Exhibit 99.1
Arrow Electronics Achieves Record Second Quarter Revenues and Earnings Per Share
-- Non-GAAP Earnings Per Share of $1.01 Exceed Street Expectations by 25%--
-- Repurchase Authorization Increased by Additional $100 Million --
MELVILLE, N.Y.--(BUSINESS WIRE)--July 28, 2010--Arrow Electronics, Inc. (NYSE:ARW) today reported second quarter 2010 net income of $116.2 million ($.97 and $.96 per share on a basic and diluted basis, respectively) on sales of $4.61 billion, compared with net income of $21.1 million ($.18 per share on both a basic and diluted basis) on sales of $3.39 billion in the second quarter of 2009.
The company's results for the second quarters of 2010 and 2009 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 July 3, 2010 would have been $121.3 million ($1.02 and $1.01 per share on a basic and diluted basis, respectively) and net income for the quarter ended July 4, 2009 would have been $37.2 million ($.31 per share on both a basic and diluted basis).
“This was another outstanding quarter for Arrow, as we achieved record second quarter revenues and earnings per share, with cash flow generation well ahead of our expectations. Our strategic focus on sales excellence, profitable market share growth, and the expansion of value-added services and capabilities all contributed to our success,” said Michael J. Long, chairman, president, and chief executive officer. “Earnings per share more than tripled year over year, substantially ahead of our revenue growth, and return on invested capital was 14.3%.”
“The very strong results this quarter demonstrate the significant earnings capacity we have in our businesses, as operating income growth substantially outpaced sales growth on both a year-over-year and sequential basis, and our operating margin reached the highest level since the end of 2007,” said Paul J. Reilly, executive vice president, finance and operations and chief financial officer. “Return on working capital increased more than two times the year-ago level reaching a new record level.”
“During the quarter we repurchased $75 million of our stock leaving us with $25 million under the Board authorization. The Board has authorized management to acquire an additional $100 million bringing the total that can be spent on future buybacks to $125 million,” added Mr. Reilly.
Global components sales of $3.26 billion increased 44 percent year over year. “Exceptional sales growth in all of our components regions led to record-levels of sales and operating income. Return on working capital more than doubled year over year, setting a new record also,” Mr. Long said.
Global enterprise computing solutions (“ECS”) sales of $1.35 billion increased 21 percent year over year. “Storage, software, services, and industry-standard servers grew at very strong double-digits rates on a year-over-year basis,” said Mr. Long. “Sequential sales exceeded our expectations as here too, our focus on sales excellence and our strategic investments in key solution segments is paying off,” Mr. Long added.
The company's results for the second quarters of 2010 and 2009 include the items outlined below that impact their comparability:
- restructuring, integration, and other charges of $5.6 million ($4.1 million net of related taxes or $.03 per share on both a basic and diluted basis) in 2010 and $19.3 million ($16.1 million net of related taxes or $.13 per share on a both basic and diluted basis) in 2009.
- 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.
SIX-MONTH RESULTS
Arrow’s net income for the first six months of 2010 was $203.2 million ($1.70 and $1.68 per share on a basic and diluted basis, respectively) on sales of $8.85 billion, compared with net income of $47.8 million ($.40 per share on both a basic and diluted basis) on sales of $6.81 billion in the first six months of 2009. Sales in the first six months of 2010 increased 30 percent year over year.
Net income for the first six months of 2010 includes restructuring, integration, and other charges of $13.1 million ($9.6 million net of related taxes or $.08 per share on both a basic and diluted basis) primarily related to initiatives taken by the company to improve operating efficiencies and a loss on prepayment of debt of $1.6 million ($1.0 million net of taxes or $.01 per share on both a basic and diluted basis). Excluding these items, net income would have been $213.8 million ($1.79 and $1.76 per share on a basic and diluted basis, respectively) for the first six months of 2010.
Net income for the first six months of 2009 includes restructuring, integration, and other charges of $43.3 million ($32.2 million net of related taxes or $.27 per share on both a basic and diluted basis) primarily related to initiatives taken by the company to improve operating efficiencies. Excluding these items, net income would have been $80.0 million ($.67 per share on both a basic and diluted basis) for the first six months of 2009.
GUIDANCE
“Looking ahead, we believe that total third quarter sales will be between $4.39 and $4.79 billion, with global components sales between $3.32 and $3.52 billion and global enterprise computing solutions sales between $1.07 and $1.27 billion. Earnings per share, on a diluted basis, excluding any charges, are expected to be in the range of $.96 to $1.06,” said Mr. Reilly.
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 900 suppliers and 125,000 original equipment manufacturers, contract manufacturers and commercial customers through a global network of more than 310 locations in 51 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 prepayment of debt. 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) (unaudited) |
| | | | | |
| | Quarter Ended | | | Six Months Ended |
| | July 3,
2010 | | | July 4,
2009 | | | July 3,
2010 | | | July 4,
2009 |
| | | | | | | | | | | | | | | |
| Operating income, as reported | | $ | 189,191 | | | $ | 51,198 | | | $ | 334,461 | | | $ | 112,435 |
| Restructuring, integration, and other charges | | | 5,649 | | | | 19,252 | | | | 13,086 | | | | 43,270 |
| Operating income, as adjusted | | $ | 194,840 | | | $ | 70,450 | | | $ | 347,547 | | | $ | 155,705 |
| | | | | | | | | | | | | | | |
Net income attributable to shareholders, as reported | | $ | 116,193 | | | $ | 21,097 | | | $ | 203,239 | | | $ | 47,838 |
| Restructuring, integration, and other charges | | | 4,095 | | | | 16,124 | | | | 9,640 | | | | 32,193 |
| Loss on prepayment of debt | | | 964 | | | | - | | | | 964 | | | | - |
Net income attributable to shareholders, as adjusted | | $ | 121,252 | | | $ | 37,221 | | | $ | 213,843 | | | $ | 80,031 |
| | | | | | | | | | | | | | | |
| Net income per basic share, as reported | | $ | .97 | | | $ | .18 | | | $ | 1.70 | | | $ | .40 |
Restructuring, integration, and other charges | | | .03 | | | | .13 | | | | .08 | | | | .27 |
| Loss on prepayment of debt | | | .01 | | | | - | | | | .01 | | | | - |
| Net income per basic share, as adjusted | | $ | 1.02 | | | $ | .31 | | | $ | 1.79 | | | $ | .67 |
| | | | | | | | | | | | | | | |
| Net income per diluted share, as reported | | $ | .96 | | | $ | .18 | | | $ | 1.68 | | | $ | .40 |
| Restructuring, integration, and other charges | | | .03 | | | | .13 | | | | .08 | | | | .27 |
| Loss on prepayment of debt | | | .01 | | | | - | | | | .01 | | | | - |
| Net income per diluted share, as adjusted | | $ | 1.01 | | | $ | .31 | | | $ | 1.76 | | | $ | .67 |
| | | | | | | | | | | | | | | |
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 | | | Six Months Ended | |
| July 3,
2010 | | | July 4,
2009 | | | July 3,
2010 | | | July 4,
2009 | |
| | | | | | | | | | | | | | | |
| Sales | $ | 4,613,307 | | | $ | 3,391,823 | | | $ | 8,848,673 | | | $ | 6,809,251 | |
| Costs and expenses: | | | | | | | | | | | | | | | |
| Cost of sales | | 4,024,831 | | | | 2,989,629 | | | | 7,722,264 | | | | 5,976,061 | |
| Selling, general and administrative expenses | | 375,876 | | | | 315,028 | | | | 742,625 | | | | 644,142 | |
| Depreciation and amortization | | 17,760 | | | | 16,716 | | | | 36,237 | | | | 33,343 | |
| Restructuring, integration, and other charges | | 5,649 | | | | 19,252 | | | | 13,086 | | | | 43,270 | |
| | 4,424,116 | | | | 3,340,625 | | | | 8,514,212 | | | | 6,696,816 | |
| Operating income | | 189,191 | | | | 51,198 | | | | 334,461 | | | | 112,435 | |
| Equity in earnings of affiliated companies | | 1,785 | | | | 1,027 | | | | 2,933 | | | | 1,350 | |
| Loss on prepayment of debt | | 1,570 | | | | - | | | | 1,570 | | | | - | |
| Interest and other financing expense, net | | 19,355 | | | | 17,082 | | | | 38,441 | | | | 40,117 | |
| Income before income taxes | | 170,051 | | | | 35,143 | | | | 297,383 | | | | 73,668 | |
| Provision for income taxes | | 53,858 | | | | 14,061 | | | | 94,149 | | | | 25,850 | |
| Consolidated net income | | 116,193 | | | | 21,082 | | | | 203,234 | | | | 47,818 | |
| Noncontrolling interests | | - | | | | (15 | ) | | | (5 | ) | | | (20 | ) |
| Net income attributable to shareholders | $ | 116,193 | | | $ | 21,097 | | | $ | 203,239 | | | $ | 47,838 | |
| Net income per share: | | | | | | | | | | | | | | | |
| Basic | $ | .97 | | | $ | .18 | | | $ | 1.70 | | | $ | .40 | |
| Diluted | $ | .96 | | | $ | .18 | | | $ | 1.68 | | | $ | .40 | |
| Average number of shares outstanding: | | | | | | | | | | | | | | | |
| Basic | | 119,228 | | | | 119,783 | | | | 119,731 | | | | 119,675 | |
| Diluted | | 120,585 | | | | 120,317 | | | | 121,270 | | | | 120,042 | |
ARROW ELECTRONICS, INC. CONSOLIDATED BALANCE SHEETS (In thousands except par value) |
| | | | | | |
| | July 3, | | | December 31, | |
| | 2010 | | | 2009 | |
| ASSETS | | (unaudited) | | | | | |
| Current assets: | | | | | | | | |
| Cash and cash equivalents | | $ | 576,664 | | | $ | 1,137,007 | |
| Accounts receivable, net | | | 3,372,945 | | | | 3,136,141 | |
| Inventories | | | 1,805,779 | | | | 1,397,668 | |
| Other current assets | | | 215,168 | | | | 168,812 | |
| Total current assets | | | 5,970,556 | | | | 5,839,628 | |
| Property, plant and equipment, at cost: | | | | | | | | |
| Land | | | 23,192 | | | | 23,584 | |
| Buildings and improvements | | | 128,605 | | | | 137,539 | |
| Machinery and equipment | | | 806,936 | | | | 779,105 | |
| | | 958,733 | | | | 940,228 | |
| Less: Accumulated depreciation and amortization | | | (482,923 | ) | | | (479,522 | ) |
| Property, plant and equipment, net | | | 475,810 | | | | 460,706 | |
| Investments in affiliated companies | | | 53,875 | | | | 53,010 | |
| Cost in excess of net assets of companies acquired | | | 1,019,292 | | | | 926,296 | |
| Other assets | | | 468,477 | | | | 482,726 | |
| Total assets | | $ | 7,988,010 | | | $ | 7,762,366 | |
| LIABILITIES AND EQUITY | | | | | | | | |
| Current liabilities: | | | | | | | | |
| Accounts payable | | $ | 3,028,403 | | | $ | 2,763,237 | |
| Accrued expenses | | | 496,667 | | | | 445,914 | |
Short-term borrowings, including current portion of long-term debt | | | 77,344 | | | | 123,095 | |
| Total current liabilities | | | 3,602,414 | | | | 3,332,246 | |
| | | | | | | | |
| Long-term debt | | | 1,262,865 | | | | 1,276,138 | |
| Other liabilities | | | 196,604 | | | | 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 | | | 1,048,253 | | | | 1,056,704 | |
Treasury stock (7,520 and 5,459 shares in 2010 and 2009, respectively), at cost | | | (233,458 | ) | | | (179,152 | ) |
| Retained earnings | | | 1,897,756 | | | | 1,694,517 | |
| Foreign currency translation adjustment | | | 97,574 | | | | 229,019 | |
| Other | | | (9,335 | ) | | | (9,415 | ) |
| Total shareholders' equity | | | 2,926,127 | | | | 2,916,960 | |
| Noncontrolling interests | | | - | | | | 337 | |
| Total equity | | | 2,926,127 | | | | 2,917,297 | |
| Total liabilities and equity | | $ | 7,988,010 | | | $ | 7,762,366 | |
ARROW ELECTRONICS, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) (unaudited) |
| | |
| Quarter Ended | |
| July 3,
2010 | | July 4,
2009 |
| Cash flows from operating activities: | | | | | | | |
| Consolidated net income | $ | 116,193 | | | $ | 21,082 | |
| Adjustments to reconcile consolidated net income to net cash provided by operations: | | | | | | | |
| Depreciation and amortization | | 17,760 | | | | 16,716 | |
| Amortization of stock-based compensation | | 8,586 | | | | 7,690 | |
| Amortization of deferred financing costs and discount on notes | | 546 | | | | 563 | |
| Equity in earnings of affiliated companies | | (1,785 | ) | | | (1,027 | ) |
| Deferred income taxes | | 9,885 | | | | 7,159 | |
| Restructuring, integration, and other charges | | 4,095 | | | | 16,124 | |
| Excess tax benefits from stock-based compensation arrangements | | 34 | | | | (1 | ) |
| Loss on prepayment of debt | | 964 | | | | - | |
| Change in assets and liabilities, net of effects of acquired businesses: | | | | | | | |
| Accounts receivable | | (308,822 | ) | | | (57,338 | ) |
| Inventories | | (346,625 | ) | | | 102,468 | |
| Accounts payable | | 580,025 | | | | 194,919 | |
| Accrued expenses | | 56,985 | | | | 2,393 | |
| Other assets and liabilities | | (73,165 | ) | | | (4,410 | ) |
| Net cash provided by operating activities | | 64,676 | | | | 306,338 | |
| Cash flows from investing activities: | | | | | | | |
| Acquisition of property, plant and equipment | | (29,106 | ) | | | (35,557 | ) |
| Cash consideration paid for acquired businesses | | (169,293 | ) | | | - | |
| Proceeds from sale of facilities | | 10,165 | | | | 1,153 | |
| Other | | - | | | | (183 | ) |
| Net cash used for investing activities | | (188,234 | ) | | | (34,587 | ) |
| Cash flows from financing activities: | | | | | | | |
| Change in short-term and other borrowings | | (21,954 | ) | | | 4,813 | |
| Repayment of long-term bank borrowings | | (471,700 | ) | | | - | |
| Proceeds from long-term bank borrowings | | 471,700 | | | | - | |
| Proceeds from exercise of stock options | | 4,826 | | | | 283 | |
| Excess tax benefits from stock-based compensation arrangements | | (34 | ) | | | 1 | |
| Repurchases of common stock | | (74,994 | ) | | | (72 | ) |
| Net cash provided by (used for) financing activities | | (92,156 | ) | | | 5,025 | |
| Effect of exchange rate changes on cash | | (17,673 | ) | | | 13,146 | |
| Net increase (decrease) in cash and cash equivalents | | (233,387 | ) | | | 289,922 | |
| Cash and cash equivalents at beginning of period | | 810,051 | | | | 618,505 | |
| Cash and cash equivalents at end of period | $ | 576,664 | | | $ | 908,427 | |
ARROW ELECTRONICS, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) (unaudited) |
| |
| Six Months Ended | |
| July 3,
2010 | | | July 4,
2009 | |
| Cash flows from operating activities: | | | | | | | |
| Consolidated net income | $ | 203,234 | | | $ | 47,818 | |
| Adjustments to reconcile consolidated net income to net cash provided by (used for) operations: | | | | | | | |
| Depreciation and amortization | | 36,237 | | | | 33,343 | |
| Amortization of stock-based compensation | | 17,053 | | | | 13,047 | |
| Amortization of deferred financing costs and discount on notes | | 1,104 | | | | 1,110 | |
| Equity in earnings of affiliated companies | | (2,933 | ) | | | (1,350 | ) |
| Deferred income taxes | | 24,976 | | | | 17,667 | |
| Restructuring, integration, and other charges | | 9,640 | | | | 32,193 | |
| Excess tax benefits from stock-based compensation arrangements | | (1,728 | ) | | | 2,157 | |
| Loss on prepayment of debt | | 964 | | | | - | |
| Change in assets and liabilities, net of effects of acquired businesses: | | | | | | | |
| Accounts receivable | | (300,728 | ) | | | 546,654 | |
| Inventories | | (445,872 | ) | | | 263,663 | |
| Accounts payable | | 307,116 | | | | (253,465 | ) |
| Accrued expenses | | 30,034 | | | | (143,462 | ) |
| Other assets and liabilities | | (96,638 | ) | | | (22,386 | ) |
| Net cash provided by (used for) operating activities | | (217,541 | ) | | | 536,989 | |
| Cash flows from investing activities: | | | | | | | |
| Acquisition of property, plant and equipment | | (56,620 | ) | | | (72,369 | ) |
| Cash consideration paid for acquired businesses | | (172,353 | ) | | | - | |
| Proceeds from sale of facilities | | 16,971 | | | | 1,153 | |
| Other | | - | | | | (272 | ) |
| Net cash used for investing activities | | (212,002 | ) | | | (71,488 | ) |
| Cash flows from financing activities: | | | | | | | |
| Change in short-term and other borrowings | | (7,794 | ) | | | (7,509 | ) |
| Repayment of long-term bank borrowings | | (471,700 | ) | | | (29,400 | ) |
| Proceeds from long-term bank borrowings | | 471,700 | | | | 29,400 | |
| Proceeds from exercise of stock options | | 6,405 | | | | 837 | |
| Excess tax benefits from stock-based compensation arrangements | | 1,728 | | | | (2,157 | ) |
| Repurchases of common stock | | (81,179 | ) | | | (2,145 | ) |
| Net cash used for financing activities | | (80,840 | ) | | | (10,974 | ) |
| Effect of exchange rate changes on cash | | (49,960 | ) | | | 2,628 | |
| Net increase (decrease) in cash and cash equivalents | | (560,343 | ) | | | 457,155 | |
| Cash and cash equivalents at beginning of period | | 1,137,007 | | | | 451,272 | |
| Cash and cash equivalents at end of period | $ | 576,664 | | | $ | 908,427 | |
ARROW ELECTRONICS, INC. SEGMENT INFORMATION (In thousands) (unaudited) |
| | | | | | | |
| | Quarter Ended | | | Six Months Ended | |
| | July 3,
2010 | | July 4,
2009 | | July 3,
2010 | | July 4,
2009 |
| Sales: | | | | | | | | | | | | | | | |
| Global components | $ | 3,259,016 | | | $ | 2,271,570 | | | $ | 6,387,038 | | | $ | 4,616,582 | |
| Global ECS | | 1,354,291 | | | | 1,120,253 | | | | 2,461,635 | | | | 2,192,669 | |
| Consolidated | $ | 4,613,307 | | | $ | 3,391,823 | | | $ | 8,848,673 | | | $ | 6,809,251 | |
| | | | | | | | | | | | | | | |
| Operating income (loss): | | | | | | | | | | | | | | | |
| Global components | $ | 182,494 | | | $ | 57,993 | | | $ | 336,602 | | | $ | 134,091 | |
| Global ECS | | 43,023 | | | | 34,461 | | | | 66,936 | | | | 66,487 | |
| Corporate (a) | | (36,326 | ) | | | (41,256 | ) | | | (69,077 | ) | | | (88,143 | ) |
| Consolidated | $ | 189,191 | | | $ | 51,198 | | | $ | 334,461 | | | $ | 112,435 | |
| | | | | | | | | | | | | | | |
(a) Includes restructuring, integration, and other charges of $5.6 million and $13.1 million for the second quarter and first six months
of 2010 and $19.3 million and $43.3 million for the second quarter and first six months of 2009, respectively. |
CONTACT:
Arrow Electronics, Inc.
Michael Taunton
Vice President & Treasurer
631-847-5680
or
Paul J. Reilly
Executive Vice President, Finance and Operations & Chief Financial Officer
631-847-1872
or
Media:
John Hourigan
Director, External Communications
303-824-4586
