assets, net 392,763 310,847 Cost in excess of net assets of companies acquired 1,473,333 1,336,351 Other assets   321,584   302,511 Total assets $ 9,829,079 $ 9,600,538   LIABILITIES AND EQUITY Current liabilities: Accounts payable $ 3,264,088 $ 3,644,988 Accrued expenses 660,996 637,045 Short-term borrowings, including current portion of long-term debt   33,843   61,210 Total current liabilities   3,958,927   4,343,243   Long-term debt 1,927,823 1,761,203 Other liabilities 267,069 244,897 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 1,076,275 1,063,461 Treasury stock (13,568 and 10,690 shares in 2011 and 2010, respectively), at cost (434,959 ) (318,494 ) Retained earnings 2,772,957 2,174,147 Foreign currency translation adjustment 158,550 207,914 Other   (29,393 )   (1,170 ) Total shareholders' equity 3,668,812 3,251,195 Noncontrolling interests   6,448   - Total equity   3,675,260   3,251,195 Total liabilities and equity $ 9,829,079 $ 9,600,538           ARROW ELECTRONICS, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands)   Quarter Ended December 31, 2011                   2010 (Unaudited)   Cash flows from operating activities: Consolidated net income $ 174,130 $ 157,889 Adjustments to reconcile consolidated net income to net cash provided by operations: Depreciation and amortization 28,734 21,905 Amortization of stock-based compensation 8,945 9,621 Equity in earnings of affiliated companies (1,936 ) (1,803 ) Deferred income taxes (10,899 ) (11,894 ) Restructuring, integration, and other charges 11,223 5,459 Non-cash impact of tax matters - (11,716 ) Excess tax benefits from stock-based compensation arrangements (435 ) (182 ) Other (554 ) 652 Change in assets and liabilities, net of effects of acquired businesses: Accounts receivable (329,943 ) (454,275 ) Inventories 214,783 98,294 Accounts payable 42,788 555,345 Accrued expenses (10,755 ) (575 ) Other assets and liabilities   20,423   93,321 Net cash provided by operating activities   146,504   462,041   Cash flows from investing activities: Cash consideration paid for acquired businesses (9,238 ) (127,086 ) Acquisition of property, plant and equipment   (25,674 )   (28,881 ) Net cash used for investing activities   (34,912 )   (155,967 )   Cash flows from financing activities: Change in short-term and other borrowings 1,984 10,677 Proceeds of long-term bank borrowings, net (243,000 ) (360,400 ) Net proceeds from note offering - 494,325 Repurchase/repayment of senior notes (19,324 ) - Proceeds from exercise of stock options 47 4,861 Excess tax benefits from stock-based compensation arrangements 435 182 Repurchases of common stock   (242 )   (42,384 ) Net cash provided by (used for) financing activities   (260,100 )   107,261   Effect of exchange rate changes on cash   829   3,262 Net increase (decrease) in cash and cash equivalents (147,679 ) 416,597 Cash and cash equivalents at beginning of period   544,566   509,724 Cash and cash equivalents at end of period $ 396,887 $ 926,321           ARROW ELECTRONICS, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands)   Year Ended December 31, 2011                   2010   Cash flows from operating activities: Consolidated net income $ 599,316 $ 479,625 Adjustments to reconcile consolidated net income to net cash provided by operations: Depreciation and amortization 103,482 77,352 Amortization of stock-based compensation 39,225 34,613 Equity in earnings of affiliated companies (6,736 ) (6,369 ) Deferred income taxes (11,377 ) 17,133 Restructuring, integration, and other charges 28,054 24,605 Settlement of legal matter 3,609 - Non-cash impact of tax matters - (11,716 ) Excess tax benefits from stock-based compensation arrangements (7,956 ) (1,922 ) Other 700 3,302 Change in assets and liabilities, net of effects of acquired businesses: Accounts receivable (193,492 ) (805,637 ) Inventories 105,150 (497,294 ) Accounts payable (465,603 ) 799,142 Accrued expenses (74,236 ) 88,675 Other assets and liabilities   747   19,263 Net cash provided by operating activities   120,883   220,772   Cash flows from investing activities: Cash consideration paid for acquired businesses (532,568 ) (587,087 ) Acquisition of property, plant and equipment (113,941 ) (112,254 ) Proceeds from sale of properties   -   16,971 Net cash used for investing activities   (646,509 )   (682,370 )   Cash flows from financing activities: Change in short-term and other borrowings (6,172 ) 9,775 Proceeds from long-term bank borrowings, net 354,000 - Repayment of bank term loan (200,000 ) - Net proceeds from note offering - 494,325 Repurchase/repayment of senior notes (19,324 ) (69,545 ) Proceeds from exercise of stock options 46,665 8,057 Excess tax benefits from stock-based compensation arrangements 7,956 1,922 Repurchases of common stock   (197,044 )   (173,650 ) Net cash provided by (used for) financing activities   (13,919 )   270,884   Effect of exchange rate changes on cash   10,111   (19,972 ) Net decrease in cash and cash equivalents (529,434 ) (210,686 ) Cash and cash equivalents at beginning of year   926,321   1,137,007 Cash and cash equivalents at end of year $ 396,887 $ 926,321                   ARROW ELECTRONICS, INC. SEGMENT INFORMATION (In thousands)   Quarter Ended December 31, Year Ended December 31, 2011     2010 2011     2010 (unaudited) Sales: Global components $ 3,443,034 $ 3,343,711 $ 14,853,823 $ 13,168,381 Global ECS   1,997,439   1,894,451   6,536,441   5,576,295 Consolidated $ 5,440,473 $ 5,238,162 $ 21,390,264 $ 18,744,676   Operating income (loss): Global components $ 176,680 $ 181,928 $ 823,774 $ 715,333 Global ECS 106,413 89,074 262,893 191,489 Corporate (a)   (50,910 )   (39,207 )   (177,824 )   (156,047 ) Consolidated $ 232,183 $ 231,795 $ 908,843 $ 750,775   (a)     Includes restructuring, integration, and other charges of $14.1 million and $37.8 million for the quarter and year ended December 31, 2011 and $6.1 million and $33.5 million for the quarter and year ended December 31, 2010, respectively. Also included for the year ended December 31, 2011 is a charge of $5.9 million related to the settlement of a legal matter. Arrow Electronics, Inc.Greer AvivSenior Manager, Investor Relations303-824-3765orPaul J. ReillyExecutive Vice President, Finance and Operations & Chief Financial Officer631-847-1872orMedia Contact: John HouriganDirector, Corporate Communications303-824-4586