Exhibit 99.1
Arrow Electronics Posts Fourth Quarter Results
MELVILLE, N.Y.--(BUSINESS WIRE)--Feb. 20, 2003--Arrow Electronics, Inc.
(NYSE:ARW) today reported fourth quarter 2002 net income from continuing
operations of $8.9 million ($.09 per share) on sales of $1.89 billion, compared
with net income from continuing operations of $6.5 million ($.07 per share) on
sales of $2.02 billion in last year's fourth quarter. During the fourth quarter,
the company repurchased $79 million of its 8.2% senior notes due to mature in
the fourth quarter of 2003. As a result, the company incurred an extraordinary
charge of $1.3 million net of taxes ($.01 per share). Including the
extraordinary charge, the company reported net income of $7.6 million ($.08 per
share) in the fourth quarter of 2002. In the second quarter of 2002, the company
sold its Gates/Arrow commodity computer products business, the sale of which has
been accounted for as a discontinued operation. Included in last year's fourth
quarter results was $.2 million of net income from discontinued operations.
Including the net income from discontinued operations, net income in the fourth
quarter of 2001 was $6.6 million.
In accordance with Statement of Financial Accounting Standards No. 142, the
company's 2002 results no longer reflect the amortization of goodwill. If last
year's fourth quarter results were restated to reflect the elimination of
goodwill amortization, earnings would have increased by approximately $.11 per
share.
Worldwide computer products sales from continuing operations totaled $573.7
million, 15.7% ahead of the third quarter and 6.1% below the prior year.
Operating income from continuing computer products activities, as a percentage
of sales, was 4.1%.
"We are very pleased by the performance of our North American computer
products businesses, whose strategy of focusing on the mid-range product
offerings of IBM, H-P, and Sun has generated earnings at record levels," said
Daniel W. Duval, Chairman of the Board of Arrow. "Operating income for the
mid-range businesses in the seasonally strong fourth quarter was in excess of 5%
of sales, while sales of these businesses were 22% ahead of the third quarter
and 11% over the prior year."
Worldwide components revenue of $1.32 billion was flat with the third
quarter, but down 6.6% from the prior year's fourth quarter. Operating income
for the quarter was 3% of sales.
"Business activity levels in our North American components businesses
slowed in the back half of December," said Mr. Duval, "but the fourth quarter
was the best of the year for our Asia/Pac business, with sales of core
components rising 15% over the third quarter. Although Europe remains a
difficult market, our European businesses remain among our most profitable."
The Hart-Scott-Rodino waiting period has expired and the company expects to
complete its previously-announced acquisition of the Industrial Electronics
Distribution (IED) business of Pioneer-Standard at the end of February. The
company remains confident that it will achieve at least $60 million in annual
cost savings from the combination of IED and its own North American components
businesses and that this acquisition will add at least $.20 per share to
earnings in the first full year following the combination (even assuming sales
attrition of as much as 20% to 25%).
The company noted that it generated $65 million in free cash flow during
the quarter, bringing the total generated during the past eight quarters to over
$2.2 billion. Cash and short-term investments at the end of the fourth quarter
exceeded $690 million. The company expects to use an estimated $285 million to
fund the purchase of Pioneer's IED business.
Recently, the company has taken a series of additional steps to make its
organizational structure, systems, and processes in North America more
efficient, the net result of which will be to reduce its cost structure by at
least $40 million annually. The majority of the financial impact of these
actions will be reflected in the company's results in the second quarter. The
company will record a related special restructuring charge of $12 to $15
million, before taxes, in its first quarter results.
Full Year Results
Arrow's net income from continuing operations for 2002 was $12.1 million
($.12 per share) on sales of $7.4 billion.
During 2002 the company repurchased $398.2 million of senior notes due to
mature in the fourth quarter of 2003. As a result, the company incurred an
extraordinary charge of $12.9 million net of taxes ($.13 per share).
Also in 2002, the company recorded a charge of $5.4 million ($3.2 million
net of taxes or $.03 per share) of severance costs associated with the
resignation of the company's former chief executive officer in June 2002.
In May 2002 the company sold its Gates/Arrow commodity computer products
business. As the company has exited the commodity computer products business,
this business is accounted for as a discontinued operation in accordance with
Statement of Financial Accounting Standards No. 144, "Accounting for the
Impairment or Disposal of Long-Lived Assets." Accordingly, its results have been
included in the consolidated statement of operations as a single line item and
all prior period information has been restated to reflect this presentation.
Included in the twelve month results for 2002 is a net loss of $5.9 million
($.06 per share) related to the discontinued operation.
The company adopted Statement of Financial Accounting Standards No. 142,
"Goodwill and Other Intangible Assets," effective January 1, 2002. In accordance
with the transitional rules of this pronouncement, the company completed its
evaluation of the carrying value of goodwill and determined that the carrying
value exceeded the fair value in certain instances. As a result of this new
pronouncement, the company recorded an impairment charge of $603.7 million
($6.05 and $5.97 per share on a basic and diluted basis, respectively), which
has been recorded as a cumulative effect of change in accounting principle.
The net loss for the year ended December 31, 2002, including the
aforementioned items, was $610.5 million ($6.12 and $6.04 per share on a basic
and diluted basis, respectively).
Arrow's net loss from continuing operations for 2001 was $75.6 million
($.77 per share on a basic and diluted basis) on sales of $9.49 billion.
Included in 2001's results were restructuring costs and other special
charges of $227.6 million ($145.1 million net of taxes or $1.47 per share)
associated with headcount reductions, the consolidation or closing of certain
facilities, valuation adjustments to inventory and Internet investments, and the
termination of certain customer engagements. Also included was an integration
charge of $9.4 million ($5.7 million net of taxes or $.06 per share) related to
costs incurred in connection with the acquisition and integration of Wyle
Electronics. Excluding the restructuring costs and other special charges and the
integration charge, net income from continuing operations for 2001 would have
been $75.2 million, $.77, and $.75 per share on a basic and diluted basis,
respectively. Also included in last year's results was net income of $1.8
million related to discontinued operations. Including the results of the
discontinued operation, the net loss and net loss per share in 2001 were $73.8
million and $.75 per share on a basic and diluted basis.
As previously mentioned, the company's results no longer reflect the
amortization of goodwill. If last year's results were restated to reflect the
elimination of goodwill amortization, earnings per share would have increased by
approximately $.42 per share.
Arrow Electronics is one of the world's largest distributors of electronic
components and computer products and a leading provider of services to the
electronics industry. Headquartered in Melville, New York, Arrow serves as a
supply channel partner for more than 600 suppliers and over 175,000 original
equipment manufacturers, contract manufacturers, and commercial customers
through more than 200 sales facilities and 23 distribution centers in 40
countries. Detailed information about Arrow's operations can be found at
www.arrow.com.
CONTACT: Arrow Electronics, Inc., Melville
Robert E. Klatell, 631/847-1830
Eileen M. O'Connor, 631/847-5740
The Private Securities Litigation Reform Act of 1995 provides a "safe
harbor" for forward-looking statements. This press release contains
forward-looking statements that are subject to certain risks and uncertainties
which could cause actual results or facts to differ materially from such
statements for a variety of reasons including, but are not limited to: industry
conditions, changes in product supply, pricing, and customer demand,
competition, other vagaries in the computer and electronic components markets,
changes in relationships with key suppliers and the other risks described from
time to time in the company's reports to the Securities and Exchange Commission
(including the company's Annual Report on Form 10-K). Shareholders and other
readers are cautioned not to place undue reliance on these forward-looking
statements, which speak only as of the date on which they are made. The company
undertakes no obligation to update publicly or revise any forward-looking
statements.
ARROW ELECTRONICS, INC.
CONSOLIDATED STATEMENT OF OPERATIONS
(In thousands except per share data)
Three Months Ended Year Ended
December 31, December 31,
---------------------- ----------------------
2002 2001 2002(A) 2001(B)
---- ---- ------- -------
Sales $1,890,959 $2,020,899 $7,390,154 $9,487,292
Costs and expenses:
Cost of products sold 1,574,128 1,686,886 6,130,581 8,004,657
Selling, general and
administrative
expenses 256,569 251,594 1,020,527 1,125,099
Depreciation and
amortization 15,641 31,159 66,141 118,344
Restructuring costs
and other
special charges - - - 77,147
Severance charge - - 5,375 -
Integration charge - - - 9,375
---------- --------- ---------- ----------
1,846,338 1,969,639 7,222,624 9,334,622
---------- --------- ---------- ----------
Operating income 44,621 51,260 167,530 152,670
Equity in earnings
(loss) of affiliated
companies 641 1,130 2,607 (1,203)
Loss on investments - - - 53,000
Interest expense 32,145 41,794 152,590 210,561
---------- --------- ---------- ----------
Earnings (loss) before
income taxes and
minority interest 13,117 10,596 17,547 (112,094)
Provision for (benefit
from) income taxes 4,591 4,577 6,166 (35,228)
---------- --------- ---------- ----------
Earnings (loss) before
minority interest 8,526 6,019 11,381 (76,866)
Minority interest (376) (435) (706) (1,279)
---------- --------- ---------- ----------
Earnings (loss) from
continuing operations 8,902 6,454 12,087 (75,587)
Income (loss) from
discontinued
operations, net of
taxes (including
loss from disposal
of $6,120, net of
tax benefit of
$4,114, in 2002)(C) - 175 (5,911) 1,761
---------- --------- ---------- ----------
Earnings (loss) before
extraordinary item 8,902 6,629 6,176 (73,826)
Extraordinary item,
net of taxes (D) (1,308) - (12,949) -
---------- --------- ---------- ----------
Income (loss) before
cumulative effect
of change in
accounting
principle 7,594 6,629 (6,773) (73,826)
Cumulative effect of
change in accounting
principle (E) - - (603,709) -
---------- --------- ---------- ----------
Net income (loss) $ 7,594 $ 6,629 $ (610,482) $ (73,826)
========== ========= ========== ==========
ARROW ELECTRONICS, INC.
CONSOLIDATED STATEMENT OF OPERATIONS
(In thousands except per share data)
Three Months Ended Year Ended
December 31, December 31,
------------------ ------------------
2002 2001 2002(A) 2001(B)
---- ---- ------- -------
Net income (loss) per basic share:
Income (loss) from continuing
operations $ .09 $ .07 $ .12 $ (.77)
Income (loss) from
discontinued operations - - (.06) .02
Loss from extraordinary item (.01) - (.13) -
Cumulative effect of change
in accounting
principle - - (6.05) -
-------- -------- -------- -------
Net income (loss) per basic
share $ .08 $ .07 $ (6.12) $ (.75)
======== ======== ======== =======
Net income (loss) per diluted
share:
Income (loss) from continuing
operations $ .09 $ .07 $ .12 $ (.77)
Income (loss) from
discontinued operations - - (.06) .02
Loss from extraordinary item (.01) - (.13) -
Cumulative effect of change
in accounting principle - - (5.97) -
-------- -------- -------- -------
Net income (loss) per diluted
share $ .08 $ .07 $ (6.04) $ (.75)
======== ======== ======== =======
Average number of shares
outstanding:
Basic 99,921 99,071 99,786 98,384
Diluted 100,441 100,441 101,068 98,384
See accompanying footnotes.
ARROW ELECTRONICS, INC.
FOOTNOTES
(A) Excluding the severance charge of $5.4 million ($3.2 million
net of taxes), net income and net income per share from
continuing operations would have been $15.3 million and $.15
on a basic and diluted basis, respectively, for the year ended
December 31, 2002.
(B) Excluding the restructuring costs and other special charges
totaling $227.6 million ($145.1 million net of taxes) and the
integration charge of $9.4 million ($5.7 million net of
taxes), net income and net income per share from continuing
operations would have been $75.2 million, $.77, and $.75 on a
basic and diluted basis, respectively, for the year ended
December 31, 2001.
(C) In May 2002, the company sold substantially all of the assets
of Gates/Arrow Distributing ("Gates/Arrow"), a business unit
within the company's North American Computer Product Group
that sells commodity computer products such as printers,
monitors, other peripherals, and software to value-added
resellers in North America. This business is accounted for as
a discontinued operation in accordance with Statement of
Financial Accounting Standards No. 144, "Accounting for the
Impairment or Disposal of Long-Lived Assets." Accordingly, its
results have been included in the consolidated statement of
operations as a single line item and all prior period
information has been restated to reflect this presentation.
Included in the year end results for 2002 is a net loss of
$5.9 million ($.06 per share on a basic and diluted basis),
reflecting the results of the discontinued operation and the
related loss on its sale.
(D) During 2002, the company repurchased $250 million of its 6.45%
senior notes and $148.2 million of its 8.20% senior notes, due
in the fourth quarter of 2003. The premiums paid in connection
with those transactions and the related deferred financing
costs and discounts totaled $12.9 million, net of taxes ($.13
per share on a basic and diluted basis), and have been
recorded as an extraordinary item.
(E) The company adopted Statement of Financial Accounting
Standards No. 142, "Goodwill and Other Intangible Assets," as
of January 1, 2002. As a result of the evaluation process, the
company recorded an impairment charge of $603.7 million ($6.05
and $5.97 per share on a basic and diluted basis,
respectively). The company has recorded the impairment charge
as a cumulative effect of a change in accounting principle.
ARROW ELECTRONICS, INC.
CONSOLIDATED BALANCE SHEET
(In thousands)
December 31, December 31,
2002 2001
------------ ------------
Assets
Current assets:
Cash and short-term investments $ 694,092 $ 556,861
Accounts receivable, net 1,378,562 1,389,882
Inventories 1,201,271 1,372,797
Other 59,810 52,892
Assets from discontinued operations - 98,954
---------- ----------
Total current assets 3,333,735 3,471,386
Property, plant and equipment, net 299,518 301,195
Investments in affiliated companies 32,527 32,917
Cost in excess of net assets of companies
acquired, net of amortization 748,368 1,224,283
Other assets 253,457 326,024
Assets from discontinued operations - 3,179
---------- ----------
$4,667,605 $5,358,984
========== ==========
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable $ 917,271 $ 641,454
Accrued expenses 258,774 342,670
Short-term borrowings 286,348 37,289
Liabilities from discontinued operations - 25,572
---------- ----------
Total current liabilities 1,462,393 1,046,985
Long-term debt 1,807,113 2,441,983
Other 162,850 103,555
Shareholders' equity 1,235,249 1,766,461
---------- ----------
$4,667,605 $5,358,984
========== ==========
ARROW ELECTRONICS, INC.
SEGMENT INFORMATION
(In thousands)
Three Months Ended Year Ended
December 31, December 31,
--------------------- -----------------------
2002 2001 2002(A) 2001(B)
---- ---- ------- -------
Sales:
Components $1,317,213 $1,409,903 $5,322,196 $7,153,171
Computer products 573,746 610,996 2,067,958 2,334,121
---------- ---------- ---------- ----------
Consolidated $1,890,959 $2,020,899 $7,390,154 $9,487,292
========== ========== ========== ==========
Operating income:
Components $ 39,331 $ 60,592 $ 183,680 $ 415,966
Computer products 23,610 20,585 58,501 43,912
Corporate (18,320) (29,917) (74,651) (307,208)
---------- ---------- ---------- ----------
Consolidated $ 44,621 $ 51,260 $ 167,530 $ 152,670
========== ========== ========== ==========
(A) Excluding the severance charge of $5.4 million, operating
income would have been $172.9 million for the year ended
December 31, 2002.
(B) Excluding the restructuring costs and other special charges of
$227.6 million ($174.6 million in operating income) and the
integration charge of $9.4 million, operating income would
have been $336.7 million for the year ended December 31, 2001.
The company has redefined certain of its reportable segments. The prior
periods have been restated for comparative purposes.