Exhibit 99.1
Arrow Electronics Announces Q1 Earnings; Strong Operating Results
Forecasted to Continue
MELVILLE, N.Y.--(BUSINESS WIRE)--April 22, 2004--Arrow
Electronics, Inc. (NYSE:ARW) today reported first quarter 2004 net
income of $29.5 million ($.28 and $.27 per share on a basic and
diluted basis, respectively) on sales of $2.68 billion, compared with
a net loss of $.9 million ($.01 per share) on sales of $1.98 billion
in the first quarter of 2003. The company's results for the first
quarter of 2004 and 2003 include a number of items outlined below that
impact their comparability. A reconciliation of these items is
provided under the heading "Certain Non-GAAP Financial Information."
Excluding those items, net income for the quarter ended March 31, 2004
would have been $50.2 million ($.47 and $.44 per share on a basic and
diluted basis, respectively) and net income for the quarter ended
March 31, 2003 would have been $10.1 million ($.10 per share).
Consolidated operating income of $106.6 million, excluding the
items impacting comparability, was up 30% sequentially and up 120%
over last year's first quarter, marking the sixth consecutive
sequential increase and the fifth consecutive quarterly year-on-year
increase. Operating income as a percentage of sales, excluding the
previously mentioned items, increased by 70 basis points sequentially
and 160 basis points year-on-year, marking the fourth consecutive
increase for both.
"The first quarter was very strong with exceptional year-on-year
sales growth of over 40% in our components businesses in North America
and Asia/Pacific and in our North American computer products
business," said William E. Mitchell, President and Chief Executive
Officer of Arrow. "For the sixth consecutive quarter, growth in
operating income outpaced the growth in sales."
During the first quarter, the company took actions to further
strengthen its balance sheet. In February 2004 the company issued 13.8
million shares of common stock with net proceeds of approximately $313
million. The proceeds were used to redeem the company's outstanding
8.7% senior notes due in October 2005 (principal amount $208.5
million) and to repurchase a portion of the company's outstanding zero
coupon convertible debentures due in 2021, which could have initially
been put to the company in February 2006. These actions have reduced
the company's leverage and will reduce interest expense by more than
$16.5 million annually.
Worldwide components sales of $2.03 billion were up 15% from $1.78
billion in the December quarter and up 36% from $1.49 billion in last
year's first quarter. Operating income as a percentage of sales was
5.4%, up 140 basis points sequentially and 210 basis points from last
year's first quarter.
"Our continued customer focus and increased operating
efficiencies, combined with improvement in the market, has enabled us
to deliver exceptional results," said Mr. Mitchell. "Sales were at
record first quarter levels in the Asia/Pacific region and sales and
operating income were at their highest levels since the first quarter
of 2001 in North America and Europe," said Mr. Mitchell. "Sales in the
North American Components group were up 44% over last year. Operating
income, both in dollars and as a percentage of sales, was at its
highest levels in eleven quarters with operating income dollars up
more than fourfold from last year."
Arrow's European sales increased by 21% sequentially and 20%
year-over-year, with operating income dollars up 68% from the December
quarter. "We grew sales sequentially across the region with the
strongest growth coming from Germany, Italy, and the United Kingdom.
Like our North American business, we are well positioned to leverage
our operating structure to drive growth in operating income at a
faster pace than our growth in sales," stated Mr. Mitchell.
Sales in the Asia/Pacific region increased by 8% over the fourth
quarter, and by 50% from last year. "Our ability to grow our business
at a healthy rate validates that our execution on our strategic
initiatives is paying off," said Mr. Mitchell. "Asia/Pacific continues
to be an area of focus and we remain committed to investing in this
region."
Worldwide computer products sales totaled $642 million, down 9%
from the seasonally strong fourth quarter and up 31% over last year.
Operating income as a percentage of sales declined 110 basis points
from the record fourth quarter and were flat with last year.
"Our North American Computer Products businesses had a very strong
quarter with sales up more than 40% over last year's first quarter.
Sequentially, the sales decline of 10% was at the low end of the
historical range," said Mr. Mitchell. "Operating income dollars were
at record first quarter levels in this business and we recorded our
11th consecutive quarter of year-over-year earnings growth."
The company's results for the first quarter of 2004 and 2003
include a number of items outlined below that impact their
comparability:
-- During the first quarter, the company announced a series of
additional steps to make its organizational structure even
more efficient, the net result of which reduced its cost
structure by an additional $15 million annually. Approximately
50% of this annual cost savings was achieved in the first
quarter, with the remaining 50% to begin late in the second
quarter of 2004. The estimated restructuring charges
associated with these actions total approximately $4.5
million, of which $3.4 million ($2.2 million net of taxes or
$.02 and $.01 per share on a basic and diluted basis,
respectively) was recorded in the first quarter. The company
will record the balance of approximately $1.1 million over the
next several quarters.
-- In January, the company repurchased through a series of
transactions $41.5 million principal amount of its 8.7% senior
notes, due in October 2005. In March, the company redeemed the
remaining outstanding $208.5 million principal amount of these
same notes. The premium paid and the related deferred
financing costs written-off upon the repurchase of this debt,
net of the gain recognized by terminating the related interest
rate swaps, aggregated approximately $18.9 million ($11.3
million net of taxes or $.10 and $.09 per share on a basic and
diluted basis, respectively).
-- During the quarter, the company repurchased an additional
$91.9 million accreted value of its zero coupon convertible
debentures due in 2021, which could have been initially put to
the company in February 2006. The related loss on the
repurchase, including the premium paid and the write-off of
related deferred financing costs, was approximately $4.8
million ($2.9 million net of taxes or $.03 per share).
-- Throughout 2003, the company implemented actions to become
more effectively organized and to improve its operating
efficiencies, with annual savings of $75 million. The
restructuring charges associated with these actions total
approximately $43.4 million, of which $38.0 million ($27.1
million net of taxes or $.27 per share) was recorded in 2003.
The remaining $5.4 million ($4.3 million net of taxes or $.04
per share) was recorded in the first quarter of 2004. The
first quarter 2003 charge associated with these actions
totaled $6.7 million ($4.7 million net of taxes or $.05 per
share).
-- Included in the first quarter of 2003 was a charge of $6.9
million ($4.8 million net of taxes or $.05 per share)
associated with the acquisition and integration of the
Industrial Electronics Distribution business of Agilysys, Inc.
at the end of February 2003.
-- During the first quarter of 2003, the company repurchased
$70.3 million of its 8.2% notes due in the fourth quarter of
2003. The premium paid, along with the write-off of related
deferred issuance costs, resulted in a charge of $2.6 million
($1.5 million net of taxes or $.01 per share).
"I am extremely pleased with the performance of each of our
operating groups and the results we delivered in the first quarter,"
said Mr. Mitchell. "Overall, customers are beginning to place a
greater percentage of scheduled orders. Lead times, while extended in
certain product sets, remain generally within 'normal ranges.' With
the macroeconomic environment continuing to show strength in North
America and Asia/Pacific and with the European economy stabilizing, we
are well positioned to continue to drive improving sales and operating
income levels," he added.
"Several years ago the company stopped giving numerical guidance
because visibility was very limited. Visibility has improved and,
based upon all of the information known to us today, we expect second
quarter revenues to be between $2.70 billion and $2.825 billion with
earnings per share on a basic basis, excluding charges, in the range
of $.47 to $.52 per share," said Mr. Mitchell. The company noted that
the dilutive impact of the equity issued at the end of February will
be $.02 per share greater in the second quarter as the shares will be
outstanding for the entire period. "We intend to provide quarterly
numerical guidance going forward so long as visibility into the
business does not deteriorate," he added.
"We remain committed to meeting the needs of our suppliers and
customers and to continuous process improvement to our structure,
processes, and procedures. As always, we also remain committed to
delivering value to our shareholders," said Mr. Mitchell.
Arrow Electronics is a major global provider of products,
services, and solutions to industrial and commercial users of
electronic components and computer products. Headquartered in
Melville, New York, Arrow serves as a supply channel partner for more
than 600 suppliers and 150,000 original equipment manufacturers,
contract manufacturers, and commercial customers through a global
network of more than 200 locations in 41 countries and territories.
Certain Non-GAAP Financial Information
In addition to disclosing results that are determined in
accordance with Generally Accepted Accounting Principles (GAAP), the
company provides certain non-GAAP financial information relating to
operating income, net income and net income per basic and diluted
share, each as adjusted for certain charges and losses that the
company believes impact the comparability of its results of
operations. These charges and losses arise out of the company's
acquisitions of other companies, the company's efficiency enhancement
initiatives, and the prepayment of debt. Reconciliations of the
company's non-GAAP financial information to GAAP are set forth in the
table below.
The company believes that such non-GAAP financial information is
useful to investors to assist in assessing and understanding the
company's operating performance and underlying trends in the company's
business because management considers the charges and losses referred
to above to be outside the company's core operating results. This
non-GAAP financial information is among the primary indicators
management uses as a basis for evaluating the company's financial and
operating performance. In addition, the company's Board of Directors
uses this non-GAAP financial information in evaluating management
performance and setting management compensation.
The presentation of this additional non-GAAP financial information
is not meant to be considered in isolation or as a substitute for, or
alternative to, operating income, net income (loss) and net income
(loss) per basic and diluted share determined in accordance with GAAP.
Analysis of results and outlook on a non-GAAP basis should be used as
a complement to, and in conjunction with, data presented in accordance
with GAAP.
ARROW ELECTRONICS, INC.
EARNINGS RECONCILIATION
(In thousands except per share data)
Three Months Ended
March 31,
------------------
2004 2003
--------- --------
Operating income, as reported $97,763 $34,775
Restructuring charges 8,818 6,690
Integration charge - 6,904
--------- --------
Operating income, as adjusted $106,581 $48,369
========= ========
Net income (loss), as reported $29,525 $ (905)
Restructuring charges 6,495 4,673
Integration charge - 4,822
Loss on prepayment of debt 14,191 1,526
--------- --------
Net income, as adjusted $50,211 $10,116
========= ========
Net income (loss) per basic share, as reported $.28 $(.01)
Restructuring charges .06 .05
Integration charge - .05
Loss on prepayment of debt .13 .01
--------- --------
Net income per basic share, as adjusted $.47 $.10
========= ========
Net income (loss) per diluted share, as reported $.27 $(.01)
Restructuring charges .05 .05
Integration charge - .05
Loss on prepayment of debt .12 .01
--------- --------
Net income per diluted share, as adjusted $.44 $.10
========= ========
Safe Harbor
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 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, the effects of additional actions taken to lower
costs, the ability of the company to generate additional cash flow 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 and Quarterly Reports on Form 10-Q).
Forward-looking statements are those statements, which are not
statements of historical fact. You can identify these forward-looking
statements by forward-looking words such as "expects," "anticipates,"
"intends," "plans," "may," "will," "believes," "seeks," "estimates,"
and similar expressions. Shareholders and other readers are cautioned
not to place undue reliance on these forward-looking statements, which
speak only as of the date on which they are made. The company
undertakes no obligation to update publicly or revise any
forward-looking statements.
ARROW ELECTRONICS, INC.
CONSOLIDATED STATEMENT OF OPERATIONS
(In thousands except per share data)
Three Months Ended
March 31,
-----------------------
2004 2003
----------- -----------
Sales $2,675,458 $1,980,105
----------- -----------
Costs and expenses:
Cost of products sold 2,252,238 1,645,048
Selling, general and administrative
expenses 298,422 269,776
Depreciation and amortization 18,217 16,912
Restructuring charges 8,818 6,690
Integration charge - 6,904
----------- -----------
2,577,695 1,945,330
----------- -----------
Operating income 97,763 34,775
Equity in earnings of affiliated companies 445 315
Loss on prepayment of debt 23,730 2,552
Interest expense, net 30,720 33,296
----------- -----------
Income (loss) before income taxes
and minority interest 43,758 (758)
Provision for income taxes 14,082 45
----------- -----------
Income (loss) before minority interest 29,676 (803)
Minority interest 151 102
----------- -----------
Net income (loss) $29,525 $(905)
=========== ===========
Net income (loss) per share:
Basic $.28 $(.01)
=========== ===========
Diluted $.27 $(.01)
=========== ===========
Average number of shares outstanding:
Basic 106,753 99,902
Diluted 121,666 99,902
This interim report is subject to independent audit at year-end.
ARROW ELECTRONICS, INC.
CONSOLIDATED BALANCE SHEET
(In thousands)
March 31, December 31,
2004 2003
---------- ------------
Assets
Current assets:
Cash and short-term investments $ 419,586 $ 612,404
Accounts receivable, net 1,867,915 1,770,690
Inventories 1,409,828 1,327,523
Prepaid expenses and other assets 59,708 59,030
----------- -----------
Total current assets 3,757,037 3,769,647
Property, plant and equipment, net 276,101 288,129
Investments in affiliated companies 36,306 36,738
Cost in excess of net assets of
companies acquired 908,124 923,256
Other assets 308,035 315,218
----------- -----------
$5,285,603 $5,332,988
=========== ===========
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable $1,230,864 $1,211,724
Accrued expenses 385,298 414,551
Short-term borrowings 16,493 14,349
----------- -----------
Total current liabilities 1,632,655 1,640,624
Long-term debt 1,673,017 2,016,627
Other liabilities 165,048 170,406
Shareholders' equity 1,814,883 1,505,331
----------- -----------
$5,285,603 $5,332,988
=========== ===========
This interim report is subject to independent audit at year-end.
ARROW ELECTRONICS, INC.
SEGMENT INFORMATION
(In thousands)
Three Months Ended
March 31,
-----------------------
2004 (A) 2003 (B)
----------- -----------
Sales:
Components $2,033,853 $1,490,291
Computer products 641,605 489,814
----------- -----------
Consolidated $2,675,458 $1,980,105
=========== ===========
Operating income:
Components $110,440 $49,535
Computer products 20,618 15,616
Corporate (33,295) (30,376)
----------- -----------
Consolidated $97,763 $34,775
=========== ===========
(A) Includes a restructuring charge of $8.8 million.
(B) Includes a restructuring charge of $6.7 million and an integration
charge of $6.9 million.
This interim report is subject to independent audit at year-end.
CONTACT: Arrow Electronics
Eileen M. O'Connor
Vice President, Investor Relations
631-847-5740
or
Paul J. Reilly
Vice President and Chief Financial Officer
631-847-1872