SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 or 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported) December 22, 2000
ARROW ELECTRONICS, INC.
-----------------------
(Exact Name of Registrant as Specified in Charter)
NEW YORK 1-4482 11-1806155
- ------------------------- ---------------- -------------------
(State or Other Juris- (Commission File (IRS Employer
diction of Incorporation) Number) Identification No.)
25 HUB DRIVE, MELVILLE, NEW YORK 11747
- -------------------------------- -------------
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code #(516) 391-1300
N/A
- -------------------------------------------------------------------
(Former Name or Former Address, if Changed Since Last Report)
Item 2. Acquisitions or Disposition of Assets.
On October 16, 2000 Arrow Electronics, Inc. completed its previously announced
acquisition of Wyle Components and Wyle Systems (the "Wyle Electronics Group"),
part of the electronics distribution business of Germany-based E.ON AG (formerly
VEBA AG).
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
7.(a) The audited combined financial statements as of and for the year ended
December 31, 1999 of the Wyle Electronics Group were filed on Form 8-K on
September 1, 2000. Combined financial statements of the Wyle Electronics Group
as of and for the nine months ended September 30, 2000 are included herein.
7.(b) Pro forma financial statements.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
ARROW ELECTRONICS, INC.
Date: December 22, 2000 By: /s/ Robert E. Klatell
---------------------
Name: Robert E. Klatell
Title: Executive Vice President
Wyle Electronics Group
Notes to Combined Financial Statements
(amounts in thousands)
1. Organization and Summary of Significant Accounting Policies
Nature of operations
Wyle Electronics Group ("Wyle" or the "Company") is a wholly owned subsidiary of
VEBA Electronics, LLC which is a wholly owned subsidiary of VEBA Corporation, a
US corporation, which is indirectly owned by E.ON AG, a German company. Wyle is
an operating company within the VEBA Electronics Group. VEBA Electronics Group
is a combination of companies indirectly owned by E.ON AG, which is in the
business of electronics distribution, marketing semiconductors and computer
products, as well as providing value-added services. These services include
complex materials management systems and engineering design for application-
specific integrated circuits, including field programmable logic devices.
On August 7, 2000, a consortium consisting of three entities entered into a
share purchase agreement to purchase the VEBA Electronics Group from E.ON AG.
On October 17th, 2000 the acquisition was finalized, with Arrow Electronics,
Inc. acquiring the Wyle Electronics Group. The affect of this transaction
is not reflected in the accompanying financial statements.
Basis of presentation
The combined financial statements include companies that comprise the Wyle
Electronics Group. Ownership of the group companies is not consolidated within
a single entity owned by Wyle Electronics. These combined financial statements
include, among other things, allocations of certain VEBA Electronics Group
corporate assets, liabilities (including profit sharing and pension benefits)
and expenses (including legal, accounting, employee benefits, insurance
services, information technology services, treasury and other corporate
overhead) to Wyle. These amounts have been allocated to Wyle on the basis that
is considered by management to reflect most fairly or reasonably the utilization
of the services provided to or the benefit obtained by Wyle. Typical measures
and activity indicators used for allocation purposes include headcount, sales
revenue and payroll expense. The Company's management believes that the methods
used to allocate these amounts are reasonable. However, these allocations are
not necessarily indicative of the amounts that would have been or that will be
recorded by the Company on a stand-alone basis. All significant intercompany
balances and transactions between combined companies have been eliminated. The
accounts of the following companies were included in the combined financial
statements: Wyle Electronics, Wyle Distribution Group Santa Clara, Inc., Wyle
Ginsbury Electronics, Inc., Wyle Electronics Ltd. (Barbados), Wyle Electronics
Canada Corp., Wyle Electronics Caribbean Corp., Redwing of California, Inc.,
Wyle Electronics de Mexico s de (Mexico), Wyle Systems LLC, Atlas Business
Services LLC, Atlas Services LLC, and EBV Electronic Holdings, Inc.
The accompanying combined financial statements reflect all adjustments,
consisting only of normal recurring accruals, which are, in the opinion of
management, necessary for a fair presentation of the combined financial
position and results of operations at and for the periods presented. Such
financial statements do not include all the information or footnotes necessary
for a complete presentation and, accordingly, should be read in conjunction with
the Company's audited combined financial statements for the year ended
December 31, 1999 and the notes thereto filed on Arrow Electronics, Inc. Form
8-K dated September 1, 2000. The results of operations for the interim period
are not necessarily indicative of results for the full year.
Impact of Recently Issued Accounting Standards
In June 1998, the Financial Accounting Standards Board issued Statement No. 133,
"Accounting for Derivative Instruments and Hedging Activities." This statement
is required to be adopted effective January 1, 2001. The Statement will require
the Company to recognize all derivatives on the balance sheet at fair value.
Gains and losses resulting from changes in the value of the derivatives would be
accounted for depending on the intended use of the derivative and whether it
qualifies for hedge accounting. The Company does not utilize derivative
financial instruments. Due to the company's limited use of derivative financial
instruments, adoption of Statement No. 133 is not expected to have an effect on
the company's combined results of operations, financial position, or cash flows.
2. Segment Information
Wyle Electronics Group distributes electronics components and systems. The
components business concentrates on the in-process distribution of semiconductor
parts and products to manufacturers and the systems business concentrates on the
wholesale distribution of final products to value-added resellers, original
equipment manufacturers and retailers.
Wyle Electronics represents the electronics components business, which
distributes active, mainly non-commodity, electronics components such as
microprocessors and microcontrollers to industrial semiconductor customers for
use in manufactured products. The electronics components business also provides
technical customer consultations, supply chain management for customers and
manufacturers, and added value services such as component programming
and special packaging.
Wyle Systems represents the electronics systems business, engages in the
wholesale distribution of computer systems, computer peripherals such as
printers and monitors, PC application software and networking products to
members of the retail trade and system integrators in the United States.
Nine Months Ended
September 30, 2000
------------------------
Wyle Wyle
Electronics Systems
----------- -------
Assets $1,178,544 $ 261,127
Revenue 1,417,364 513,226
Depreciation and amortization 32,927 3,149
Capital expenditures 5,800 7,660
Operating profit (loss) 93,181 (51,071)
Interest expense, net (31,247) (9,814)
Income tax (expense) benefit (34,544) 24,399
Net income (loss) 27,390 (36,486)
Miscellaneous immaterial amounts in certain categories presented are
attributable to the other businesses of the Company.
Wyle Electronics Group
Combined Statement of Operations
(in thousands)
Nine Months ended
September 30,
------------------------
2000 1999
---- ----
(Unaudited)
Net revenues $1,930,590 $1,402,675
Cost of net revenues (1,641,259) (1,199,665)
---------- ----------
Gross profit 289,331 203,010
Selling and administrative expenses (224,017) (162,796)
Goodwill amortization (23,204) (22,793)
Interest expense, net (41,061) (32,808)
---------- ----------
Income (loss) before income taxes 1,049 (15,387)
Income tax provision (10,145) (3,402)
---------- ----------
Net loss $ (9,096) $ (18,789)
========== ==========
The accompanying notes are an integral part of the combined financial
statements.
Wyle Electronics Group
Combined Balance Sheet
(in thousands, except share data)
September 30, December 31,
2000 1999
------------ -----------
(Unaudited)
Assets
Current assets:
Cash and cash equivalents $ 19,929 $ 12,592
Accounts receivable (less allowance
of $51,838 in 2000 and $30,221
in 1999) 452,096 338,479
Inventory, net 466,417 356,634
Prepaid expenses and other assets 60,017 45,038
---------- ----------
Total current assets 998,459 752,743
Property, plant and equipment, net 62,983 64,646
Intangible assets, net 353,477 386,681
Other assets 24,752 24,742
---------- ----------
Total assets $1,439,671 $1,228,812
========== ==========
Liabilities and Parent's Equity
Current liabilities:
Notes payable to affiliated companies 714,003 570,718
Accounts payable 196,499 113,503
Accrued liabilities 83,307 87,634
---------- ----------
Total current liabilities 993,809 771,855
Notes payable 50,000 50,000
Notes payable to affiliated companies 200,000 200,000
Other 14,852 16,851
---------- ----------
Total liabilities 1,258,661 1,038,706
Parent's equity:
Investment by parent 263,433 263,431
---------- ----------
Accumulated deficit (82,423) (73,325)
---------- ----------
Total parent's equity 181,010 190,106
---------- ----------
Total liabilities and parent's equity $1,439,671 $1,228,812
========== ==========
The accompanying notes are an integral part of the combined financial
statements.
Wyle Electronics Group
Combined Statements of Cash Flows
(in thousands)
Nine Months ended
September 30,
----------------------
2000 1999
---- ----
(Unaudited)
Cash flows from operating activities:
Net income (loss) $ (9,096) $ (18,789)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation and amortization 36,077 32,736
(Gain)/loss on retirement of fixed assets 13 (15)
Provision for losses on accounts receivable
and inventory obsolescence 53,488 21,982
Changes in operating assets and liabilities:
Receivables (143,519) (104,848)
Inventory (133,369) 11,765
Other assets (2,752) (6,101)
Accounts payable 82,996 9,078
Accrued liabilities (4,327) 23,579
Other non-current liabilities (1,999) 561
--------- ---------
Net cash used in operating activities (122,488) (30,052)
--------- ---------
Cash flows from investing activities:
Acquisition of property, plant and equipment (13,460) (8,556)
--------- ---------
Net cash used for investing activities (13,460) (8,556)
--------- ---------
Cash flows from financing activities:
Proceeds from issuance of notes payable 143,285 38,219
--------- ---------
Net cash provided by financing activities 143,285 38,219
--------- ---------
Increase (decrease) in cash and cash equivalents 7,337 (389)
Cash and cash equivalents at beginning of period 12,592 12,924
--------- ---------
Cash and cash equivalents at end of period $ 19,929 $ 12,535
========= =========
Supplemental disclosures of cash flow information
Cash paid during the period:
Interest $ 33,065 $ 25,960
Income taxes $ 29,202 $ 2,909
The accompanying notes are an integral part of the combined financial
statements.
ITEM 7.(b)
Included herein is the unaudited pro forma balance sheet of Arrow Electronics,
Inc. and the Wyle Electronics Group as of September 30, 2000 and the unaudited
pro forma statements of income for the year ended December 31, 1999 and the nine
months ended September 30, 2000.
The unaudited pro forma financial statements are based on the historical
consolidated financial statements of Arrow Electronics, Inc. ("Arrow") and the
combined financial statements of the Wyle Electronics Group ("Wyle"), adjusted
to give effect to the acquisition by Arrow of Wyle. The unaudited pro forma
statement of income for the year ended December 31, 1999 and the nine months
ended September 30, 2000 give effect to the acquisition of Wyle as if it had
occurred on January 1, 1999. The unaudited pro forma balance sheet gives effect
to the acquisition of Wyle as if it had occurred as of September 30, 2000.
The pro forma adjustments are based upon available information and certain
assumptions which we believe are reasonable. In our opinion, all adjustments
that are necessary to present fairly the pro forma data have been made. The
unaudited pro forma financial statements do not purport to present what our
results of operations or financial condition would actually have been had the
acquisition in fact occurred on such dates or to project our results of
operations or financial condition for any future period or date.
UNAUDITED PRO FORMA BALANCE SHEET
SEPTEMBER 30, 2000
(In millions)
Historical Pro Forma
---------- ---------
Arrow Wyle Adjustments As Adjusted
----- ---- ----------- -----------
Current assets
Cash and short-term
investments $ 43 $ 20 $ 63
Accounts receivable, net 2,283 452 2,735
Inventories 1,926 466 2,392
Prepaid expenses and
other assets 43 60 $ 50(d) 153
------ ------ ----- ------
Total current assets 4,295 998 50 5,343
------ ------ ----- ------
Property, plant and
equipment, net 241 63 (30)(f) 274
Investments in
affiliated companies 38 38
Cost in excess of net assets
of companies acquired and
intangibles, net of
accumulated amortization 1,000 353 (353)(e) 1,220
166 (e)
54 (f)
Other assets 134 25 6 (d) 191
26 (f)
------ ------ ----- ------
$5,708 $1,439 $ (81) $7,066
====== ====== ===== ======
Current liabilities
Accounts payable $1,141 $ 196 $1,337
Accrued expenses 408 83 $ 50 (f) 541
Short-term borrowings,
including current
maturities of long-term
debt and capital lease
obligations 1,465 200 (d) 1,665
Due to affiliated
companies 714 (714)(d)
------ ----- ----- ------
Total current liabilities 3,014 993 (464) 3,543
------ ----- ----- ------
Long-term debt and capital
lease obligations 859 50 875 (d) 1,673
(50)(d)
(61)(d)
Due to affiliated companies 200 (200)(d)
Other liabilities 69 15 84
Shareholders' equity
Common stock 104 104
Capital in excess of
Par value 528 263 (263)(d) 528
Retained earnings 1,488 (82) 82 (d) 1,488
Foreign currency
translation adjustment (196) (196)
------ ---- ----- ------
1,924 181 (181) 1,924
Less:Treasury stock 149 149
Unamortized employee
stock awards 9 9
------ ------ ----- ------
Total shareholders' equity 1,766 181 (181) 1,766
------ ------ ----- ------
$5,708 $1,439 $ (81) $7,066
====== ====== ===== ======
UNAUDITED PRO FORMA STATEMENT OF INCOME
NINE MONTHS ENDED SEPTEMBER 30, 2000
(In millions except per share data)
Historical Pro Forma
---------- ---------
Arrow Wyle Adjustments As Adjusted
----- ---- ----------- -----------
Sales $9,268 $1,931 $11,199
------ ------ -------
Cost and expenses
Cost of products sold 7,823 1,641 9,464
Selling, general and
administrative expenses 845 212 1,057
Depreciation and
amortization 63 36 $(23)(a) 83
7 (a)
------ ------ ---- -------
8,731 1,889 (16) 10,604
------ ------ ---- -------
Operating income 537 42 16 595
Equity in (loss) of
affiliated companies (3) (3)
Interest expense, net 107 41 (41)(b) 169
62 (b)
------ ------ ---- -------
Earnings (loss) before
income taxes and minority
interest 427 1 (5) 423
Provision for (benefit
from) income taxes 175 10 (8)(c) 177
------- ------ ---- -------
Earnings (loss) before
minority interest 252 (9) 3 246
Minority interest 3 3
------- ------ ---- -------
Net income (loss) $ 249 $ (9) $ 3 $ 243
======= ====== ==== =======
Per common share
Basic $ 2.58 $ 2.52
======= =======
Diluted $ 2.53 $ 2.47
======= =======
Average number of common
shares outstanding
Basic 96 96
======= =======
Diluted 98 98
======= =======
UNAUDITED PRO FORMA STATEMENT OF INCOME
YEAR ENDED DECEMBER 31, 1999
(In millions except per share data)
Historical Pro Forma
---------- ---------
Arrow Wyle Adjustments As Adjusted
----- ---- ----------- -----------
Sales $9,313 $1,929 $11,242
------ ------ -------
Cost and expenses
Cost of products sold 8,011 1,652 9,663
Selling, general and
administrative expenses 867 200 1,067
Depreciation and
amortization 71 44 $(31)(a) 93
9 (a)
Integration charge 25 25
------ ------ ---- -------
8,974 1,896 (22) 10,848
Operating income 339 33 22 394
Equity in (loss) of
affiliated companies (1) (1)
Interest expense, net 107 45 (45)(b) 189
82 (b)
------ ------ ---- -------
Earnings (loss) before
income taxes and minority
interest 231 (12) (15) 204
Provision for (benefit
from) income taxes 102 10 (15)(c) 97
Earnings (loss) before
minority interest 129 (22) 107
Minority interest 5 5
------- ------ ---- -------
Net income (loss) $ 124 $ (22) $ $ 102
======= ====== ==== =======
Per common share
Basic $ 1.31 $ 1.07
======= =======
Diluted $ 1.29 $ 1.06
======= =======
Average number of common
shares outstanding
Basic 95 95
======= =======
Diluted 96 96
======= =======
NOTES TO UNAUDITED PRO FORMA FINANCIAL STATEMENTS
(a) Adjustments to eliminate the historical amortization of the cost in
excess of net assets acquired recorded by the Wyle Electronics Group and other
intangibles and the recognition of the amortization of the cost in excess of net
assets acquired, over 20 years, created as a result of the acquisition of the
Wyle Electronics Group (the "acquisition").
(b) Adjustments to eliminate the historical interest expense recorded by
the Wyle Electronics Group and the recognition of the interest expense
associated with the financing of the acquisition and the bridge loan to an
affiliate of Schroder Ventures, net of the interest paid on the bridge loan, as
well as the amortization of the related deferred financing costs.
(c) Adjustments to record the tax benefit associated with the reduction
in taxable income as a result of the incremental interest expense of the debt to
finance the acquisition.
(d) Adjustments to record the financing associated with the acquisition,
the related deferred financing costs, and the purchase price of the acquisition
(in millions):
Total financing:
Short-term $ 200
Long-term 875
------
1,075
======
Payment of purchase price 958
Bridge loan to an affiliate of Schroder Ventures 50
Cost of debt financing 6
------
Borrowings in respect of purchase 1,014
------
Proceeds utilized to repay other borrowings $ 61
======
(e) Adjustments to eliminate the cost in excess of net assets of companies
acquired historically recorded by the Wyle Companies and to give recognition to
the cost in excess of net assets acquired of the Wyle Companies as a result of
the acquisition as follows (in millions):
Cash $ 20
Accounts receivable 452
Inventories 466
Prepaid expenses and other assets 60
----
$998 $ 998
====
Property, plant and equipment, net 63
Other assets 25
------
1,086
Accounts payable $196
Accrued expenses 83
----
$279 279
====
Other liabilities 15
------
Net assets acquired 792
Purchase price 958
------
Cost in excess of net assets acquired $ 166
======
(f) Adjustment to record the preliminary estimate of integration costs,
the write-off of certain property, plant and equipment, and the related
deferred taxes.