Form 10-K
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(Mark One)
X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 (FEE REQUIRED)
For the fiscal year ended December 31, 1993
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
For the transition period from............to.................
Commission file number 1-4482
ARROW ELECTRONICS, INC.
(Exact name of registrant as specified in its charter)
New York 11-1806155
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
25 Hub Drive
Melville, New York 11747
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (516) 391-1300
Securities registered pursuant to Section 12(b) of the Act:
Name of Each Exchange on
Title of Each Class Which Registered
Common Stock, $1 par value New York Stock Exchange
Preferred Share Purchase Rights New York Stock Exchange
5-3/4% Convertible Subordinated
Debentures due 2002 New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing requirements
for the past 90 days. Yes X No
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K is not contained herein, and
will not be contained to the best of registrant's knowledge, in
definitive proxy or information statements incorporated by reference
in Part III of this Form 10-K or any amendment to this Form 10-K.
[ X ]
The aggregate market value of voting stock held by nonaffiliates
of the registrant as of March 19, 1994 was $1,270,816,679.
Indicate the number of shares outstanding of each of the
registrant's classes of common stock, as of the latest practicable
date.
Common Stock, $1 par value: 31,417,574 shares outstanding at
March 9, 1994.
The following documents are incorporated herein by reference:
1. Proxy Statement filed in connection with Annual Meeting of
Shareholders to be held May 10, 1994 (incorporated in Part III).
PART I
Item 1. Business.
Arrow Electronics, Inc. (the "company") is the world's largest
distributor of electronic components and computer products to
industrial and commercial customers.
The company's electronics distribution networks, spanning
North America, Europe, and the Pacific Rim, incorporate over 150
selling locations, ten primary distribution centers (four of which
employ advanced automation), and 4,000 remote on-line terminals--all
serving the needs of a diversified base of original equipment
manufacturers (OEMs) and commercial customers worldwide. OEMs
include manufacturers of computer and office products, industrial
equipment (including machine tools, factory automation, and robotic
equipment), telecommunications products, aircraft and aerospace
equipment, and scientific and medical devices. Commercial customers
are mainly value-added resellers (VARs) of computer systems.
In 1993, the company acquired an additional 15% share in
Spoerle Electronic, the largest electronics distributor in Germany,
increasing its holdings to a majority interest. The company also
acquired Zeus Components, Inc. a distributor of high-reliability
electronic components and value-added services, Microprocessor &
Memory Distribution Limited, a focused U.K. distributor of high-
technology semiconductor products, and Components Agent Limited, one
of the largest distributors in Hong Kong. In addition, in 1993 the
company acquired Amitron S.A. and ATD Electronica S.A., distributors
serving the Spanish and Portuguese markets, and CCI Electronique, a
distributor serving the French marketplace. On February 28, 1992,
the company acquired the electronics distribution businesses of Lex
Service PLC ("Lex") in the U.K. and France (the "European
businesses"), and Spoerle acquired the electronics distribution
business of Lex in Germany. On September 27, 1991, the company
acquired Lex Electronics Inc. and Almac Electronics Corporation, the
North American electronics distribution businesses of Lex (the
"North American businesses"), the third largest electronics
distribution business in the United States.
Early in 1994, the company acquired an additional 15% interest
in Spoerle, bringing its holdings to 70%, and increased its holdings
in Silverstar, the company's Italian affiliate, to a majority share.
Additionally, the company acquired the electronic component
distribution business of Field Oy, the largest distributor of
electronic components in Finland, and TH:s Elektronik, a leading
distributor in Sweden and Norway. For information with respect to
these acquisitions, the company's results of operations, and other
matters, see Item 6 (Selected Financial Data), Item 7 (Management's
Discussion and Analysis of Financial Condition and Results of
Operations), and Item 8 (Financial Statements) appearing elsewhere
in this Annual Report.
In North America, the company is organized into four product-
specific sales and marketing groups: The Arrow/Schweber Electronics
Group is the largest dedicated semiconductor distributor in the
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world. Zeus Electronics is the only specialist distributor serving
the military and high-reliability markets. Capstone Electronics
focuses exclusively on the distribution of connectors,
electromechanical, and passive components. And Arrow's Commercial
Systems Group distributes commercial computer products and systems.
Through its wholly-owned subsidiary, Arrow Electronics
Distribution Group - Europe B. V., Arrow is the largest pan-European
electronics distributor. The company's European strategy stresses
two key elements: strong, locally-managed distributors to satisfy
widely varying customer preferences and business practices; and an
electronic backbone uniting Arrow's European partners with one
another and with Arrow worldwide to leverage inventory investment
and better meet the needs of customers in all of Europe's leading
industrial electronics markets. In most of these markets, Arrow
companies hold the number one position: Arrow Electronics (UK) Ltd.
in Britain; Spoerle Electronic in Central Europe; Silverstar Ltd.
S.p.A. in Italy; and Amitron-Arrow and ATD Electronica S.A. in Spain
and Portugal. Arrow Electronique is the fourth largest electronics
distributor in France, and Arrow's Nordic companies, Field Oy and
TH:s Elektronik, are among the largest distributors in the markets
of Finland, Norway, and Sweden.
Arrow is the first American electronics distributor to be
present in the Pacific Rim market. Arrow's Components Agent Limited
(C.A.L.), headquartered in Hong Kong, is the region's leading
multinational distributor, maintaining seven additional facilities
in key cities in Singapore, Malaysia, the People's Republic of
China, and South Korea; an additional Arrow company serves India.
Within these dynamic markets, Arrow is benefiting from two important
growth factors: the decision by many of Arrow's traditional North
American customers to locate production facilities in the region and
the surging demand for electronic products resulting from rising
living standards and massive investments in infrastructure.
The company distributes a broad range of electronic
components, computer products, and related equipment manufactured by
others. About 66% of the company's consolidated sales are of
semiconductor products; industrial and commercial computer products,
including microcomputer boards and systems, design systems, desktop
computer systems, terminals, printers, disc drives, controllers, and
communication control equipment account for about 24%; and the
remaining 10% of sales are of passive, electromechanical, and
connector products, principally capacitors, resistors,
potentiometers, power supplies, relays, switches and connectors.
Worldwide, the company maintains a $435 million inventory of more
than 300,000 different electronic components and computer products
at the company's primary distribution centers.
Most manufacturers of electronic components and computer
products rely on independent authorized distributors such as the
company to augment their product marketing operations. As a
stocking, marketing and financial intermediary, the distributor
relieves its manufacturers of a portion of the costs and personnel
associated with stocking and selling their products (including
otherwise sizable investments in finished goods inventories and
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accounts receivable), while providing geographically dispersed
selling, order processing, and delivery capabilities. At the same
time, the distributor offers a broad range of customers the
convenience of diverse inventories and rapid or scheduled
deliveries. The growth of the electronics distribution industry has
been fostered by the many manufacturers who recognize their
authorized distributors as essential extensions of their marketing
organizations.
The company and its affiliates serve approximately 125,000
industrial and commercial customers in North America, Europe, and
the Pacific Rim. Industrial customers range from major original
equipment manufacturers to small engineering firms, while commercial
customers include value-added resellers, small systems integrators,
and large end-users. Most of the company's customers require
delivery of the products they have ordered on schedules that are
generally not available on direct purchases from manufacturers, and
frequently their orders are of insufficient size to be placed
directly with manufacturers. No single customer accounted for more
than 2% of the company's 1993 sales.
The electronic components and other products offered by the
company are sold by field sales representatives, who regularly call
on customers in assigned market areas, and by telephone from the
company's selling locations, from which inside sales personnel with
access to pricing and stocking data provided by computer display
terminals accept and process orders. Each of the company's North
American selling locations, warehouses, and primary distribution
centers is electronically linked to the business' central computer,
which provides fully integrated, on-line, real-time data with
respect to nationwide inventory levels and facilitates control of
purchasing, shipping, and billing. The company's foreign operations
utilize Arrow's Worldwide Stock Check System, which affords access
to the company's on-line, real-time inventory system. Sales are
managed and coordinated by regional sales managers and by product
managers principally located at the company's headquarters in
Melville, New York.
Of the approximately 200 manufacturers whose products are sold
by the company, the ten largest accounted for about 57% of the
business' purchases during 1993. Intel Corporation accounted for
approximately 18% of the business' purchases because of the market
demand for microprocessors. No other supplier accounted for more
than 9% of 1993 purchases. The company does not regard any one
supplier of products to be essential to its operations and believes
that many of the products presently sold by the company are
available from other sources at competitive prices. Most of the
company's purchases are pursuant to authorized distributor
agreements which are typically cancelable by either party at any
time or on short notice.
Approximately 62% of the company's inventory consists of
semiconductors. It is the policy of most manufacturers to protect
authorized distributors, such as the company, against the potential
write-down of such inventories due to technological change or
manufacturers' price reductions. Under the terms of the related
distributor agreements, and assuming the distributor complies with
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certain conditions, such suppliers are required to credit the
distributor for inventory losses incurred through reductions in
manufacturers' list prices of the items. In addition, under the
terms of many such agreements, the distributor has the right to
return to the manufacturer for credit a defined portion of those
inventory items purchased within a designated period of time. A
manufacturer who elects to terminate a distributor agreement is
generally required to purchase from the distributor the total amount
of its products carried in inventory. While these industry
practices do not wholly protect the company from inventory losses,
management believes that they currently provide substantial
protection from such losses.
The company's business is extremely competitive, particularly
with respect to prices, franchises, and, in certain instances,
product availability. The company competes with several other large
multinational, national, and numerous regional and local,
distributors. As the world's largest electronics distributor, the
company is greater in terms of financial resources and sales than
most of its competitors.
The company and its affiliates employ approximately 4,600
people worldwide.
Executive Officers
The following table sets forth the names and ages of, and the
positions and offices with the company held by, each of the
executive officers of the company.
Name Age Position or Office Held
John C. Waddell 56 Chairman of the Board
Stephen P. Kaufman 52 President and Chief Executive
Officer
Robert E. Klatell 48 Senior Vice President, Chief
Financial Officer, General Counsel,
Secretary, and Treasurer
Carlo Giersch 56 President and Chief Executive
Officer of Spoerle Electronic
Robert J. McInerney 48 Vice President; President,
Commercial Systems Group
Steven W. Menefee 49 Vice President; President,
Arrow/Schweber Electronics Group
Wesley S. Sagawa 46 Vice President; President, Capstone
Electronics Corp.
Jan Salsgiver 37 Vice President; President, Zeus
Electronics
Set forth below is a brief account of the business experience
during the past five years of each executive officer of the company.
John C. Waddell has been Chairman of the Board of the company
for more than five years.
Stephen P. Kaufman has been President and Chief Executive
Officer of the company for more than five years.
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Robert E. Klatell has been Senior Vice President and has
served as General Counsel and Secretary of the company for more than
five years. He has been Chief Financial Officer since January 1992
and Treasurer of the company since October 1990.
Carlo Giersch has been President and Chief Executive Officer
of Spoerle Electronic for more than five years.
Robert J. McInerney has been a Vice President of the company
for more than 5 years and President of the company's Commercial
Systems Group since April 1989.
Steven W. Menefee has been a Vice President of the company and
President of the company's Arrow/Schweber Electronics Group since
November 1990. For more than five years prior thereto, he was a
Vice President of Avnet, Inc., principally an electronics
distributor, and an executive of Avnet's Electronic Marketing Group.
Wesley S. Sagawa has been a Vice President of the company for
more than 5 years and President of Capstone Electronics Corp., the
company's subsidiary which markets passive, electromechanical, and
connector products, since January 1990.
Jan Salsgiver has been a Vice President of the company since
September 1993 and President of the company's Zeus Electronics since
July 1993. For more than five years prior thereto, she held a
variety of senior marketing positions in the company, the most
recent of which was Vice President, Semiconductor Marketing of the
Arrow/Schweber Electronics Group.
Item 2. Properties.
The company's executive office, located in Melville, New York,
is owned by the company. The company occupies additional locations
under leases due to expire on various dates to 2016. One additional
facility is owned by the company, and another two facilities have
been sold and leased back in connection with the financing thereof.
Item 3. Legal Proceedings.
Through a wholly-owned subsidiary, Schuylkill Metals
Corporation, the company was previously engaged in the refining and
selling of lead. In September 1988, the company sold its refining
business.
In mid-1986 the refining business ceased operations at its
battery breaking facility in Plant City, Florida, which facility had
been placed on the list of hazardous waste sites targeted for
cleanup under the federal Super Fund Program. The Plant City site
was not sold to the purchaser of the refining business, and the
company remains subject to various environmental cleanup obligations
at the site under federal and state law. During 1991, the company
engaged in settlement negotiations with the EPA, resulting in the
execution of a consent decree defining those obligations which was
entered by a federal court in Florida and became effective on April
22, 1992. The consent decree requires the company to fund and
implement remedial design and remedial action activity addressing
environmental impacts to site soils and sediment, underlying ground
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water, and wetland areas. The company, through its technical
contractors, has begun implementation of these requirements.
Between January 1, 1993 and the date of this report, a substantial
amount of the work necessary to prepare the site for the planned
remediation activities was completed, the plans for the treatment
and discharge of ground water contemplated by the consent decree
were finalized, the plans for the remediation and mitigation of the
wetland areas were finalized and approved in principle by the
relevant agencies, and the company began the bid process for certain
of the contracts relating to the performance of the remediation
activities (including a previously-agreed upon plan for treating
soils and sediment). Such activities are expected to commence in
mid-1994 and the company believes that a substantial part of such
activities will be completed over the next three years. The extent
of such remediation activities (including the estimated cost thereof
and the time necessary to complete them) is subject to change based
upon conditions actually encountered during remediation, and the EPA
reserves the right to seek additional action if it subsequently
finds further contamination or other conditions rendering the work
insufficiently protective of human health or the environment. The
company believes that the amount expected to be expended in any year
to fund such activities will not have a material adverse impact on
the company's liquidity, capital resources or results of operations.
Item 4. Submission of Matters to a Vote of Security Holders.
None.
PART II
Item 5. Market for the Registrant's Common Equity and
Related Stockholder Matters.
Market Information
The company's common stock is listed on the New York Stock
Exchange (trading symbol: "ARW"). The high and low sales prices
during each quarter of 1993 and 1992 were as follows:
Year High Low
1993:
Fourth Quarter $42-1/4 $33-5/8
Third Quarter 43-1/8 34-5/8
Second Quarter 36-1/4 29-3/4
First Quarter 34-3/8 26-1/2
1992:
Fourth Quarter $30-1/2 $22-1/8
Third Quarter 22-3/4 18-1/2
Second Quarter 19-1/2 15-1/8
First Quarter 18-1/2 14-3/8
Holders
On March 9, 1994, there were approximately 4,000 shareholders
of record of the company's common stock.
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Dividend History and Restrictions
The company has not paid cash dividends on its common stock
during the past two years. While it is the intention of the Board
of Directors to consider the payment of dividends on the common
stock from time to time, the declaration of future dividends will be
dependent upon the company's earnings, financial condition, and
other relevant factors.
The terms of the company's U.S. credit agreement, senior
notes, and certain foreign debt (see Note 4 of the Notes to
Consolidated Financial Statements) restrict the payment of cash
dividends, limit long-term debt and short-term borrowings, and
require that the ratio of earnings to interest expense, ratio of
operating cash flow to interest expense, working capital, and net
worth be maintained at certain designated levels.
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Item 6. Selected Financial Data.
The following table sets forth certain selected consolidated
financial data and should be read in conjunction with the company's
consolidated financial statements and related notes appearing elsewhere in
this Annual Report.
SELECTED FINANCIAL DATA
(In thousands except per share data)
For the year: 1993(a) 1992 1991(b) 1990 1989
Sales $2,535,584 $1,621,535 $1,043,654 $970,944 $925,207
Operating income 181,542 103,781 34,399(c) 32,682 27,557
Equity in earnings of affiliated
companies 1,673 6,550 5,657 6,395 5,466
Interest expense 24,987 30,061 29,145 28,972 29,809
Earnings before extraordinary
charges 81,559 50,244 8,685 10,105 3,214
Extraordinary charges, net of
income taxes - 5,424 - - -
Net income $ 81,559 $ 44,820 $ 8,685 $ 10,105 $ 3,214
Per common share:
Earnings (loss) before
extraordinary charges(d) $ 2.62 $ 1.81 $ .28 $ .44 $ (.19)
Extraordinary charges - (.21) - - -
Net income (loss)(d) $ 2.62 $ 1.60 $ .28 $ .44 $ (.19)
At year-end:
Accounts receivable and
inventories $ 798,037 $ 539,476 $ 506,496 $ 322,916 $333,578
Total assets 1,191,304 780,893 745,379 478,045 483,528
Long-term debt, including
current portion 159,024 101,146 218,787 104,937 109,017
Subordinated debentures, including
current portion 125,000 125,000 105,965 107,300 108,326
Total long-term debt and
subordinated debentures 284,024 226,146 324,752 212,237 217,343
Shareholders' equity 457,015 351,220 225,836 151,172 149,977
(a) Includes results of Spoerle Electronic, which was accounted for under the equity method
prior to January 1993 when Arrow increased its holdings to a majority interest (see Note
2 of the Notes to Consolidated Financial Statements).
(b) Reflects the acquisition in September 1991 of the North American electronics distribution
businesses of Lex Service PLC (see Note 2 of the Notes to Consolidated Financial
Statements).
(c) Includes special charges of $9.8 million reflecting expenses associated with the integration
of the businesses acquired from Lex Service PLC.
(d) After preferred stock dividends of $.9 million in 1993, $3.9 million in 1992, $4.6 million
in 1991, $4.9 million in 1990, and $5.4 million in 1989.
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Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations.
For an understanding of the significant factors that influenced the
company's performance during the past three years, the following
discussion should be read in conjunction with the consolidated financial
statements and other information appearing elsewhere in this report.
Included in the 1993 consolidated results is Spoerle Electronic,
which had been accounted for under the equity method prior to January 1993
when the company acquired an additional 15% share, increasing its holdings
to a majority interest. The 1993 consolidated results also include the
acquired businesses of Zeus Components, Inc., a distributor of high-
reliability electronic components and value-added services, Microprocessor
& Memory Distribution Limited, a focused U.K. distributor of high-
technology semiconductor products, and Components Agent Limited, one of
the largest distributors in Hong Kong. In addition, the 1993 results
include Amitron-Arrow S.A. and ATD Electronica S.A., distributors serving
the Spanish and Portuguese markets, and CCI Electronique, a distributor
serving the French marketplace. On February 28, 1992, the company
acquired the electronics distribution businesses of Lex Service PLC
("Lex") in the U.K. and France (the "European businesses"), and Spoerle
Electronic acquired the electronics distribution business of Lex in
Germany. On September 27, 1991, the company acquired Lex Electronics Inc.
and Almac Electronics Corporation, the North American electronics
distribution businesses of Lex (the "North American businesses"), the
third largest electronics distribution business in the United States. See
Note 2 of the Notes to Consolidated Financial Statements for information
with respect to the 1993 and 1992 acquisitions and the pro forma effect of
these transactions on the company's statement of operations.
Sales
In 1993, consolidated sales of $2.5 billion were 56% ahead of the
1992 sales of $1.6 billion. Excluding Spoerle, sales were $2.2 billion,
an advance of 34% over the year-earlier period. This sales growth was
principally due to increased activity levels in each of the company's
distribution groups and, to a lesser extent, acquisitions in North
America, Europe, and the Pacific Rim, offset in part by weaker currencies
in Europe.
Consolidated sales of $1.6 billion in 1992 were 55% higher than 1991
sales of $1 billion. This increase principally reflects the acquisitions
of the North American and European businesses in September 1991 and
February 1992, respectively, and increased North American sales.
In 1991, consolidated sales of $1 billion were 7.5% higher than 1990
sales of $971 million. The increase in sales primarily reflects the
inclusion of the North American businesses during the fourth quarter of
1991, which more than offset the 5% decrease in sales for the nine months
ended September 30, 1991 principally resulting from declining sales of
commercial computer products and related systems owing to soft market
conditions.
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Operating Income
In 1993, the company's consolidated operating income increased to
$181.5 million, compared with 1992 operating income of $103.8 million.
The significant improvement in operating income reflects the impact of
increased sales and the consolidation of Spoerle, offset in part by lower
gross profit margins primarily reflecting proportionately higher sales of
low-margin microprocessors. Excluding Spoerle, operating income was
$146.2 million in 1993, and operating expenses as a percentage of sales
were 12.4%, the lowest in the company's history.
The company's 1992 consolidated operating income increased to $103.8
million, compared with operating income of $34.4 million in 1991.
Operating income in 1991 included the recognition of approximately $9.8
million of costs associated with the integration of the North American
businesses. The significant improvement in operating income in 1992
primarily reflected the impact of the company's acquisition of the North
American businesses, improved gross profit margins reflecting a product
mix now more heavily weighted to semiconductor products, and improved
North American sales. The rapid and successful integration of the North
American businesses resulted in the realization of sizable economies of
scale which, when combined with increased sales, enabled the company to
reduce operating expenses as a percentage of sales from 17.6% in 1991 to
14.7% in 1992, the then lowest level in the company's history. Such
economies of scale principally resulted from reductions in personnel
performing duplicative functions and the elimination of duplicative
administrative facilities, selling and stocking locations, and computer
and telecommunications equipment.
In 1991, the company's consolidated operating income increased to
$34.4 million, an advance of 5% over 1990. This improvement was
principally the result of increased sales and reduced operating expenses
as a percentage of sales in the fourth quarter of 1991. The improved
fourth quarter operating results, combined with lower operating expenses
through September 1991, more than offset the special charge of $9.8
million reflecting integration expenses associated with the North American
businesses, the effect of a 5% decrease in sales through September 1991,
and a decrease in the company's gross profit margin as a result of
competitive pricing pressures in the commercial computer products and
related systems markets.
Interest
In 1993, interest expense decreased to $25 million from $30.1
million in 1992. The decrease principally reflects the full-year effect
of the retirement during 1992 of $46 million of the company's 13-3/4%
subordinated debentures and the refinancing of the company's remaining
high-yield debt with securities bearing lower interest rates, offset in
part by the consolidation of Spoerle and borrowings associated with
acquisitions.
Interest expense of $30.1 million in 1992 increased by $.9 million
from the 1991 level, reflecting the company's borrowings to finance the
cash portion of the purchase price of the North American and European
businesses, to pay fees and expenses relating to the acquisitions, to
refinance existing credit facilities of the company, and to provide the
company with working capital. Such increased borrowings were partially
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offset by the company's redemption in May of $46 million of its 13-3/4%
subordinated debentures with the proceeds from the public offering of 4.7
million shares of common stock and lower effective interest rates.
In 1991, interest expense of $29.1 million increased $.1 million
from 1990's level as the financing expense for the purchase of the North
American businesses offset lower interest rates and reduced borrowings
resulting from operating cash flow and improvements in asset management.
Income Taxes
In 1993, the company's effective tax rate was 40.7% compared with
37.4% in 1992. The higher effective tax rate reflects increased U.S.
taxes as a result of higher statutory rates and the consolidation of
Spoerle.
The company recorded a provision for taxes at an effective tax rate
of 37.4% in 1992 compared with 20.4% in 1991. The higher effective tax
rate reflects the depletion of the company's remaining $5.8 million U.S.
net operating loss carryforwards in 1991.
The company's effective tax rate in 1991 was 20.4%, principally as a
result of the utilization of the remaining $5.8 million of U.S. net
operating loss carryforwards.
Net Income
Net income in 1993 was $81.6 million, an advance from $44.8 million
in 1992 (after giving effect to extraordinary charges of 5.4 million
reflecting the net unamortized discount and issuance expenses associated
with the redemption of high-coupon subordinated debentures and other debt
in 1992). The increase in net income is due principally to the increase
in operating income and lower interest expense offset in part by higher
taxes.
The company recorded net income of $50.2 million in 1992, before
extraordinary charges aggregating $5.4 million, compared with net income
of $8.7 million in 1991. Including these charges, net income in 1992 was
$44.8 million. Included in 1991's results was a special charge of $9.8
million ($6.5 million after taxes) associated with the integration of the
acquired businesses. The improvement in net income was principally the
result of the increase in operating income offset in part by the higher
provision for income taxes.
The company's net income in 1991 of $8.7 million decreased 14% from
$10.1 million in 1990. The decrease in net income was principally the
result of the $9.8 million special charge ($6.5 million after taxes)
reflecting integration expenses associated with the North American
businesses and the provision for income taxes. Excluding the special
charge, net income was $15.2 million, an increase of 50% over 1990.
Net income also included the company's equity in earnings of
affiliated companies of $1.7 million in 1993, $6.6 million in 1992, and
$5.7 million in 1991. The decrease in the company's equity in earnings of
affiliated companies in 1993 was due to the consolidation of Spoerle.
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In 1993, the earnings of Silverstar, the company's Italian affiliate,
advanced as a result of significant sales growth offset in part by a
weaker lira. The increase in the company's equity in earnings of
affiliated companies in 1992 was the result of Silverstar's profitability.
The decrease in 1991 was the result of lower earnings in Germany and a
loss in Italy.
Liquidity and Capital Resources
The company maintains a high level of current assets, primarily
accounts receivable and inventories. Consolidated current assets as a
percentage of total assets were 73% in 1993 and 70% in 1992.
Working capital increased in 1993 by $160 million, or 43%, compared
with 1992, as a result of increased sales, the consolidation of Spoerle,
and acquisitions. Working capital increased by $42 million in 1992, as a
result of the acquisition of the European businesses and increased sales.
The net amount of cash provided by operations in 1993 was $41.7
million, the principal element of which was the cash flow resulting from
higher net earnings offset by increased working capital needs to support
sales growth. The net amount of cash used by the company for investing
activities in 1993 amounted to $111.7 million, including $87.9 million for
various acquisitions. Cash flows from financing activities were
$100.3 million, principally resulting from increased borrowings to finance
the 1993 acquisitions in the U.S., Europe, and the Pacific Rim (see Notes
2 and 4 of the Notes to Consolidated Financial Statements for additional
information regarding these acquisitions).
In September 1993, the company completed the conversion of all of
its outstanding series B $19.375 convertible exchangeable preferred stock,
into 1,009,086 shares of its common stock. This conversion eliminated the
company's obligation to pay $1.3 million of annual dividends.
The net amount of cash provided by operating activities in 1992 was
$71.5 million, attributable primarily to the higher net earnings of the
company. The net amount of cash used by the company for investing activi-
ties in 1992 amounted to $45.8 million, including $37.2 million for the
acquisition of the European businesses.
The aggregate cost of the company's acquisition of the electronics
distribution businesses of Lex in the U.K. and France, and Spoerle's
acquisition of the Lex electronics distribution business in Germany, was
$52 million, of which $32 million was paid in cash and $20 million was
paid in the form of a senior subordinated note due in June 1997. The
company financed the cash portion of the purchase price through the sale
of 66,196 shares of newly-created series B preferred stock and U.K. bank
borrowings. In addition, a portion of the proceeds from the company's
public offering of common stock and the issuance of the 5-3/4% convertible
subordinated debentures was used to repay the senior subordinated note.
The German business was purchased by Spoerle for cash (see Notes 2, 4, and
6 of the Notes to Consolidated Financial Statements for additional
information regarding these acquisitions).
The net amount of cash used for financing activities in 1992 was
$23.9 million, principally reflecting the redemption of high-yield
-13-
subordinated debentures, repayment of long-term debt, and the payment of
preferred stock dividends and financing fees, offset by the public
offering of 4,703,500 shares of common stock and the 5-3/4% convertible
subordinated debentures, the issuance of the senior secured notes, and
U.K. bank borrowings.
In September 1992, the company completed the conversion of all of
its outstanding depositary shares, each representing one-tenth share of
its $19.375 convertible exchangeable preferred stock, into 3,615,056
shares of its common stock. This conversion eliminated the company's
obligation to pay $4.6 million of annual dividends relating to the
depositary shares.
Early in 1994, the company purchased an additional 15% share in
Spoerle for approximately $23 million in cash. The company financed the
acquisition through its U.S. credit agreement and German bank
borrowings. Additionally, the company increased its holdings in
Silverstar to a majority share and acquired the electronic component
distribution business of Field Oy, the largest distributor of electronic
components in Finland, and TH:s Elektronik, a leading distributor in
Sweden and Norway.
-14-
Item 8. Financial Statements.
REPORT OF ERNST & YOUNG, INDEPENDENT AUDITORS
The Board of Directors and Shareholders
Arrow Electronics, Inc.
We have audited the accompanying consolidated balance sheet of Arrow
Electronics, Inc. as of December 31, 1993 and 1992, and the related
consolidated statements of operations, cash flows, and shareholders'
equity for each of the three years in the period ended December 31,
1993. Our audits also included the financial statement schedules
listed in the Index at Item 14(a). These financial statements and
schedules are the responsibility of the company's management. Our
responsibility is to express an opinion on these financial state-
ments and schedules based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts
and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to
above present fairly, in all material respects, the consolidated
financial position of Arrow Electronics, Inc. at December 31, 1993
and 1992, and the consolidated results of its operations and its
cash flows for each of the three years in the period ended December
31, 1993, in conformity with generally accepted accounting princi-
ples. Also, in our opinion, the related financial statement
schedules, when considered in relation to the basic financial
statements taken as a whole, present fairly in all material respects
the information set forth therein.
ERNST & YOUNG
New York, New York
February 24, 1994
-15-
ARROW ELECTRONICS, INC.
CONSOLIDATED BALANCE SHEET
(Dollars in thousands)
ASSETS
December 31,
1993 1992
Current assets:
Cash and short-term investments................................... $ 60,730 $ 3,393
Accounts receivable, less allowance for doubtful
accounts ($16,491 in 1993 and $8,268 in 1992)................... 363,084 240,740
Inventories....................................................... 434,953 298,736
Prepaid expenses and other assets................................. 10,841 5,890
Total current assets................................................ 869,608 548,759
Property, plant and equipment at cost
Land.............................................................. 5,700 4,634
Buildings and improvements........................................ 33,709 27,745
Machinery and equipment........................................... 55,148 35,353
94,557 67,732
Less accumulated depreciation and amortization.................... 38,606 31,950
55,951 35,782
Investments in affiliated companies................................. 13,371 64,893
Cost in excess of net assets of companies acquired,
less accumulated amortization ($13,514 in 1993 and
$8,421 in 1992)................................................... 199,383 97,695
Other assets........................................................ 52,991 33,764
$1,191,304 $780,893
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable.................................................. $ 190,013 $120,995
Accrued expenses.................................................. 104,146 56,730
Accrued interest.................................................. 5,421 1,253
Short-term borrowings, including current maturities of
long-term debt.................................................. 40,965 713
Total current liabilities........................................... 340,545 179,691
Long-term debt...................................................... 153,828 100,433
Deferred income taxes and other liabilities......................... 43,457 24,549
Subordinated debentures............................................. 125,000 125,000
Minority interest................................................... 71,459 -
Shareholders' equity:
Preferred stock, par value $1:
Authorized--2,000,000 shares
Issued--66,196 shares in 1992,
$19.375 convertible exchangeable preferred stock.............. - 66
Common stock, par value $1:
Authorized--60,000,000 shares
Issued--31,298,335 shares in 1993 and 29,296,457 shares in 1992 31,298 29,296
Capital in excess of par value.................................... 310,203 285,510
Retained earnings................................................. 124,689 44,010
Foreign currency translation adjustment........................... (7,492) (6,518)
458,698 352,364
Less: Treasury shares (10,872 in 1993 and 14,222 in 1992) at cost 12 19
Unamortized employee stock awards........................... 1,671 1,125
Total shareholders' equity.......................................... 457,015 351,220
$1,191,304 $780,893
See accompanying notes.
-16-
ARROW ELECTRONICS, INC.
CONSOLIDATED STATEMENT OF OPERATIONS
(In thousands except per share data)
Years Ended December 31,
1993 1992 1991
Sales..............................................$2,535,584 $1,621,535 $1,043,654
Costs and expenses:
Cost of products sold............................ 2,022,253 1,279,646 825,709
Selling, general and administrative expenses..... 314,323 225,835 174,094
Depreciation and amortization.................... 17,466 12,273 9,452
2,354,042 1,517,754 1,009,255
Operating income................................... 181,542 103,781 34,399
Equity in earnings of affiliated companies......... 1,673 6,550 5,657
Interest expense................................... 24,987 30,061 29,145
Earnings before income taxes, minority interest
and extraordinary charges....................... 158,228 80,270 10,911
Provision for income taxes......................... 64,448 30,026 2,226
Earnings before minority interest
and extraordinary charges........................ 93,780 50,244 8,685
Minority interest.................................. 12,221 - -
Extraordinary charges.............................. - 5,424 -
Net income.........................................$ 81,559 $ 44,820 $ 8,685
Net income used in per common share
calculation (reflecting deduction of
preferred stock dividends).......................$ 80,679 $ 40,917 $ 4,089
Per common share:
Primary:
Earnings before extraordinary charges..........$ 2.62 $ 1.81 $ .28
Extraordinary charges.......................... - (.21) -
Net income.....................................$ 2.62 $ 1.60 $ .28
Fully diluted:
Earnings before extraordinary charges..........$ 2.43 $ 1.73 $ .28
Extraordinary charges.......................... - (.19) -
Net income.....................................$ 2.43 $ 1.54 $ .28
Average number of common shares and common
share equivalents outstanding:
Primary........................................ 30,766 25,547 14,484
Fully diluted.................................. 35,305 29,378 14,484
See accompanying notes.
-17-
ARROW ELECTRONICS, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(In thousands)
Years Ended December 31,
1993 1992 1991
Cash flows from operating activities:
Net income.......................................$ 81,559 $ 44,820 $ 8,685
Adjustments to reconcile net income to net
cash provided by (used for) operations:
Minority interest in earnings................ 12,221 - -
Extraordinary charges........................ - 5,424 -
Special integration charge................... - - 9,850
Depreciation and amortization................ 19,898 14,692 12,690
Equity in undistributed earnings of
affiliated companies....................... (1,673) 2,551 14
Deferred taxes............................... 4,722 14,100 1,305
Prepaid income taxes......................... - - (3,974)
Change in assets and liabilities, net of
effects of acquired businesses:
Accounts receivable...................... (56,437) (3,276) (3,604)
Inventories.............................. (53,079) 8,552 (60)
Prepaid expenses and other assets........ 439 137 (159)
Accounts payable......................... 28,827 8,133 2,002
Accrued expenses......................... (3,983) (15,737) (11,086)
Accrued interest......................... 4,036 (4,594) 174
Other.................................... 5,158 (3,254) (1,719)
Net cash provided by operating activities........ 41,688 71,548 14,118
Cash flows from investing activities:
Acquisition of property, plant and equipment, net (16,817) (3,451) (3,781)
Cash consideration paid for acquired businesses.. (87,875) (37,183) (111,706)
Investment in and loans to affiliate............. (7,000) (9,949) -
Proceeds from sale of property................... - 4,757 -
Net cash used for investing activities...........(111,692) (45,826) (115,487)
Cash flows from financing activities:
Change in short-term borrowings ................. 16,860 (1,520) (201)
Proceeds from long-term debt..................... 61,781 85,533 184,756
Proceeds from common stock offering.............. 17,705 66,394 -
Proceeds from issuance of
subordinated debentures........................ - 125,000 -
Proceeds from preferred stock offering........... - 15,721 -
Proceeds from exercise of stock options.......... 3,560 5,737 1,069
Proceeds from minority partners.................. 2,993 - -
Repayment of long-term debt and subordinated
debentures..................................... (694) (311,656) (72,121)
Dividends paid................................... (880) (4,609) (4,596)
Financing fees paid.............................. (1,041) (4,467) (6,859)
Net cash provided by (used for)
financing activities........................... 100,284 (23,867) 102,048
Net increase in cash and
short-term investments........................... 30,280 1,855 679
Cash and short-term investments at
beginning of year................................ 3,393 1,538 859
Cash and short-term investments from affiliate
at beginning of year............................. 27,057 - -
Cash and short-term investments at end of year.....$ 60,730 $ 3,393 $ 1,538
Supplemental disclosures of cash
flow information:
Cash paid during the year for:
Income taxes...................................$ 44,114 $ 7,809 $ 3,532
Interest....................................... 19,835 31,461 26,872
See accompanying notes.
-18-
ARROW ELECTRONICS,INC.
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
(In thousands)
Preferred Common Capital Foreign Unamortized
Stock Stock in Excess Retained Currency Employee
at Par at Par of Par Earnings Translation Treasury Stock
Value Value Value (Deficit) Adjustment Shares Awards Total
Balance at December 31, 1990 $237 $11,962 $136,624 $ (290) $ 3,614 $ (81) $ (894) $151,172
Issuance of common stock
for acquisitions - 7,765 62,116 - - - - 69,881
Exercise of stock options - 182 821 - - 66 - 1,069
Restricted stock awards, net - 11 119 - - (3) (127) -
Amortization of employee
stock awards - - - - - - 388 388
Net income - - - 8,685 - - - 8,685
Preferred stock cash dividends - - - (4,596) - - - (4,596)
Translation adjustments - - - - (763) - - (763)
Balance at December 31, 1991 237 19,920 199,680 3,799 2,851 (18) (633) 225,836
Issuance of common stock - 4,704 61,690 - - - - 66,394
Issuance of preferred stock 66 - 15,655 - - - - 15,721
Conversion of preferred stock (237) 3,615 (3,698) - - - - (320)
Exercise of stock options - 973 4,753 - - 11 - 5,737
Tax benefits related to
exercise of stock options - - 6,615 - - - - 6,615
Restricted stock awards, net - 84 920 - - (12) (992) -
Amortization of employee
stock awards - - - - - - 500 500
Net income - - - 44,820 - - - 44,820
Preferred stock cash dividends - - - (4,609) - - - (4,609)
Translation adjustments - - - - (9,369) - - (9,369)
Other - - (105) - - - - (105)
Balance at December 31, 1992 66 29,296 285,510 44,010 (6,518) (19) (1,125) 351,220
Issuance of common stock - 562 17,143 - - - - 17,705
Conversion of preferred stock (66) 1,009 (991) - - - - (48)
Exercise of stock options - 383 3,164 - - 13 - 3,560
Tax benefits related to
exercise of stock options - - 4,142 - - - - 4,142
Restricted stock awards, net - 48 1,235 - - (6) (1,277) -
Amortization of employee
stock awards - - - - - - 731 731
Net income - - - 81,559 - - - 81,559
Preferred stock cash dividends - - - (880) - - - (880)
Translation adjustments - - - - (974) - - (974)
Balance at December 31, 1993 $ - $31,298 $310,203 $124,689 $(7,492) $(12) $(1,671) $457,015
See accompanying notes.
-19-
ARROW ELECTRONICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1993, 1992, AND 1991
1. Summary of Significant Accounting Policies
Principles of Consolidation
The financial statements include the accounts of the company and its
consolidated subsidiaries. The company's investments in its affiliated
companies which are not majority-owned are accounted for using the
equity method. All significant intercompany transactions are eliminat-
ed.
Basis of Presentation
Certain prior year amounts have been reclassified to conform to the
current year's presentation.
Inventories
Inventories are stated at the lower of cost or market. Cost is deter-
mined on the first-in, first-out (FIFO) method.
Property and Depreciation
Depreciation is computed on the straight-line method for financial
reporting purposes and on accelerated methods for tax reporting purpos-
es. Leasehold improvements are amortized over the shorter of the term
of the related lease or the life of the improvement.
Cost in Excess of Net Assets of Companies Acquired
The cost in excess of net assets of companies acquired is being amor-
tized on a straight-line basis, principally over 40 years.
Foreign Currency
The assets and liabilities of foreign operations are translated at the
exchange rates in effect at the balance sheet date, with the related
translation gains or losses reported as a separate component of share-
holders' equity. The results of foreign operations are translated at
the weighted average exchange rates for the year. Gains or losses
resulting from foreign currency transactions, other than transactions
used to hedge the value of foreign investments, are included in the
statement of operations.
-20-
ARROW ELECTRONICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
Income Taxes
Effective January 1, 1991, the company adopted Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes" ("SFAS
109"), which requires that the accounting for income taxes be on the
liability method. Deferred taxes reflect the tax consequences on future
years of differences between the tax bases of assets and liabilities and
their financial reporting amounts.
Net Income Per Common Share
Net income per common share is computed after deducting preferred stock
dividends and is based upon the weighted average number of shares of
common stock and common stock equivalents outstanding. The average
number of common stock equivalents was 631,973, 885,137, and 552,128 for
1993, 1992, and 1991, respectively.
Net income per common share on a fully diluted basis assumes that the
convertible exchangeable preferred shares and the convertible subordi-
nated debentures were converted to common stock at either the beginning
of each period or the date of issuance. The dividends related to the
convertible exchangeable preferred stock and the interest expense on the
5-3/4% convertible subordinated debentures, net of taxes, are eliminat-
ed. The 9% convertible subordinated debentures are not assumed to be
converted into common stock in 1992 as they would have been
antidilutive. For 1991, the aforementioned adjustments were not
required as they would have been antidilutive.
Cash and Short-term Investments
Short-term investments which have a maturity of ninety days or less at
time of purchase are considered cash equivalents in the statement of
cash flows. The carrying amount reported in the balance sheet for cash
and short-term investments approximates its fair value.
2. Acquisitions of Electronics Distribution Businesses
In January 1993, the company acquired an additional 15% share, for
approximately $25,145,000, in Spoerle Electronic Handelsgessellschaft
mbH and Co. and its general partner, Spoerle GmbH (collectively,
"Spoerle") the largest distributor of electronic components in Germany,
increasing its holdings to a 55% majority interest. In May 1993, the
company acquired the high-reliability electronic component distribution
and value-added service businesses of Zeus Components, Inc. ("Zeus").
In June 1993, the company acquired Microprocessor & Memory Distribution
Limited ("MMD"), a U.K.-based electronics distributor which focuses on
the distribution of high-technology semiconductor products. In August
1993, the company acquired Components Agent Limited, one of the largest
electronics distributors in Hong Kong. During the third quarter of 1993
the company acquired a majority interest in Amitron S.A. and the ATD
Group, electronics distributors serving the Spanish and Portuguese
markets. In November 1993, the company augmented its French operations
by acquiring CCI Electronique. The aggregate cost of the acquisitions
was $87,875,000, including $4,757,000 for non-competition agreements.
Each acquisition was accounted for as a purchase transaction beginning
in the month of acquisition.
-21-
ARROW ELECTRONICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
The following summarizes the allocation of the aggregate consider-
ation paid for the aforementioned acquisitions, except Spoerle, to the
fair market value of the assets acquired and liabilities assumed by the
company (in thousands):
Current assets:
Accounts receivable ..................$48,010
Inventories........................... 31,726
Other................................. 2,972 $ 82,708
Property, plant and equipment........... 3,876
Cost in excess of net assets of
acquired businesses................... 50,797
Other assets............................ 9,113
146,494
Current liabilities:
Accounts payable.....................$(30,412)
Accrued expenses..................... (35,374)
Other................................ (16,789) (82,575)
Net consideration paid................. $ 63,919
In February 1992, the company acquired the electronics distribution
businesses of Lex Service PLC ("Lex") in the U.K. and France, and
Spoerle acquired the electronics distribution business of Lex in
Germany. The aggregate cost of the acquisitions was $51,983,000, of
which $31,983,000 was paid in cash and $20,000,000 was paid in the form
of a 12% senior subordinated note due June 1997. The company financed
the cash portion of the purchase price through the sale of 66,196 shares
of newly-created series B preferred stock and bank borrowings in the
U.K. The German business of Lex was purchased by Spoerle for cash of
$14,800,000. The acquisitions of the European businesses of Lex are
being accounted for as purchase transactions effective February 28,
1992.
The following summarizes the allocation of the consideration paid
for the electronics distribution businesses in the U.K. and France to
the fair market value of the assets acquired and liabilities assumed by
the company (in thousands):
Current assets:
Accounts receivable.................$ 27,479
Inventories......................... 17,947
Other............................... 1,662 $ 47,088
Property, plant and equipment......... 2,975
Cost in excess of net assets of
acquired businesses.................. 21,065
Other assets......................... 3,150
74,278
Current liabilities:
Accounts payable.....................$(10,397)
Accrued expenses..................... (26,698) (37,095)
Net consideration paid............... $ 37,183
-22-
ARROW ELECTRONICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
In September 1991, the company acquired the North American
electronics distribution businesses of Lex, consisting of Lex Electron-
ics Inc. and Almac Electronics Corporation (collectively the "North
American businesses"). The aggregate cost of the acquisition was
$173,257,000, including $7,292,000 for a five-year non-competition
agreement, and payment consisted of $111,706,000 of cash and 6,839,000
shares of the company's common stock valued at $61,551,000. The cash
portion of the purchase price was financed under the company's U.S.
credit agreement. The acquisition of the North American businesses has
been accounted for as a purchase transaction effective September 27,
1991.
In October 1991, the company acquired a 50% interest in Silverstar
Ltd. S.p.A. ("Silverstar") in exchange for 926,000 shares of common
stock valued at $8,330,000.
Set forth below is the unaudited pro forma combined summary of
operations for the years ended December 31, 1993 and 1992 as though each
of the acquisitions had been made on January 1, 1992.
1993 1992
(In thousands except per share data)
Sales..................................$2,658,000 $2,182,000
Operating income....................... 185,000 140,000
Earnings before extraordinary charges.. 83,000 51,000
Net income............................. 83,000 45,000
Per common share:
Primary:
Earnings before
extraordinary charges............ 2.63 1.78
Net income......................... 2.63 1.57
Fully diluted:
Earnings before
extraordinary charges............ 2.44 1.70
Net income......................... 2.44 1.52
Average number of common shares and common
share equivalents outstanding:
Primary.............................. 30,994 26,109
Fully diluted........................ 35,533 30,045
The unaudited pro forma combined summary of operations has been
prepared utilizing the historical financial statements of Arrow and the
acquired businesses. The unaudited pro forma combined summary of
operations does not reflect all sales attrition which may result from
the combination of Zeus and MMD with Arrow's businesses or the sales
attrition which may have resulted from the combination of the European
businesses. It also does not reflect the full cost savings the company
expects to achieve from the combination of the Zeus and MMD businesses
with its own.
-23-
ARROW ELECTRONICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
The 1992 unaudited pro forma combined summary of operations does
not reflect the cost savings achieved from the combination of the U.K.
business of Lex with its own or any sales attrition which may have
resulted from the combination.
The cost savings achieved result principally from reductions in
personnel performing duplicative functions and the elimination of
duplicative administrative facilities, selling and stocking locations,
and computer and telecommunications equipment. The unaudited pro forma
combined summary of operations does not purport to be indicative of the
results which actually would have been obtained if the acquisitions had
been made at the beginning of 1992.
The unaudited pro forma combined summary of operations includes
the effects of the purchase price allocation adjustments, the additional
interest expense on debt incurred in connection with the acquisitions as
if the debt had been outstanding from the beginning of the periods
presented, and the issuance of additional shares of the company's
preferred stock. The purchase price allocation adjustments include the
adjustment of the net assets acquired to fair market value and the
estimated costs associated with the integration of the businesses. Such
estimated costs include professional fees as well as real estate lease
termination costs, costs associated with the elimination of certain
redundant franchised lines, and severance and other expenses related to
personnel performing duplicative functions, all of which are associated
with facilities and personnel of the acquired businesses.
Early in 1994, the company acquired an additional 15% interest in
Spoerle, bringing its holdings to 70%, and increased its holdings in
Silverstar to a majority share. Silverstar will be consolidated into
the company's results in 1994. Additionally, the company acquired the
electronic component distribution business of Field Oy, the largest
distributor of electronic components in Finland, and TH:s Elektronik, a
leading distributor in Sweden and Norway.
3. Investments in Affiliated Companies
At December 31, 1993, the company had a 50% interest in Silverstar, the
largest distributor of electronic components in Italy. Prior to 1993
when it increased its holdings to a 55% majority interest, the company
had a 40% interest in Spoerle. The investment in Silverstar is account-
ed for using the equity method as was the investment in Spoerle prior to
1993. For the year ended December 31, 1993, Silverstar recorded net
sales of $158,546,000, gross profit of $46,111,000, income before taxes
of $8,959,000 and net income of $4,000,000. For the year ended December
31, 1992, Spoerle and Silverstar recorded net sales of $487,179,000,
gross profit of $135,200,000, income before income taxes of $32,185,000,
and net income of $26,082,000. For the year ended December 31, 1991,
Spoerle recorded net sales of $226,890,000, gross profit of $66,038,000,
-24-
ARROW ELECTRONICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
income before income taxes of $26,748,000, and net income of
$20,466,000. Such results are exclusive of interest expense associated
with financing the investment and purchase accounting adjustments
(including amortization of costs assigned to identifiable assets,
principally franchise agreements which are being amortized over 30
years, amortization over 40 years of costs in excess of the company's
interest in net assets acquired, and related income taxes). A summary
of Silverstar's balance sheet at December 31, 1993 and both affiliates'
balance sheets at December 31, 1992, exclusive of the aforementioned
adjustments, follows:
1993 1992
(In thousands)
Current assets........................... $ 94,624 $194,232
Noncurrent assets........................ 4,854 25,946
Total assets ....................... $ 99,478 $220,178
Current liabilities..................... $ 78,836 $106,912
Noncurrent liabilities.................. 7,822 17,603
Equity.................................. 12,820 95,663
Total liabilities and equity....... $ 99,478 $220,178
The above amounts have been translated from deutsche marks and lira
into U.S. dollars based on exchange rates in effect at the end of the
respective year or during such year.
4. Long-Term Debt and Subordinated Debentures
Long-term debt at December 31, 1993 and 1992 consisted of the
following:
1993 1992
(In thousands)
8.29% senior notes due 2000.................... $ 75,000 $ 75,000
U.S. credit agreement due 1998................. 35,000 -
Deutsche mark term loan due 2000............... 28,794 15,442
Pound sterling term loan due 1998.............. 18,596 7,573
Other obligations with various interest rates.. 1,634 3,131
159,024 101,146
Less installments due within one year......... 5,196 713
$ 153,828 $100,433
-25-
ARROW ELECTRONICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
The senior notes are payable in three equal annual installments commenc-
ing in 1998. The senior notes restrict the payment of cash dividends,
limit long-term debt and short-term borrowings, and require net worth
and the ratio of operating cash flow to interest expense be maintained
at certain designated levels.
The company's credit agreement with a group of banks (the "U.S.
credit agreement") was amended in January 1994 to release all collater-
al, to increase to $175,000,000 the amount of loans available, to reduce
the borrowing rate, and to extend the maturity date to January 1998. At
February 24, 1994, the company had outstanding borrowings of $30,500,000
under the U.S. credit agreement and unused borrowing capacity of
$144,500,000.
At the company's option, the interest rate for loans under the
U.S. credit agreement is at the agent bank's prevailing prime rate (6%
at December 31, 1993) or the U.S. dollar London Interbank Offered Rate
("LIBOR") (3.25% at December 31, 1993) plus .75%. The company pays the
banks a commitment fee of .25% per annum on the aggregate unused portion
of the U.S. credit agreement.
The U.S. credit agreement restricts the payment of cash dividends,
limits long-term debt and short-term borrowings, and requires that
working capital, net worth, and the ratio of earnings to interest
expense be maintained at certain designated levels.
The company's wholly-owned German subsidiary has a 50,000,000
deutsche mark term loan from a group of German banks. The loan is
payable in installments and bears interest at deutsche mark LIBOR
(5.9375% at December 31, 1993) plus .75%. The loan is secured by an
assignment of the subsidiary's interest in profit distributions from
Spoerle and is guaranteed by the company. The obligations of the
company under the guarantee are subordinated to the company's obliga-
tions under the U.S. credit agreement and the senior notes.
In January 1994, in connection with the acquisition of an addi-
tional 15% interest in Spoerle, the company borrowed 25,000,000 deutsche
marks from the German banks thereby increasing the loan balance to
75,000,000 deutsche marks.
The company's wholly-owned U.K. subsidiary has a loan agreement
with a British bank which, as amended in June 1993, includes a
L8,000,000 term loan, payable in semi-annual installments from 1994
through 1998, and a revolving credit facility which provides for loans
of up to L5,000,000. Borrowings under the loan agreement bear interest
at sterling LIBOR (5.5% at December 31, 1993) plus 1.5% and are secured
by the assets and common stock of the subsidiary. The loan agreement
also requires that operating cash flow, as defined, and the ratio of
earnings to interest expense be maintained by the subsidiary at certain
designated levels.
-26-
ARROW ELECTRONICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
In April 1992, the company used the net proceeds of its common
stock offering to redeem $46,000,000 of its 13-3/4% subordinated
debentures and to repay approximately $13,000,000 of the company's 12%
senior subordinated note issued to Lex in connection with the acquisi-
tion of the European businesses. The redemption of the subordinated
debentures resulted in an extraordinary charge of $4,039,000 ($2,424,000
after taxes), reflecting the net unamortized discount and issuance
expenses of the subordinated debentures.
In November 1992, the company issued $125,000,000 of 5-3/4%
convertible subordinated debentures due in 2002. The debentures are
convertible at any time prior to maturity, unless previously redeemed,
into shares of the company's common stock, at a conversion price of
$33.125. The debentures are not redeemable at the option of the company
prior to October 1995. The net proceeds from the issuance of the
debentures together with the proceeds from the private placement of the
senior notes were used to redeem the balance of the 13-3/4% subordinated
debentures, the 12% subordinated debentures, and the 9% convertible
subordinated debentures, to repay the balance of the 12% senior subordi-
nated note issued to Lex, to repay the then existing term loan under the
U.S. credit agreement, and to provide the company with general working
capital. The redemption of the subordinated debentures and repayment of
the term loan resulted in an extraordinary charge of $4,925,000
($3,000,000 after taxes). The charge resulted from the amortization of
the net unamortized discount and issuance expenses.
The aggregate annual maturities of long-term debt and subordinated
debentures for each of the five years in the period ending December 31,
1998 are: 1994--$5,196,000; 1995--$5,053,000; 1996--$5,056,000; 1997--
$6,943,000; and 1998--$74,151,000.
The carrying amounts of the company's U.S. credit agreement and
foreign borrowings approximate their fair value. At December 31, 1993,
the closing price of the 5-3/4% convertible subordinated debentures on
the New York Stock Exchange was 140% of par. The estimated fair market
value of the 8.29% senior notes at December 31, 1993 was 106% of par.
5. Income Taxes
The provision for income taxes for 1993, 1992, and 1991 consisted
of the following:
1993 1992 1991
(In thousands)
Current
Federal..................... $39,106 $14,080 $ 5,200
State....................... 9,432 3,744 1,000
Foreign..................... 9,376 - -
57,914 17,824 6,200
Deferred
Federal..................... 2,760 9,869 (3,974)
State....................... 552 2,333 -
Foreign..................... 3,222 - -
6,534 12,202 (3,974)
$64,448 $30,026 $ 2,226
-27-
ARROW ELECTRONICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
The principal causes of the difference between the U.S. statutory
and effective income tax rates for 1993, 1992, and 1991 are as follows:
1993 1992 1991
(In thousands)
Provision at statutory rate... $55,380 $27,292 $ 3,710
State taxes, net of federal
benefit..................... 6,490 4,011 660
Minority interest............. (4,277) - -
Foreign tax rate differential 3,448 - -
Effect of equity income and
foreign loss................ (385) (1,199) (716)
Amortization of goodwill...... 1,124 775 513
Other differences............. 2,960 176 208
Tax benefit of loss and credit
carryforwards............... (292) (1,029) (2,149)
Income tax provision.......... $64,448 $30,026 $ 2,226
For financial reporting purposes in 1993, income before income
taxes attributable to the United States and foreign operations was
$120,112,000 and $38,116,000, respectively.
The significant components of the company's deferred tax assets
are as follows:
1993 1992
(In thousands)
Inventory reserves............ $ 4,913 $ 8,082
Acquired net operating loss
carryforwards............... 2,931 3,662
Other......................... 1,927 1,192
$ 9,771 $12,936
At December 31, 1993, the company had approximately $7,000,000 of
acquired U.S. net operating loss carryforwards available for tax return
purposes which expire in the years 2001 through 2006. Such carry-
forwards are subject to certain annual restrictions on the amount that
can be utilized for tax return purposes. In France, the company had
approximately $9,500,000 of net operating loss carryforwards, of which
approximately $8,900,000 was acquired, which expire through 1997. In
accordance with SFAS 109, the cost in excess of net assets of companies
acquired has been adjusted by $24,600,000 in conjunction with various
acquisitions to reflect the tax benefits of these net operating loss
carryforwards and other differences in the tax and book bases of the
assets and liabilities acquired. Included in other liabilities are
deferred tax liabilities of $11,954,000 and $11,436,000 at December 31,
1993 and 1992, respectively. The deferred tax liabilities are princi-
pally the result of the differences in the bases of the German assets
and liabilities for tax and financial reporting purposes.
-28-
ARROW ELECTRONICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
6. Shareholders' Equity
The company has 2,000,000 authorized shares of serial preferred
stock with a par value of $1. In February 1992, the company issued
66,196 shares of newly-created series B $19.375 convertible exchangeable
preferred stock (the "series B preferred stock") for approximately
$15,721,000 to provide partial funding for the acquisition of the
European electronics distribution businesses of Lex.
In September 1993, the company completed the conversion of all of
its outstanding series B preferred stock into 1,009,086 shares of its
common stock. This conversion eliminated $1.3 million of annual
dividends.
In 1988, the company paid a dividend of one preferred share
purchase right on each outstanding share of common stock. Each right,
as amended, entitles a shareholder to purchase one one-hundredth of a
share of a new series of preferred stock at an exercise price of $50
(the "exercise price"). The rights are exercisable only if a person or
group acquired 20% or more of the company's common stock or announces a
tender or exchange offer that will result in such person or group
acquiring 30% or more of the company's common stock. Rights owned by
the person acquiring such stock or transferees thereof will automatical-
ly be void. Each other right will become a right to buy, at the
exercise price, that number of shares of common stock having a market
value of twice the exercise price. The rights, which do not have voting
rights, expire on March 2, 1998 and may be redeemed by the company at a
price of $.01 per right at any time until ten days after a 20% ownership
position has been acquired. In the event that the company merges with,
or transfers 50% or more of its consolidated assets or earning power to,
any person or group after the rights become exercisable, holders of the
rights may purchase, at the exercise price, a number of shares of common
stock of the acquiring entity having a market value equal to twice the
exercise price.
7. Employee Stock Plans
Restricted Stock Plan
Under the terms of the Arrow Electronics, Inc. Restricted Stock
Plan (the "Plan"), a maximum of 1,330,000 shares of common stock may be
awarded at the discretion of the Board of Directors to key employees of
the company. The company believes that as many as 50 employees may be
considered for awards under the Plan.
Shares awarded under the Plan may not be sold, assigned, trans-
ferred, pledged, hypothecated, or otherwise disposed of, except as
provided in the Plan. Shares awarded become free of such restrictions
over a four-year period. The company awarded 40,000 shares of common
stock in early 1994 to 35 key employees in respect of 1993, 49,250
shares of common stock to 35 key employees during 1993 (including 39,750
shares of common stock in early 1993 to 31 key employees in respect of
-29-
ARROW ELECTRONICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
1992), 84,000 shares of common stock to 32 key employees during 1992
(including 63,000 shares awarded in early 1992 to 30 key employees in
respect of 1991), and 11,000 shares of common stock to five key employ-
ees during 1991. Forfeitures of shares awarded under the Plan were
7,625, 11,875, and 2,875 during 1993, 1992, and 1991, respectively. The
aggregate market value of outstanding awards under the Plan at the
respective dates of award is being amortized over a four-year period and
the unamortized balance is included in shareholders' equity as unamor-
tized employee stock awards.
Stock Option Plan
Under the terms of the Arrow Electronics, Inc. Stock Option Plan
(the "Option Plan"), both nonqualified and incentive stock options were
authorized for grant to key employees at prices determined by the Board
of Directors in its discretion or, in the case of incentive stock
options, prices equal to the fair market value of the shares at the
dates of grant. Options currently outstanding have terms of ten years
and become exercisable in equal annual installments over two or three-
year periods from date of grant. In 1993, the shareholders of the
company approved an increase in the number of shares of common stock
authorized for stock options to an aggregate of 4,500,000 shares.
The following information relates to the Option Plan:
Year ended December 31,
1993 1992 1991
Options outstanding at
beginning of year...... 989,755 1,532,504 1,503,780
Granted.................. 367,250 473,900 268,550
Exercised................ (392,934) (978,446) (202,225)
Forfeited................ (36,337) (38,203) (37,601)
Options outstanding at
end of year............ 927,734 989,755 1,532,504
Prices per share of
options outstanding....$3.63-39.75 $3.63-28.25 $3.63-14.63
Average price per share
of options exercised... $9.06 $5.86 $5.29
Average price per share
of options outstanding. $17.02 $9.73 $6.21
Exercisable options...... 715,170 665,821 1,145,599
Options available for
future grant:
Beginning of year.... 748,959 1,184,656 165,605
End of year.......... 1,918,046 748,959 1,184,656
Stock Ownership Plan
The company maintains a noncontributory employee stock ownership
plan which enables most North American employees to acquire shares of
the company's common stock. Contributions, which are determined by the
Board of Directors, are in the form of company common stock or cash
which is used to purchase the company's common stock for the benefit of
participating employees. Contributions to the plan for 1993, 1992, and
1991 aggregated $2,525,000, $2,360,000, and $1,550,000, respectively.
-30-
ARROW ELECTRONICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
8. Retirement Plan
The company has a defined contribution plan for eligible employ-
ees, which qualifies under Section 401(k) of the Internal Revenue Code.
The company's contribution to the plan, which is based on a specified
percentage of employee contributions, amounted to $2,286,000,
$2,131,000, and $1,302,000 in 1993, 1992, and 1991, respectively.
9. Lease Commitments
The company leases certain office, warehouse, and other property
under noncancellable operating leases expiring at various dates through
2016. Rental expenses of noncancellable operating leases amounted to
$16,375,000 in 1993, $12,943,000 in 1992, and $11,588,000 in 1991.
Aggregate minimum rental commitments under all noncancellable operating
leases approximate $69,922,000, exclusive of real estate taxes, insur-
ance, and leases related to facilities closed in connection with the
integration of the acquired businesses. Such commitments on an annual
basis are: 1994-$15,012,000; 1995-$12,145,000; 1996-$9,858,000; 1997-
$6,859,000; 1998-$5,539,000 and $20,509,000 thereafter. The company's
obligations under capitalized leases are reflected as a component of
deferred income taxes and other liabilities.
10. Segment and Geographic Information
The company is engaged in one business segment, the distribution
of electronic components, systems, and related products. The geographic
distribution of consolidated sales, operating income, and identifiable
assets for 1993 and 1992 are as follows (in thousands):
Sales to Identifiable
Unaffiliated Operating Assets at
1993 Customers Income (Loss) December 31,
North America.... $1,890,615 $156,014 $ 717,566
Europe........... 600,935 40,153 367,102
Pacific Rim...... 44,034 1,706 57,416
Eliminations
and Corporate.. - (16,331) 35,849
$2,535,584 $181,542 1,177,933
Investment in affiliated company 13,371
Total assets at December 31, 1993 $1,191,304
-31-
ARROW ELECTRONICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
Sales to Identifiable
Unaffiliated Operating Assets at
1992 Customers Income (Loss) December 31,
North America.... $1,504,958 $116,007 $598,017
Europe........... 116,577 1,420 94,145
Pacific Rim...... - - -
Eliminations
and Corporate.. - (13,646) 23,838
$1,621,535 $103,781 716,000
Investments in affiliated companies 64,893
Total assets at December 31, 1992 $780,893
11. Quarterly Financial Data (Unaudited)
A summary of the company's quarterly results of operations for 1993
and 1992 follows:
First Second Third Fourth
Quarter Quarter Quarter Quarter
(In thousands except per share data)
1993:
Sales.......................$551,391 $584,069 $697,825 $702,299
Gross profit................ 120,091 120,847 136,876 135,517
Net income.................. 17,982 19,114 21,734 22,729
Per common share:...........
Primary .................. .59 .62 .69 .72
Fully diluted............. .55 .58 .64 .67
First Second Third Fourth
Quarter Quarter Quarter Quarter
(In thousands except per share data)
1992:
Sales.......................$378,679 $382,041 $407,421 $453,394
Gross profit................ 78,930 82,706 87,038 93,215
Earnings before
extraordinary charges..... 9,270 11,518 13,323 16,133
Net income.................. 9,270 9,094 13,323 13,133
Per common share:
Earnings before
extraordinary charges.... .38 .41 .47 .53
Extraordinary charges ..... - (.10) - (.10)
Net income.................... .38 .31 .47 .43
-32-
Item 9. Changes In and Disagreements with Accountants on
Accounting and Financial Disclosure.
None.
Part III
Item 10. Directors and Executive Officers of the Registrant.
See "Executive Officers" in the response to Item 1 above. In
addition, the information set forth under the heading "Election of
Directors" in the company's Proxy Statement filed in connection with the
Annual Meeting of Shareholders scheduled to be held May 10, 1994 hereby
is incorporated herein by reference.
Item 11. Executive Compensation.
The information set forth under the heading "Executive Compensation
and Other Matters" in the company's Proxy Statement filed in connection
with the Annual Meeting of Shareholders scheduled to be held May 10,
1994 hereby is incorporated herein by reference.
Item 12. Security Ownership of Certain Beneficial Owners and Manage-
ment.
The information on page 3 and under the heading "Election of
Directors" in the company's Proxy Statement filed in connection with the
Annual Meeting of Shareholders scheduled to be held May 10, 1994 hereby
is incorporated herein by reference.
Item 13. Certain Relationships and Related Transactions.
The information set forth under the heading "Executive Compensation
and Other Matters" in the company's Proxy Statement filed in connection
with the Annual Meeting of Shareholders scheduled to be held May 10,
1994 hereby is incorporated herein by reference.
Part IV
Item 14. Exhibits, Financial Statement Schedules and Reports on
Form 8-K.
(a)1. Financial Statements.
The financial statements listed in the accompanying index to
financial statements and financial statement schedules are filed as part
of this annual report.
2. Financial Statement Schedules.
The financial statement schedules listed in the accompanying
index to financial statements and financial statement schedules are
filed as part of this annual report.
-33-
All other schedules have been omitted since the required
information is not present or is not present in amounts sufficient to
require submission of the schedule, or because the information required
is included in the consolidated financial statements, including the
notes thereto.
ARROW ELECTRONICS, INC.
INDEX TO FINANCIAL STATEMENTS
AND FINANCIAL STATEMENT SCHEDULES
(Item 14 (a))
Page
Report of Ernst & Young, independent auditors 15
Consolidated balance sheet at December 31, 1993 and 1992 16
For the years ended December 31, 1993, 1992 and 1991:
Consolidated statement of operations 17
Consolidated statement of cash flows 18
Consolidated statement of shareholders' equity 19
Notes to consolidated financial statements for
the years ended December 31, 1993, 1992 and 1991 20
Consolidated schedules for the three years
ended December 31, 1993:
II - Amounts receivable from employees 45
VIII - Valuation and qualifying accounts 46
IX - Short-term borrowings 47
-34-
3. Exhibits.
(2)(a) Restated Agreement of Purchase and Sale,
dated as of September 20, 1987, between Ducommun Incorporated and Arrow
Electronics, Inc. (incorporated by reference to Exhibit 2(b) to the
company's Registration Statement on Form S-4, Commission File No.
33-17942).
(b) Letter Agreement dated January 11, 1988
between Ducommun Incorporated and Arrow Electronics, Inc. (incorporated
by reference to Exhibit 2(b) to the company's Current Report on Form 8-K
dated January 21, 1988, Commission File No. 1-4482).
(c) Acquisition Agreement, dated July 28, 1988,
between Craig, Hochreiter & Co., Incorporated and Arrow Electronics,
Inc., as amended and supplemented (incorporated by reference to Exhibit
2 to the company's Quarterly Report on Form 10-Q for the quarter ended
September 30, 1988, Commission File No. 1-4482).
(d)(i) Acquisition Agreement, dated July 6, 1989,
between Arrow Electronics (UK) Limited and Electrocomponents plc
(incorporated by reference to Exhibit 2(d)(i) to the company's Annual
Report on Form 10-K for the year ended December 31, 1989, Commission
File No. 1-4482).
(ii) English language translation of Acquisition
Agreement, dated July 6, 1989, between Spoerle Electronic Handelsgesell-
schaft mbH & Co. and Retron Manger Electronic GmbH and Eldi GmbH
Electronik Distributor (incorporated by reference to Exhibit 2(d)(ii) to
the company's Annual Report on Form 10-K for the year ended December 31,
1989, Commission File No. 1-4482).
(iii) Umbrella Agreement, dated July 6, 1989,
between Electrocomponents plc; Retron Elektronische Bauteile und Gerate
Handelsgesellschaft mbH, Manger Elektronik GmbH, and Eldi GmbH Elektro-
nik Distributor; Arrow Electronics, Inc.; Arrow Electronics (UK)
Limited; and Spoerle Electronic Handelsgesellschaft GmbH & Co. (incorpo-
rated by reference to Exhibit 2(d)(iii) to the company's Annual Report
on Form 10-K for the year ended December 31, 1989, Commission File No.
1-4482).
(e)(i) Agreement of Purchase and Sale, as amended,
by and among Lex Service PLC, Lex Burlington Inc., and Arrow Electron-
ics, Inc. (incorporated by reference to Exhibit 6(a) to the company's
Quarterly Report on Form 10-Q for the quarter ended September 30, 1991,
Commission File No. 1-4482).
(ii) Stockholders' Agreement dated as of September
27, 1991 by and among Arrow Electronics, Inc., Lex Service PLC, and Lex
Burlington Inc. (incorporated by reference to Exhibit 2(e)(ii) to the
company's Annual Report on Form 10-K for the year ended December 31,
1991, Commission File No. 1-4482).
(iii) Amendment No. 1 dated as of February 28, 1992
to the Stockholders' Agreement in (2)(e)(ii) above (incorporated by
reference to Exhibit 2(g)(iii) to the company's Annual Report on Form
10-K for the year ended December 31, 1991, Commission File No. 1-4482).
-35-
(iv) Amendment No. 2 dated as of July 30, 1992 to
the Stockholders' Agreement in (2)(e)(ii) above (incorporated by
reference to Exhibit 2(e)(iv) to the company's Annual Report on Form
10-K for the year ended December 31, 1992, Commission File No. 1-4482).
(v) Amendment No. 3 dated as of February 1, 1993
to the Stockholders' Agreement in (2)(e)(ii) above (incorporated by
reference to Exhibit 2(e)(v) to the company's Annual Report on Form 10-K
for the year ended December 31, 1992, Commission File No. 1-4482).
(vi) Registration Rights Agreement dated as of
September 27, 1991 by and among Arrow Electronics, Inc., Lex Service
PLC, and Lex Burlington Inc. (incorporated by reference to Exhibit
2(e)(iii) to the company's Annual Report on Form 10-K for the year ended
December 31, 1991, Commission File No. 1-4482).
(vii) Amendment No. 1 dated as of February 28, 1992
to the Registration Rights Agreement in (2)(e)(vi) above (incorporated
by reference to Exhibit (2)(g)(iv) to the company's Annual Report on
Form 10-K for the year ended December 31, 1991, Commission File No.
1-4482).
(viii) Amendment No. 2 dated as of July 30, 1992 to
the Registration Rights Agreement in (2)(e)(vi) above (incorporated by
reference to Exhibit (2)(e)(viii) to the company's Annual Report on Form
10-K for the year ended December 31, 1992, Commission File No. 1-4482).
(ix) Amendment No. 3 dated as of February 1, 1993
to the Registration Rights Agreement in (2)(e)(vi) above (incorporated
by reference to Exhibit (2)(e)(ix) to the company's Annual Report on
Form 10-K for the year ended December 31, 1992, Commission File No.
1-4482).
(f)(i) Share Purchase Agreement dated as of October
10, 1991 among EDI Electronics Distribution International B.V., Aquarius
Investments Ltd., Andromeda Investments Ltd., and the other persons
named therein (incorporated by reference to Exhibit 2.2 to the company's
Registration Statement on Form S-3, Registration No. 33-42176).
(ii) Standstill Agreement dated as of October 10,
1991 among Arrow Electronics, Inc., Aquarius Investments Ltd., Andromeda
Investments Ltd., and the other persons named therein (incorporated by
reference to Exhibit 4.1 to the company's Registration Statement on Form
S-3, Registration No. 33-42176).
(iii) Shareholder's Agreement dated as of October
10, 1991 among EDI Electronics Distribution International B.V., Giorgio
Ghezzi, Germano Fanelli, and Renzo Ghezzi.
(g) Asset Purchase Agreement, dated as of
February 12, 1993, between Zeus Components, Inc. and Arrow Electronics,
Inc. (incorporated by reference to Exhibit 10(1) to the company's Annual
Report on Form 10-K for the year ended December 31, 1992, Commission
File No. 1-4482).
(h) Agreement dated as of February 28, 1992 among
Lex Service PLC, Arrow Electronics (UK) Limited, EDI Electronics
Distribution International (France) SA, Arrow Electronics GmbH, and
Arrow Electronics, Inc. (incorporated by reference to Exhibit 2(1) to
the company's Current Report on Form 8-K, dated March 11, 1992, Commis-
sion File No. 1-4482).
-36-
(i) Subscription Agreement dated February 7,
1992, between Arrow Electronics, Inc. and various purchasers, pertaining
to the sale of the company's Series B $19.375 Convertible Exchangeable
Preferred Stock (incorporated by reference to Exhibit 2(h) to the
company's Annual Report on Form 10-K for the year ended December 31,
1991, Commission File No. 1-4482).
(3) (a) Amended and Restated Certificate of Incorpo-
ration of the company, as amended (incorporated by reference to Exhibit
4(1) to the company's Registration Statement on Form S-3, Registration
No. 33-67890).
(b) Certificate of Amendment of the Amended and
Restated Certificate of Incorporation of the company dated as of August
24, 1993 (incorporated by reference to Exhibit 4(2) to the company's
Registration Statement on Form S-3, Registration No. 33-67890).
(c) By-Laws of the company, as amended (incorpo-
rated by reference to Exhibit 3(b) to the company's Annual Report on
Form 10-K for the year ended December 31, 1986, Commission File No.
1-4482).
(4) (a) Indenture, including Debenture, dated as of
November 25, 1992 between the company and the Bank of Montreal Trust
Company, as Trustee, with respect to the company's 5-3/4% Convertible
Subordinated Debentures due 2004 (incorporated by reference to Exhibit
4(a) to the company's Annual Report on Form 10-K for the year ended
December 31, 1992, Commission File No. 1-4482).
(b)(i) Rights Agreement dated as of March 2, 1988
between Arrow Electronics, Inc. and Manufacturers Hanover Trust Company,
as Rights Agent, which includes as Exhibit A a Certificate of Amendment
of the Restated Certificate of Incorporation for Arrow Electronics, Inc.
for the Participating Preferred Stock, as Exhibit B a letter to share-
holders describing the Rights and a summary of the provisions of the
Rights Agreement and as Exhibit C the forms of Rights Certificate and
Election to Exercise (incorporated by reference to Exhibit 1 to the
company's Current Report on Form 8-K dated March 3, 1988, Commission
File No. 1-4482).
(ii) First Amendment, dated June 30, 1989, to the
Rights Agreement in (4)(b)(i) above (incorporated by reference to
Exhibit 4(b) to the Company's Current Report on Form 8-K dated June 30,
1989, Commission File No. 1-4482).
(iii) Second Amendment, dated June 8, 1991, to the
Rights Agreement in (4)(b)(i) above (incorporated by reference to
Exhibit 4(i)(iii) to the company's Annual Report on Form 10-K for the
year ended December 31, 1991, Commission File No. 1-4482).
(iv) Third Amendment, dated July 19, 1991, to the
Rights Agreement in (4)(b)(i) above (incorporated by reference to
Exhibit 4(i)(iv) to the company's Annual Report on Form 10-K for the
year ended December 31, 1991, Commission File No. 1-4482).
(v) Fourth Amendment, dated August 26, 1991, to
the Rights Agreement in (4)(b)(i) above (incorporated by reference to
Exhibit 4(i)(v) to the company's Annual Report on Form 10-K for the year
ended December 31, 1991, Commission File No. 1-4482).
-37-
(10)(a) Investment Management Agreement, dated as of
September 28, 1981, between the company and Fayez Sarofim & Co. (incor-
porated by reference to Exhibit 10(b)(ii) to the company's Quarterly
Report on Form 10-Q for the quarter ended September 30, 1981, Commission
File No. 1-4482).
(b)(i) Arrow Electronics Savings Plan, as amended
and restated through January 1, 1989 (incorporated by reference to
Exhibit 10(b)(i) to the company's Annual Report on Form 10-K for the
year ended December 31, 1989, Commission File No. 1-4482).
(ii) Amendment No. 1, dated December 7, 1989, to
the Arrow Electronics Savings Plan in (10)(b)(i) above (incorporated by
reference to Exhibit 10(b)(ii) to the company's Annual Report on Form
10-K for the year ended December 31, 1992, Commission File No. 1-4482).
(iii) Amendment No. 2, dated January 18, 1990, to
the Arrow Electronics Savings Plan in (10)(b)(i) above (incorporated by
reference to Exhibit 10(b)(ii) to the company's Annual Report on Form
10-K for the year ended December 31, 1991, Commission File No. 1-4482).
(iv) Amendment No. 3, dated February 21, 1992, to
the Arrow Electronics Savings Plan in (10)(b)(i) above (incorporated by
reference to Exhibit 10(b)(iv) to the company's Annual Report on Form
10-K for the year ended December 31, 1992, Commission File No. 1-4482).
(v) Supplement, dated September 27, 1991, to the
Arrow Electronics Savings Plan in (10)(b)(i) above (incorporated by
reference to Exhibit 10(b)(v) to the company's Annual Report on Form
10-K for the year ended December 31, 1992, Commission File No. 1-4482).
(vi) Supplement No. 3, dated August 24, 1993, to
the Arrow Electronics Savings Plan in 10(b)(i) above.
(vii) Arrow Electronics Stock Ownership Plan, as
amended and restated through January 1, 1989 (incorporated by reference
to Exhibit 10(b)(ii) to the company's Annual Report on Form 10-K for the
year ended December 31, 1989, Commission File No. 1-4482).
(viii) Amendment No. 1, dated November 29, 1989, to
the Arrow Electronics Stock Ownership Plan in (10)(b)(vii) above (incor-
porated by reference to Exhibit 10(b)(vii) to the company's Annual
Report on Form 10-K for the year ended December 31, 1992, Commission
File No. 1-4482).
(ix) Amendment No. 2, dated December 7, 1989, to
the Arrow Electronics Stock Ownership Plan in (10)(b)(vii) above (incor-
porated by reference to Exhibit 10(b)(viii) to the company's Annual
Report on Form 10-K for the year ended December 31, 1992, Commission
File No. 1-4482).
(x) Amendment No. 3, dated January 18, 1990, to
the Arrow Electronics Stock Ownership Plan in (10)(b)(vii) above
(incorporated by reference to Exhibit 10(b)(iv) to the company's Annual
Report on Form 10-K for the year ended December 31, 1991, Commission
File No. 1-4482).
(xi) Amendment No. 4, dated December 31, 1992 to
the Arrow Electronics Stock Ownership Plan in (10)(b)(vii) above (incor-
porated by reference to Exhibit 10(b)(x) to the company's Annual Report
on Form 10-K for the year ended December 31, 1992, Commission File No.
1-4482).
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(xii) Supplement No. 1, dated September 8, 1992, to
the Arrow Electronics Stock Ownership Plan in (10)(b)(vii) above (incor-
porated by reference to Exhibit 10(b)(xi) to the company's Annual Report
on Form 10-K for the year ended December 31, 1992, Commission File No.
1-4482).
(xiii) Supplement No. 3, dated August 24, 1993, to
the Arrow Electronics Stock Ownership Plan in (10)(b)(vii) above.
(xiv) Capstone Electronics Corp. Profit-Sharing
Plan, effective January 1, 1990 (incorporated by reference to Exhibit
10(b)(iii) to the company's Annual Report on Form 10-K for the year
ended December 31, 1990, Commission File No. 1-4482).
(xv) Supplement No. 1, dated September 8, 1992, to
the Capstone Electronics Profit-Sharing Plan in (10)(b)(xiv) above
(incorporated by reference to Exhibit 10(b)(xiii) to the company's
Annual Report on Form 10-K for the year ended December 31, 1992,
Commission File No. 1-4482).
(xvi) Supplement No. 2, dated August 24, 1993, to
the Capstone Electronics Profit Sharing Plan in (10)(b)(xiv) above.
(c)(i) Employment Agreement, dated as of October 16,
1990, between the company and John C. Waddell (incorporated by reference
to Exhibit 10(c)(i) to the company's Annual Report on Form 10-K for the
year ended December 31, 1990, Commission File No. 1-4482).
(ii) Employment Agreement, dated as of March 13,
1991, between the company and Stephen P. Kaufman (incorporated by
reference to Exhibit 10(c)(ii) to the company's Annual Report on Form
10-K for the year ended December 31, 1990, Commission File No. 1-4482).
(iii) Employment Agreement, dated as of March 13,
1991, between the company and Robert E. Klatell (incorporated by
reference to Exhibit 10(c)(iii) to the company's Annual Report on Form
10-K for the year ended December 31, 1990, Commission File No. 1-4482).
(iv) Form of agreement between the company and the
employees parties to the Employment Agreements listed in 10(c)(i), (ii),
and (iii) above providing extended separation benefits under certain
circumstances (incorporated by reference to Exhibit 10(c)(iv) to the
company's Annual Report on Form 10-K for the year ended December 31,
1988, Commission File No. 1-4482).
(v) Form of Employment Agreement, dated as of
April 1, 1989, between the company and Robert J. McInerney (incorporated
by reference to Exhibit 10(c)(v) to the company's Annual Report on Form
10-K for the year ended December 31, 1989, Commission File No. 1-4482).
(vi) Form of Employment Agreement, dated as of
March 13, 1991, between the company and Steven W. Menefee (incorporated
by reference to Exhibit 10(c)(vi) to the company's Annual Report on Form
10-K for the year ended December 31, 1990, Commission File No. 1-4482).
(vii) Form of Employment Agreement, as amended and
restated as of January 1, 1990, between the company and Wesley S. Sagawa
(incorporated by reference to Exhibit 10(c)(vi) to the company's Annual
Report on Form 10-K for the year ended December 31, 1989, Commission
File No. 1-4482).
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(viii) Form of Employment Agreement, dated as of
October 27, 1988, between the company and William J. Smith (incorporated
by reference to Exhibit 10(c)(v) to the company's Annual Report on Form
10-K for the year ended December 31, 1988, Commission File No. 1-4482).
(ix) Employment Agreement, dated as of October 19,
1990, between the company and Don E. Burton (incorporated by reference
to Exhibit 10(c)(ix) to the company's Annual Report on Form 10-K for the
year ended December 31, 1990, Commission File No. 1-4482).
(x) Employment Agreement, dated as of January 7,
1991, between the company and Betty Jane Scheihing (incorporated by
reference to Exhibit 10(c)(xi) to the company's Annual Report on Form
10-K for the year ended December 31, 1990, Commission File No. 1-4482).
(xi) Employment Agreement, dated as of January 7,
1991, between the company and John S. Smith (incorporated by reference
to Exhibit 10(c)(xii) to the company's Annual Report on Form 10-K for
the year ended December 31, 1990, Commission File No. 1-4482).
(xii) Employment Agreement, dated as of March 17,
1993, between the company and Jan Salsgiver.
(xiii) Form of agreement between the company and all
corporate Vice Presidents, including the employees parties to the
Employment Agreements listed in 10(c)(v)-(xii) above, providing extended
separation benefits under certain circumstances (incorporated by
reference to Exhibit 10(c)(ix) to the company's Annual Report on Form
10-K for the year ended December 31, 1988, Commission File No. 1-4482).
(xiv) Form of agreement between the company and
non-corporate officers providing extended separation benefits under
certain circumstances (incorporated by reference to Exhibit 10(c)(x) to
the company's Annual Report on Form 10-K for the year ended December 31,
1988, Commission File No. 1-4482).
(xv) Unfunded Pension Plan for Selected Executives
of Arrow Electronics, Inc. (incorporated by reference to Exhibit
10(c)(xv) to the company's Annual Report on Form 10-K for the year ended
December 31, 1990, Commission File No. 1-4482).
(xvi) English translation of the Service Agreement,
dated January 19, 1993, between Spoerle Electronic and Carlo Giersch
(incorporated by reference to Exhibit 10(f)(v) to the company's Annual
Report on Form 10-K for the year ended December 31, 1992, Commission
File No. 1-4482).
(d)(i) Senior Note Purchase Agreement, dated as of
December 29,1992, with respect to the company's 8.29% Senior Secured
Notes due 2000 (incorporated by reference to Exhibit 10(d) to the
company's Annual Report on Form 10-K for the year ended December 31,
1992, Commission File No. 1-4482).
(ii) First Amendment, dated as of December 22,
1993, to the Senior Note Purchase Agreement in 10(d)(i) above.
(e) Amended and Restated Credit Agreement dated
as of January 28, 1994 among Arrow Electronics, Inc., the several Banks
from time to time parties hereto, Bankers Trust Company and Chemical
Bank, as agents.
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(f)(i) English translation of the Agreement of
Purchase and Sale, dated January 19, 1993, between Carlo Giersch and
Arrow Electronics GmbH with respect to the purchase of an additional 15%
interest in Spoerle Electronic (incorporated by reference to Exhibit
10(f)(i) to the company's Annual Report on Form 10-K for the year ended
December 31, 1992, Commission File No. 1-4482).
(ii) English translation of the Offer Agreement,
with supplemental letters attached, dated January 19, 1993, between
Arrow Electronics GmbH and Carlo Giersch with respect to the purchase of
a second 15% interest in Spoerle Electronic (incorporated by reference
to Exhibit 10(f)(ii) to the company's Annual Report on Form 10-K for the
year ended December 31, 1992, Commission File
No. 1-4482).
(iii) English translation of the Partnership
Agreement of Spoerle Electronic, dated January 19, 1993 (incorporated by
reference to Exhibit 10(f)(iii) to the company's Annual Report on Form
10-K for the year ended December 31, 1992, Commission File No. 1-4482).
(iv) English translation of the Articles of
Spoerle GmbH, dated as of January 1, 1993 (incorporated by reference to
Exhibit 10(f)(iv) to the company's Annual Report on Form 10-K for the
year ended December 31, 1992, Commission File No. 1-4482).
(g) Amendment and Restatement Agreement relating
to a Facilities Agreement dated February 28, 1992, between Arrow
Electronics (UK) Limited and National Westminster Bank PLC.
(h)(i) Credit Agreement, dated April 14, 1993,
between Berliner Handels- und Frankfurter Bank and Arrow Electronics
GmbH.
(ii) Amendment, dated January 28, 1994, to the
Credit Agreement in (10)(h)(i) above.
(iii) Guarantee, dated January 16, 1990, between
Arrow Electronics, Inc. and Berliner Handels- und Frankfurter Bank
(incorporated by reference to Exhibit 10(h)(ii) to the company's Annual
Report on Form 10-K for the year ended December 31, 1989, Commission
File No. 1-4482).
(iv) Subordination Agreement, dated January 16,
1990, between Berliner Handels- und Frankfurter Bank, Arrow Electronics,
Inc., and The First National Bank of Chicago (incorporated by reference
to Exhibit 10(h)(iii) to the company's Annual Report on Form 10-K for
the year ended December 31, 1989, Commission File No. 1-4482).
(v) First Amendment, dated December 29, 1992, to
the Subordination Agreement in (10)(h)(iv) above (incorporated by
reference to Exhibit 10(h)(iv) to the company's Annual Report on Form
10-K for the year ended December 31, 1992, Commission File No. 1-4482).
(vi) Second Amendment, dated January 26, 1993, to
the Subordination Agreement in (10)(h)(iv) above (incorporated by
reference to Exhibit 10(h)(v) to the company's Annual Report on Form
10-K for the year ended December 31, 1992, Commission File No. 1-4482).
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(vii) Third Amendment, dated April 12, 1993, to the
Subordination Agreement in (10)(h)(iv) above.
(viii) Fourth Amendment, dated January 28, 1994, to
the Subordination Agreement in (10)(h)(iv) above.
(viv) Assignments, dated January 16, 1990, by Arrow
Electronics GmbH in favor of Berliner Handels- und Frankfurter Bank
(incorporated by reference to Exhibit 10(h)(iv) to the company's Annual
Report on Form 10-K for the year ended December 31, 1989, Commission
File No. 1-4482).
(i)(i) Arrow Electronics, Inc. Stock Option Plan, as
amended (incorporated by reference to Exhibit (27)(a) to the company's
Registration Statement on Form S-8, Registration No. 33-66594).
(ii) Form of Stock Option Agreement under (i)(i)
above (incorporated by reference to Exhibit 10(k)(ii) to the company's
Annual Report on Form 10-K for the year ended December 31, 1986,
Commission File No. 1-4482).
(iii) Form of Nonqualified Stock Option Agreement
under (i)(i) above (incorporated by reference to Exhibit 10(k)(iv) to
the company's Registration Statement on Form S-4, Registration No.
33-17942).
(j)(i) Restricted Stock Plan of Arrow Electronics,
Inc., as amended and restated (incorporated by reference to Exhibit
10(j)(i) to the company's Annual Report on Form 10-K for the year ended
December 31, 1991, Commission File No. 1-4482).
(ii) Form of Award Agreement under (j)(i) above
(incorporated by reference to Exhibit 10(l)(iv) to the company's
Registration Statement on Form S-4, Registration No. 33-17942).
(k) Form of Indemnification Agreement between the
company and each director (incorporated by reference to Exhibit 10(m) to
the company's Annual Report on Form 10-K for the year ended December 31,
1986, Commission File No. 1-4482).
(l) Share Purchase Agreement dated as of July 2,
1993 between Baring Brothers (Guernsey) Limited and Others and Arrow
Electronics (UK) Limited.
(m) Share Sale Agreement dated as of August 17,
1993 between Ocean Information Holdings Limited and Arrow Electronics,
Inc.
(11) Statement Re: Computation of Earnings Per
Share.
(22) List of Subsidiaries.
(24) Consent of Ernst & Young
(28) (i) Record of Decision, issued by the EPA on
September 28, 1990, with respect to environmental clean-up in Plant
City, Florida (incorporated by reference to Exhibit 28 to the company's
Annual Report on Form 10-K for the year ended December 31, 1990,
Commission File No. 1-4482).
-42-
(ii) Consent Decree lodged with the U.S. District
Court for the Middle District of Florida, Tampa Division, on December
18, 1991, with respect to environmental clean-up in Plant City, Florida
(incorporated by reference to Exhibit 28(ii) to the company's Annual
Report on Form 10-K for the year ended December 31, 1991, Commission
File No. 1-4482).
(b) Reports on Form 8-K
None.
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CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration
Statements (Forms S-8 No. 33-66594, No. 33-48252, No. 33-20428 and No.
2-78185) and in the related Prospectuses pertaining to the employee
stock plans of Arrow Electronics, Inc., in Amendment No. 1 to the
Registration Statement (Form S-3 No. 33-67890) and in the related
Prospectus pertaining to the registration of 1,009,086 shares of Arrow
Electronics, Inc. Common Stock, and in Amendment No. 1 to the Registra-
tion Statement (Form S-3 No. 33-42176) and in the related Prospectus
pertaining to the registration of up to 944,445 shares of Arrow Elec-
tronics, Inc. Common Stock held by Aquarius Investments Ltd. and
Andromeda Investments Ltd. of our report dated February 24, 1994 with
respect to the consolidated financial statements and schedules of Arrow
Electronics, Inc. included in this Annual Report on Form 10-K for the
year ended December 31, 1993.
ERNST & YOUNG
New York, New York
March 25, 1994
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ARROW ELECTRONICS, INC.
SCHEDULE II - AMOUNTS RECEIVABLE FROM EMPLOYEES
For the three years ended December 31, 1993
Deductions
Balance at Amounts Balance
beginning Amounts written at end
of year Additions collected off of year
1993
John C. Waddell (1) $ 120,000 $ - $ - $ - $ 120,000
1992
John C. Waddell (1) 120,000 - - - 120,000
1991
John C. Waddell (1) 120,000 - - - 120,000
(1) Demand note bearing interest at 12% per annum. The obligation was satisfied in full
in 1994.
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ARROW ELECTRONICS, INC.
SCHEDULE VIII - VALUATION AND QUALIFYING ACCOUNTS
For the three years ended December 31, 1993
Additions
Balance at Balance
beginning Charged Charged at end
of year to income to other Write-offs of year
Allowance for
doubtful accounts
1993 $8,268,000 $10,769,000 $3,060,000(1) $ 5,606,000 $16,491,000
1992 $7,734,000 $12,081,000 $1,288,000(2) $12,835,000 $ 8,268,000
1991 $5,678,000 $ 4,677,000 $5,589,000(3) $ 8,210,000 $ 7,734,000
(1) Represents the allowance for doubtful accounts of the electronics distribution
businesses acquired by the company in 1993 including Zeus Components, Inc., Microproces-
sor & Memory Distribution Limited, Amitron-Arrow S.A., ATD Electronica S.A., CCI
Electronique S.A., and Spoerle Electronic.
(2) Represents the allowance for doubtful accounts of the European electronics distribution
businesses acquired from Lex Service PLC in 1992.
(3) Represents the allowance for doubtful accounts of the North American electronics
distribution businesses acquired from Lex Service PLC in 1991.
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ARROW ELECTRONICS, INC.
SCHEDULE IX - SHORT-TERM BORROWINGS
For the three years ended December 31, 1993
Maximum
Weighted amount Weighted
average outstanding Average average
interest at any amount interest
Balance at rate at month-end outstanding rate
end of end of during during during
the year the year the year the year the year
Short-term borrowings
1993 $35,769,000 6.61% $35,769,999 $19,666,000 7.82%
1992 $ - - $ 399,000 $ 114,000 8.23%
1991 $1,520,000 8.00% $ 1,790,000 $ 341,000 13.53%
Short-term borrowings represent obligations payable under short-term lines of credit arrange-
ments with various banks. Borrowings were arranged on an as needed basis at either the bank's
prime lending rate or LIBOR plus various credit margins which vary from country to country in
1993, sterling LIBOR plus 2 1/4% in 1992, and sterling LIBOR plus 2% in 1991.
The average amount outstanding during the year was computed by averaging the total month-end
outstanding principal balances during the year. The weighted average interest rate for each
year was computed by dividing the interest expense by the average amount outstanding.
-47-
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of
the Securities Exchange Act of 1934, the Registrant has duly
caused this annual report to be signed on its behalf by the
undersigned, thereunto duly authorized.
ARROW ELECTRONICS, INC.
By/s/ Stephen P. Kaufman
Stephen P. Kaufman
President
March 30, 1994
Pursuant to the requirements of the Securities Exchange
Act of 1934, this report has been signed below by the following
persons on behalf of the Registrant and in the capacities and on
the dates indicated:
By/s/ Stephen P. Kaufman March 30, 1994
Stephen P. Kaufman, Principal
Executive Officer and Director
By/s/ Robert E. Klatell March 30, 1994
Robert E. Klatell, Senior Vice President,
Principal Financial Officer, and Director
By/s/ Paul J. Reilly March 30, 1994
Controller and Principal Accounting
Officer
By/s/ John C. Waddell March 30, 1994
John C. Waddell, Chairman of the
Board of Directors
By/s/ Thomas M. Davidson March 30, 1994
Thomas M. Davidson, Director
By/s/ Daniel W. Duval March 30, 1994
Daniel W. Duval, Director
By/s/ Carlo Giersch March 30, 1994
Carlo Giersch, Director
By/s/ J. Spencer Gould March 30, 1994
J. Spencer Gould, Director
By/s/ Lawrence R. Kem March 30, 1994
Lawrence R. Kem, Director
By/s/ Steven W. Menefee March 30, 1994
Steven W. Menefee, Director
By/s/ Richard S. Rosenbloom March 30, 1994
Richard S. Rosenbloom, Director
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