Exhibit 99.1
Arrow Electronics Reports First-Quarter Results
-- Non-GAAP earnings per share of $1.05 --
-- Generated $250 million in cash flow from operations --
ENGLEWOOD, Colo.--(BUSINESS WIRE)--May 1, 2012--Arrow Electronics, Inc. (NYSE:ARW) today reported first-quarter 2012 net income of $113.6 million ($1.01 and $1.00 per share on a basic and diluted basis, respectively) on sales of $4.89 billion, compared with 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 in the first quarter of 2011. Cash flow from operations for the quarter ended March 31, 2012 was $250 million.
The company's results for the first quarters of 2012 and 2011 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 March 31, 2012, would have been $119.8 million ($1.07 and $1.05 per share on a basic and diluted basis, respectively) and 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).
“We executed well in the first quarter with sales and earnings per share in line with our expectations. Cash flow generation was a bright spot in the first quarter, as we generated $250 million in cash flow from operations, with contributions from both business segments,” said Michael J. Long, chairman, president, and chief executive officer.
“Our return on capital continues to be strong with return on invested capital well in excess of our weighted average cost of capital,” said Paul J. Reilly, executive vice president, finance and operations and chief financial officer. “We continue to invest in businesses that will provide above market growth opportunities over the long-term.”
Global enterprise computing solutions (“ECS”) first-quarter sales of $1.54 billion increased 15 percent year over year. “We had very impressive results in the first quarter with sales well above normal seasonality, especially in our North American value-added distribution business. Globally, we saw robust product line performance in storage, software, and services, which each grew in excess of 20% year over year,” said Mr. Long.
Global components first-quarter sales of $3.35 billion decreased 14 percent year over year. “The Americas region performed well while weaker macroeconomic conditions in Asia and Europe have had a negative impact on our results. Our global book-to-bill of 1.04 to 1 is at its highest level in six quarters with sequential increases seen in all regions. Our global teams remain committed to driving increased market share in all regions while providing the highest possible level of service to our customers,” Mr. Long said.
The company's results for the first quarters of 2012 and 2011 include the items outlined below that impact their comparability:
| ● | restructuring, integration, and other charges of $8.2 million ($6.1 million net of related taxes or $.05 per share on both a basic and diluted basis) in the first quarter of 2012 and $9.6 million ($7.2 million net of related taxes or $.06 per share on a both basic and diluted basis) in the first quarter of 2011; |
| ● | 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 |
| ● | 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). |
GUIDANCE
“Looking ahead, we believe that total second-quarter sales will be between $5.04 and $5.44 billion, with global components sales between $3.37 and $3.57 billion and global enterprise computing solutions sales between $1.67 and $1.87 billion. Earnings per share, on a diluted basis, excluding any charges, are expected to be in the range of $1.08 to $1.20. 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 53 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, 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 | |
| | | March 31, 2012 | | | April 2, 2011 | |
| | | (Unaudited) | |
| | | | | | | | | |
| Operating income, as reported | | $ | 187,449 | | | $ | 219,168 | |
| Restructuring, integration, and other charges | | | 8,243 | | | | 9,607 | |
| Settlement of legal matter | | | - | | | | 5,875 | |
| Operating income, as adjusted | | $ | 195,692 | | | $ | 234,650 | |
| | | | | | | | | |
| Net income attributable to shareholders, as reported | | $ | 113,628 | | | $ | 136,309 | |
| Restructuring, integration, and other charges | | | 6,141 | | | | 7,199 | |
| Settlement of legal matter | | | - | | | | 3,609 | |
| Gain on bargain purchase | | | - | | | | (1,078 | ) |
| Net income attributable to shareholders, as adjusted | | $ | 119,769 | | | $ | 146,039 | |
| | | | | | | | | |
| Net income per basic share, as reported | | $ | 1.01 | | | $ | 1.18 | |
| Restructuring, integration, and other charges | | | .05 | | | | .06 | |
| Settlement of legal matter | | | - | | | | .03 | |
| Gain on bargain purchase | | | - | | | | (.01 | ) |
| Net income per basic share, as adjusted | | $ | 1.07 | | | $ | 1.27 | |
| | | | | | | | | |
| Net income per diluted share, as reported | | $ | 1.00 | | | $ | 1.16 | |
| Restructuring, integration, and other charges | | | .05 | | | | .06 | |
| Settlement of legal matter | | | - | | | | .03 | |
| Gain on bargain purchase | | | - | | | | (.01 | ) |
| Net income per diluted share, as adjusted | | $ | 1.05 | | | $ | 1.24 | |
| | | | | | | | | |
| | 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 | |
| | | March 31, 2012 | | | April 2, 2011 | |
| | | | | | | |
| Sales | | $ | 4,889,529 | | | $ | 5,223,003 | |
| Costs and expenses: | | | | | | | | |
| Cost of sales | | | 4,208,950 | | | | 4,500,495 | |
| Selling, general and administrative expenses | | | 455,837 | | | | 464,920 | |
| Depreciation and amortization | | | 29,050 | | | | 22,938 | |
| Restructuring, integration, and other charges | | | 8,243 | | | | 9,607 | |
| Settlement of legal matter | | | - | | | | 5,875 | |
| | | | 4,702,080 | | | | 5,003,835 | |
| Operating income | | | 187,449 | | | | 219,168 | |
| Equity in earnings of affiliated companies | | | 2,184 | | | | 1,213 | |
| Gain on bargain purchase | | | - | | | | 1,755 | |
| Interest and other financing expense, net | | | 27,132 | | | | 25,767 | |
| Income before income taxes | | | 162,501 | | | | 196,369 | |
| Provision for income taxes | | | 48,778 | | | | 59,872 | |
| Consolidated net income | | | 113,723 | | | | 136,497 | |
| Noncontrolling interests | | | 95 | | | | 188 | |
| Net income attributable to shareholders | | $ | 113,628 | | | $ | 136,309 | |
| Net income per share: | | | | | | | | |
| Basic | | $ | 1.01 | | | $ | 1.18 | |
| Diluted | | $ | 1.00 | | | $ | 1.16 | |
| Average number of shares outstanding: | | | | | | | | |
| Basic | | | 112,002 | | | | 115,215 | |
| Diluted | | | 114,077 | | | | 117,428 | |
ARROW ELECTRONICS, INC. CONSOLIDATED BALANCE SHEETS (In thousands except par value) |
| | | | | | | |
| | | March 31, 2012 | | | December 31, 2011 |
| | | (unaudited) | | | | | |
| ASSETS | | | | | | | |
| Current assets: | | | | | | | | |
| Cash and cash equivalents | | $ | 739,708 | | | $ | 396,887 | |
| Accounts receivable, net | | | 4,207,647 | | | | 4,482,117 | |
| Inventories | | | 2,011,442 | | | | 1,963,910 | |
| Other current assets | | | 210,854 | | | | 181,677 | |
| Total current assets | | | 7,169,651 | | | | 7,024,591 | |
| Property, plant and equipment, at cost: | | | | | | | | |
| Land | | | 23,925 | | | | 23,790 | |
| Buildings and improvements | | | 149,936 | | | | 147,215 | |
| Machinery and equipment | | | 962,053 | | | | 934,558 | |
| | | | 1,135,914 | | | | 1,105,563 | |
| Less: Accumulated depreciation and amortization | | | (572,395 | ) | | | (549,334 | ) |
| Property, plant and equipment, net | | | 563,519 | | | | 556,229 | |
| Investments in affiliated companies | | | 63,487 | | | | 60,579 | |
| Intangible assets, net | | | 420,728 | | | | 392,763 | |
| Cost in excess of net assets of companies acquired | | | 1,615,210 | | | | 1,473,333 | |
| Other assets | | | 306,153 | | | | 321,584 | |
| Total assets | | $ | 10,138,748 | | | $ | 9,829,079 | |
| LIABILITIES AND EQUITY | | | | | | | | |
| Current liabilities: | | | | | | | | |
| Accounts payable | | $ | 3,160,135 | | | $ | 3,264,088 | |
| Accrued expenses | | | 608,652 | | | | 660,996 | |
Short-term borrowings, including current portion of long-term debt | | | 30,554 | | | | 33,843 | |
| Total current liabilities | | | 3,799,341 | | | | 3,958,927 | |
| | | | | | | | | |
| Long-term debt | | | 2,250,463 | | | | 1,927,823 | |
| Other liabilities | | | 280,142 | | | | 267,069 | |
| Equity: | | | | | | | | |
| Shareholders' equity: | | | | | | | | |
| Common stock, par value $1: | | | | | | | | |
| Authorized – 160,000 shares in 2012 and 2011 | | | | | | | | |
Issued – 125,424 and 125,382 shares in 2012 and 2011, respectively | | | 125,424 | | | | 125,382 | |
| | | | | | | | | |
| Capital in excess of par value | | | 1,062,542 | | | | 1,076,275 | |
Treasury stock (13,877 and 13,568 shares in 2012 and 2011, respectively), at cost | | | (456,672 | ) | | | (434,959 | ) |
| Retained earnings | | | 2,886,585 | | | | 2,772,957 | |
| Foreign currency translation adjustment | | | 206,585 | | | | 158,550 | |
| Other | | | (19,511 | ) | | | (29,393 | ) |
| Total shareholders' equity | | | 3,804,953 | | | | 3,668,812 | |
| Noncontrolling interests | | | 3,849 | | | | 6,448 | |
| Total equity | | | 3,808,802 | | | | 3,675,260 | |
| Total liabilities and equity | | $ | 10,138,748 | | | $ | 9,829,079 | |
ARROW ELECTRONICS, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) (Unaudited) |
| | | | |
| | | Quarter Ended | |
| | | March 31, 2012 | | | April 2, 2011 | |
| Cash flows from operating activities: | | | | | | |
| Consolidated net income | | $ | 113,723 | | | $ | 136,497 | |
| Adjustments to reconcile consolidated net income to net cash provided by (used for) operations: | | | | | | | | |
| Depreciation and amortization | | | 29,050 | | | | 22,938 | |
| Amortization of stock-based compensation | | | 7,255 | | | | 10,357 | |
| Equity in earnings of affiliated companies | | | (2,184 | ) | | | (1,213 | ) |
| Deferred income taxes | | | 18,961 | | | | (1,057 | ) |
| Restructuring, integration, and other charges | | | 6,141 | | | | 7,199 | |
| Settlement of legal matter | | | - | | | | 3,609 | |
| Excess tax benefits from stock-based compensation arrangements | | | (4,947 | ) | | | (5,728 | ) |
| Other | | | (1,457 | ) | | | (361 | ) |
| Change in assets and liabilities, net of effects of acquired businesses: | | | | | | | | |
| Accounts receivable | | | 334,014 | | | | 278,549 | |
| Inventories | | | (24,357 | ) | | | 37,981 | |
| Accounts payable | | | (135,198 | ) | | | (574,003 | ) |
| Accrued expenses | | | (64,564 | ) | | | (43,109 | ) |
| Other assets and liabilities | | | (26,102 | ) | | | (51,328 | ) |
| Net cash provided by (used for) operating activities | | | 250,335 | | | | (179,669 | ) |
| Cash flows from investing activities: | | | | | | | | |
| Cash consideration paid for acquired businesses | | | (160,543 | ) | | | (379,013 | ) |
| Acquisition of property, plant and equipment | | | (22,253 | ) | | | (18,177 | ) |
| Net cash used for investing activities | | | (182,796 | ) | | | (397,190 | ) |
| Cash flows from financing activities: | | | | | | | | |
| Change in short-term and other borrowings | | | (9,074 | ) | | | (3,900 | ) |
| Proceeds from long-term bank borrowings, net | | | 329,700 | | | | 190,800 | |
| Proceeds from exercise of stock options | | | 10,138 | | | | 27,150 | |
| Excess tax benefits from stock-based compensation arrangements | | | 4,947 | | | | 5,728 | |
| Repurchases of common stock | | | (57,684 | ) | | | (46,447 | ) |
| Net cash provided by financing activities | | | 278,027 | | | | 173,331 | |
| Effect of exchange rate changes on cash | | | (2,745 | ) | | | (1,491 | ) |
| Net increase (decrease) in cash and cash equivalents | | | 342,821 | | | | (405,019 | ) |
| Cash and cash equivalents at beginning of period | | | 396,887 | | | | 926,321 | |
| Cash and cash equivalents at end of period | | $ | 739,708 | | | $ | 521,302 | |
ARROW ELECTRONICS, INC. SEGMENT INFORMATION (In thousands) (unaudited) |
| | | | |
| | | Quarter Ended | |
| | | March 31, 2012 | | | April 2, 2011 | |
| | | | | | | | | |
| Sales: | | | | | | | | |
| Global components | | $ | 3,349,554 | | | $ | 3,886,600 | |
| Global ECS | | | 1,539,975 | | | | 1,336,403 | |
| Consolidated | | $ | 4,889,529 | | | $ | 5,223,003 | |
| | | | | | | | | |
| Operating income (loss): | | | | | | | | |
| Global components | | $ | 170,708 | | | $ | 228,881 | |
| Global ECS | | | 55,487 | | | | 39,080 | |
| Corporate (a) | | | (38,746 | ) | | | (48,793 | ) |
| Consolidated | | $ | 187,449 | | | $ | 219,168 | |
| | | | | | | | | |
| (a) | | | Includes restructuring, integration, and other charges of $8.2 million and $9.6 million for the first quarters of 2012 and 2011, respectively. Also included in the first quarter of 2011 is a charge of $5.9 million related to the settlement of a legal matter. |
CONTACT:
Arrow Electronics, Inc.
Greer Aviv, 303-824-3765
Senior Manager, Investor Relations
or
Paul J. Reilly, 631-847-1872
Executive Vice President, Finance and Operations & Chief Financial Officer
or
John Hourigan, 303-824-4586
Director, Corporate Communications
