Exhibit 99.1
Arrow Electronics Reports First Quarter Earnings in Line with Expectations
-- Achieves Targeted Level of Expense Reductions --
-- Cash from Operations Exceeds $230 Million --
MELVILLE, N.Y.--(BUSINESS WIRE)--April 29, 2009--Arrow Electronics, Inc. (NYSE:ARW) today reported first quarter 2009 net income of $26.7 million ($.22 per share on both a basic and diluted basis) on sales of $3.42 billion, compared with net income of $85.9 million ($.70 and $.69 per share on a basic and diluted basis, respectively) on sales of $4.03 billion in the first quarter of 2008. Sales decreased 15 percent year over year. Pro forma to include the impact of the acquisition of LOGIX S.A. (“LOGIX”), sales decreased 18 percent year over year.
The company's results for the first quarters of 2009 and 2008 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 4, 2009, would have been $42.8 million ($.36 per share on both a basic and diluted basis) and net income for the quarter ended March 31, 2008, would have been $97.9 million ($.80 and $.79 per share on a basic and diluted basis, respectively).
“We executed well in the first quarter, despite the persistent backdrop of global economic uncertainty and turbulence, with sales and earnings per share in line with our expectations. Cash flow generation was again a bright spot, as we generated more than $230 million in cash flow from operations, marking our 10th consecutive quarter of positive cash flow generation,” said William E. Mitchell, chairman and chief executive officer. “We achieved our targeted level of cost reductions, and reduced expenses at a faster rate than the decline in sales. Our disciplined financial strategy and solid market position are competitive advantages, and we will continue to manage the company in a prudent, fiscally disciplined manner to increase profitability, maintain positive cash flow, and strengthen our already strong balance sheet. However, we cannot ignore the fact that economies around the world are still struggling with recessionary conditions, and this will continue to have an impact on our business. Our visibility remains extremely limited, and we are not prepared to call a bottom yet.”
Global enterprise computing solutions (“ECS”) sales of $1.07 billion decreased 3 percent year over year. Pro forma to include the impact of the acquisition of LOGIX S.A. (“LOGIX”), sales decreased 13 percent year over year. “Our ECS segment performed well despite the macro environment. We continue to see the integration of LOGIX in Europe going well, as sales in this region came in ahead of expectations due to strong performance in the UK and Southern Europe. While our visibility on revenue and demand remains challenging, we would expect second quarter sales growth to be at the low end of our normal seasonal range,” added Michael J. Long, president and chief operating officer.
Global components sales of $2.35 billion decreased 20 percent year over year, primarily due to weakness in Europe and North America. “Global components sales were modestly ahead of the midpoint of our expectations. In Asia Pacific, we achieved above-seasonal sales growth, driven by strong performance in our low-end handset business in Taiwan, as well as strength in China. Our book to bill in global components was 1.05 on a global basis, with North America and Asia Pac strengthening. Looking ahead to the second quarter, we still remain cautious, with the macro economy in Europe a significant concern.” Mr. Long said.
The company's results for the first quarter of 2009 and 2008 include the items outlined below that impact their comparability:
- During the first quarter of 2009, the company recorded a restructuring and integration charge of $24.0 million ($16.1 million net of related taxes or $.13 per share on both a basic and diluted basis) primarily related to initiatives taken by the company to improve operating efficiencies.
- During the first quarter of 2008, the company recorded a restructuring and integration charge of $6.5 million ($4.2 million net of related taxes or $.03 per share on both a basic and diluted basis), primarily related to initiatives taken by the company to improve operating efficiencies.
- As previously disclosed, during the first quarter of 2008, the company recorded a charge related to a preference claim from 2001 of $12.9 million ($7.8 million net of related taxes or $.06 per share on both a basic and diluted basis).
GUIDANCE
“Looking ahead, we believe that total second quarter sales will be between $3.15 and $3.75 billion, with global component sales between $2.0 and $2.4 billion and global enterprise computing solutions sales between $1.15 and $1.35 billion. Earnings per share, on a diluted basis, excluding any charges, are expected to be in the range of $.26 to $.38. Our guidance assumes that the average Euro to USD exchange rate for the second quarter is 1.32 to 1, compared with an average exchange rate of 1.56 to 1 in the second quarter of 2008,” said Paul J. Reilly, senior vice president and chief financial officer.
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 approximately 800 suppliers and 130,000 original equipment manufacturers, contract manufacturers and commercial customers through a global network of more than 340 locations in 53 countries and territories.
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 out of the company’s efficiency enhancement initiatives and 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 4,
2009 | | | | | March 31,
2008 |
| | | | | (unaudited) |
| | | | | | | | | | | | |
| Operating income, as reported | | | | | $ | 61,237 | | | | | $ | 144,143 |
| Restructuring and integration charge | | | | | | 24,018 | | | | | | 6,478 |
| Preference claim from 2001 | | | | | | - | | | | | | 12,941 |
| Operating income, as adjusted | | | | | $ | 85,255 | | | | | $ | 163,562 |
| | | | | | | | | | | | |
| Net income attributable to shareholders, as reported | | | | | $ | 26,741 | | | | | $ | 85,871 |
| Restructuring and integration charge | | | | | | 16,069 | | | | | | 4,159 |
| Preference claim from 2001 | | | | | | - | | | | | | 7,822 |
| Net income attributable to shareholders, as adjusted | | | | | $ | 42,810 | | | | | $ | 97,852 |
| | | | | | | | | | | | |
| Net income per basic share, as reported | | | | | $ | .22 | | | | | $ | .70 |
| Restructuring and integration charge | | | | | | .13 | | | | | | .03 |
| Preference claim from 2001 | | | | | | - | | | | | | .06 |
| Net income per basic share, as adjusted | | | | | $ | .36 | | | | | $ | .80 |
| | | | | | | | | | | | |
| Net income per diluted share, as reported | | | | | $ | .22 | | | | | $ | .69 |
| Restructuring and integration charge | | | | | | .13 | | | | | | .03 |
| Preference claim from 2001 | | | | | | - | | | | | | .06 |
| Net income per diluted share, as adjusted | | | | | $ | .36 | | | | | $ | .79 |
| | 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 planned 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 |
| | | | | | | April 4,
2009 | | | March 31,
2008 |
| | | | | | | | | (unaudited) |
| | | | | | | | | | | | | | |
| Sales | | | | | | | | | $ | 3,417,428 | | | $ | 4,028,491 |
| Costs and expenses: | | | | | | | | | | | | | | |
| Cost of products sold | | | | | | | | | | 2,986,432 | | | | 3,442,200 |
| Selling, general and administrative expenses | | | | | | | | | | 329,114 | | | | 405,512 |
| Depreciation and amortization | | | | | | | | | | 16,627 | | | | 17,217 |
| Restructuring and integration charge | | | | | | | | | | 24,018 | | | | 6,478 |
| Preference claim from 2001 | | | | | | | | | | - | | | | 12,941 |
| | | | | | | | | | 3,356,191 | | | | 3,884,348 |
| Operating income | | | | | | | | | | 61,237 | | | | 144,143 |
| Equity in earnings of affiliated companies | | | | | | | | | | 323 | | | | 2,354 |
| Interest and other financing expense, net | | | | | | | | | | 23,035 | | | | 25,072 |
| Income before income taxes | | | | | | | | | | 38,525 | | | | 121,425 |
| Provision for income taxes | | | | | | | | | | 11,789 | | | | 35,520 |
| Consolidated net income | | | | | | | | | | 26,736 | | | | 85,905 |
| Noncontrolling interests | | | | | | | | | | (5 | ) | | | 34 |
| Net income attributable to shareholders | | | | | | | | | $ | 26,741 | | | $ | 85,871 |
| Net income per share: | | | | | | | | | | | | | | |
| Basic | | | | | | | | | $ | .22 | | | $ | .70 |
| Diluted | | | | | | | | | $ | .22 | | | $ | .69 |
| Average number of shares outstanding: | | | | | | | | | | | | | | |
| Basic | | | | | | | | | | 119,570 | | | | 122,777 |
| Diluted | | | | | | | | | | 120,133 | | | | 123,789 |
| |
ARROW ELECTRONICS, INC. |
CONSOLIDATED BALANCE SHEETS |
(In thousands except par value) |
| | | | | | | |
| | | April 4, | | | December 31, | |
| | | 2009 | | | 2008 | |
| | | (unaudited) | | | | | |
| | | | | | | | |
| ASSETS | | | | | | | | | |
| Current assets: | | | | | | | | | |
| Cash and cash equivalents | | | $ | 618,505 | | | $ | 451,272 | |
| Accounts receivable, net | | | | 2,444,842 | | | | 3,087,290 | |
| Inventories | | | | 1,446,097 | | | | 1,626,559 | |
| Prepaid expenses and other assets | | | | 191,338 | | | | 180,647 | |
| Total current assets | | | | 4,700,782 | | | | 5,345,768 | |
| Property, plant and equipment, at cost: | | | | | | | | | |
| Land | | | | 24,829 | | | | 25,127 | |
| Buildings and improvements | | | | 144,477 | | | | 147,138 | |
| Machinery and equipment | | | | 724,617 | | | | 698,156 | |
| | | | 893,923 | | | | 870,421 | |
| Less: Accumulated depreciation and amortization | | | | (465,427 | ) | | | (459,881 | ) |
| Property, plant and equipment, net | | | | 428,496 | | | | 410,540 | |
| Investments in affiliated companies | | | | 47,633 | | | | 46,788 | |
| Cost in excess of net assets of companies acquired | | | | 902,002 | | | | 905,848 | |
| Other assets | | | | 388,318 | | | | 409,341 | |
| Total assets | | | $ | 6,467,231 | | | $ | 7,118,285 | |
| LIABILITIES AND EQUITY | | | | | | | | | |
| Current liabilities: | | | | | | | | | |
| Accounts payable | | | $ | 1,983,558 | | | $ | 2,459,922 | |
| Accrued expenses | | | | 328,368 | | | | 455,547 | |
| Short-term borrowings, including current portion of long-term debt | | | | 39,410 | | | | 52,893 | |
| Total current liabilities | | | | 2,351,336 | | | | 2,968,362 | |
| | | | | | | | | |
| Long-term debt | | | | 1,208,101 | | | | 1,223,985 | |
| Other liabilities | | | | 240,873 | | | | 248,888 | |
| Equity: | | | | | | | | | |
| Shareholders' equity: | | | | | | | | | |
| Common stock, par value $1: | | | | | | | | | |
| Authorized – 160,000 shares in 2009 and 2008 | | | | | | | | | |
Issued – 125,285 and 125,048 shares in 2009 and 2008, | | | | | | | | | |
respectively | | | | 125,285 | | | | 125,048 | |
| Capital in excess of par value | | | | 1,033,690 | | | | 1,035,302 | |
Treasury stock (5,701 and 5,740 shares in 2009 and | | | | | | | | | |
2008, respectively), at cost | | | | (187,079 | ) | | | (190,273 | ) |
| Retained earnings | | | | 1,597,746 | | | | 1,571,005 | |
| Foreign currency translation adjustment | | | | 132,386 | | | | 172,528 | |
| Other | | | | (35,456 | ) | | | (36,912 | ) |
| Total shareholders' equity | | | | 2,666,572 | | | | 2,676,698 | |
| Noncontrolling interests | | | | 349 | | | | 352 | |
| Total equity | | | | 2,666,921 | | | | 2,677,050 | |
| Total liabilities and equity | | | $ | 6,467,231 | | | $ | 7,118,285 | |
| |
ARROW ELECTRONICS, INC. |
CONSOLIDATED STATEMENTS OF CASH FLOWS |
(In thousands) |
| | | | |
| | | Quarter Ended | |
| | | April 4,
2009 | | | March 31,
2008 | |
| | | (unaudited) | |
| Cash flows from operating activities: | | | | | | | | | |
| Consolidated net income | | | $ | 26,736 | | | $ | 85,905 | |
| Adjustments to reconcile consolidated net income to net cash provided by operations: | | | | | | | | | |
| Depreciation and amortization | | | | 16,627 | | | | 17,217 | |
| Amortization of stock-based compensation | | | | 5,357 | | | | 5,499 | |
| Amortization of deferred financing costs and discount on notes | | | | 547 | | | | 572 | |
| Equity in earnings of affiliated companies | | | | (323 | ) | | | (2,354 | ) |
| Deferred income taxes | | | | 10,508 | | | | (4,379 | ) |
| Restructuring and integration charge | | | | 16,069 | | | | 4,159 | |
| Preference claim from 2001 | | | | - | | | | 7,822 | |
| Excess tax benefits from stock-based compensation arrangements | | | | 2,158 | | | | (266 | ) |
| Change in assets and liabilities, net of effects of acquired businesses: | | | | | | | | | |
| Accounts receivable | | | | 603,992 | | | | 287,479 | |
| Inventories | | | | 161,195 | | | | (71,348 | ) |
| Prepaid expenses and other assets | | | | (8,291 | ) | | | (3,332 | ) |
| Accounts payable | | | | (448,384 | ) | | | (296,846 | ) |
| Accrued expenses | | | | (145,855 | ) | | | 28,545 | |
| Other | | | | (9,685 | ) | | | (17,969 | ) |
| Net cash provided by operating activities | | | | 230,651 | | | | 40,704 | |
| Cash flows from investing activities: | | | | | | | | | |
| Acquisition of property, plant and equipment | | | | (36,812 | ) | | | (32,345 | ) |
| Cash consideration paid for acquired businesses | | | | - | | | | (73,398 | ) |
| Other | | | | (89 | ) | | | (124 | ) |
| Net cash used for investing activities | | | | (36,901 | ) | | | (105,867 | ) |
| Cash flows from financing activities: | | | | | | | | | |
| Change in short-term borrowings | | | | (11,178 | ) | | | (766 | ) |
| Repayment of revolving credit facility borrowings | | | | (29,400 | ) | | | (409,428 | ) |
| Proceeds from revolving credit facility borrowings | | | | 28,256 | | | | 409,784 | |
| Proceeds from exercise of stock options | | | | 554 | | | | 1,347 | |
| Excess tax benefits from stock-based compensation arrangements | | | | (2,158 | ) | | | 266 | |
| Repurchases of common stock | | | | (2,073 | ) | | | (4,421 | ) |
| Net cash used for financing activities | | | | (15,999 | ) | | | (3,218 | ) |
| Effect of exchange rate changes on cash | | | | (10,518 | ) | | | 12,534 | |
| Net increase (decrease) in cash and cash equivalents | | | | 167,233 | | | | (55,847 | ) |
| Cash and cash equivalents at beginning of period | | | | 451,272 | | | | 447,731 | |
| Cash and cash equivalents at end of period | | | $ | 618,505 | | | $ | 391,884 | |
| | | | | |
ARROW ELECTRONICS, INC. |
SEGMENT INFORMATION |
(In thousands) |
| | | | | |
| | | | Quarter Ended | |
| | | | | | | April 4,
2009 | | | March 31,
2008 | |
| | | | | | | | | (unaudited) | |
| | | | | | | | | | | | | | | |
| Sales: | | | | | | | | | | | | | | | |
| Global components | | | | | | | | | $ | 2,345,012 | | | $ | 2,922,243 | |
| Global ECS | | | | | | | | | | 1,072,416 | | | | 1,106,248 | |
| Consolidated | | | | | | | | | $ | 3,417,428 | | | $ | 4,028,491 | |
| | | | | | | | | | | | | | | |
| Operating income (loss): | | | | | | | | | | | | | | | |
| Global components | | | | | | | | | $ | 76,098 | | | $ | 160,578 | |
| Global ECS | | | | | | | | | | 32,026 | | | | 30,673 | |
| Corporate (a) | | | | | | | | | | (46,887 | ) | | | (47,108 | ) |
| Consolidated | | | | | | | | | $ | 61,237 | | | $ | 144,143 | |
| (a) | | Includes a restructuring and integration charges of $24.0 million and $6.5 million for the first quarters of 2009 and 2008, respectively, and a charge of $12.9 related to the preference claim from 2001 for the first quarter of 2008. |
CONTACT:
Arrow Electronics, Inc.
Michael Taunton, 631-847-5680
Vice President & Treasurer
or
Paul J. Reilly, 631-847-1872
Senior Vice President & Chief Financial Officer
or
Media:
John Hourigan, 303-824-4586
Director, External Communications
