Exhibit 99.1
Arrow Electronics Announces Sales and Earnings at Highest Level in 3
Years
MELVILLE, N.Y.--(BUSINESS WIRE)--July 22, 2004--Arrow Electronics,
Inc. (NYSE:ARW) today reported second quarter 2004 net income of $66.9
million ($.58 and $.55 per share on a basic and diluted basis,
respectively) on sales of $2.75 billion, compared with net income of
$6.8 million ($.07 per share) on sales of $2.12 billion in the second
quarter of 2003. The company's results 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
June 30, 2004 would have been $69.2 million ($.60 and $.57 per share
on a basic and diluted basis, respectively) and net income for the
quarter ended June 30, 2003 would have been $16.8 million ($.17 per
share).
Consolidated second quarter 2004 operating income of $126.7
million, excluding the items impacting comparability, was up 19%
sequentially and up 129% over last year's second quarter, marking the
seventh consecutive sequential increase and the sixth consecutive
quarterly year-on-year increase. Operating income as a percentage of
sales, excluding the previously mentioned items, increased by 60 basis
points sequentially and 200 basis points year-on-year, marking the
fifth consecutive increase for both.
"The second quarter was very strong with year-on-year sales growth
in our components businesses of over 28% in North America, 21% in
Europe in local currencies, and 46% in Asia/Pacific," said William E.
Mitchell, President and Chief Executive Officer of Arrow, "and our
North American computer products business grew 25% year-on-year on an
adjusted basis."
Worldwide components sales of $2.04 billion were up approximately
1% from $2.03 billion in the March quarter and up 30% from $1.57
billion in last year's second quarter. Operating income as a
percentage of sales was 5.9%, up 50 basis points sequentially and up
240 basis points from last year's second quarter.
"Successful execution of our customer-focused strategies combined
with increased operating efficiencies has enabled us to continue to
deliver exceptional results," said Mr. Mitchell. "Sales in the North
American Components group were up 28% over last year, with operating
income dollars up 177%. Operating income, both in dollars and as a
percentage of sales, was at its highest levels in twelve quarters,"
added Mr. Mitchell.
Arrow's European sales decreased 1% sequentially, yet operating
income was up 18% in local currencies. Compared with last year, sales
were up 15%, with operating income nearly doubling in local
currencies. "Our businesses in Europe continue to post strong
results," said Mr. Mitchell, "and while sales were down on a
sequential basis due in part to fewer shipping days in the second
quarter, the seasonal decline in our business was much less than what
we have seen in the past several years."
Sales in the Asia/Pacific region increased 9% over the first
quarter, and 46% from last year. "We have clearly stated that the
Asia/Pacific region is a priority for us, and our execution of our
customized strategies is enabling us to continue to grow at a
significant pace," said Mr. Mitchell.
Worldwide computer products sales totaled $706.9 million, up 10%
from the first quarter and up 29% over last year. Operating income as
a percentage of sales was 4.5%, up 130 basis points sequentially and
up 110 basis points over last year's second quarter.
"Our North American Computer Products business posted record
results with sales up 10% on an adjusted basis sequentially and up 25%
on an adjusted basis from last year's second quarter." added Mr.
Mitchell. "This marked our 12th consecutive quarter of year-over-year
earnings growth."
The company's results for the second quarter of 2004 and 2003
include the items outlined below that impact their comparability:
-- During the second quarter of 2004, the company repurchased an
additional $141.7 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, aggregated $7.1
million ($4.2 million net of taxes or $.04 and $.03 per share
on a basic and diluted basis, respectively).
-- During the second quarter of 2004, the company recorded a net
restructuring gain of $1.2 million ($1.9 million net of taxes
or $.02 and $.01 per share on a basic and diluted basis,
respectively). Included in this amount is a $2.9 million gain
on the sale of the Brookhaven, New York logistics center
offset, in part, primarily by personnel costs from previously
announced restructurings.
-- During the second quarter of 2003, the company repurchased
$14.6 million of its 8.2% senior notes scheduled to mature in
the fourth quarter of 2003. The related loss on the
repurchase, including the premium paid and the write-off of
related deferred financing costs, aggregated $.4 million ($.2
million net of taxes).
-- During the second quarter of 2003, the company recorded
restructuring charges of $14.6 million ($9.7 million net of
taxes or $.10 per share).
"I am extremely pleased with the performance of each of our
operating groups and the results we delivered in the second quarter,"
said Mr. Mitchell. "We are well positioned to continue to drive
improving sales and operating income levels," he added. "Based upon
all of the information known to us today, we expect third quarter
revenues to be between $2.60 billion and $2.70 billion - an increase
of 24% to 29% over last year's third quarter - with earnings per
share, excluding charges, in the range of $.45 to $.49 per share on a
diluted basis," said Mr. Mitchell.
Six-Month Results
Arrow's net income for the first six months of 2004 was $96.4
million ($.87 and $.82 per share on a basic and diluted basis,
respectively) on sales of $5.43 billion, compared with net income of
$5.9 million ($.06 per share) on sales of $4.10 billion in the first
six months of 2003.
Net income for the first six months of 2004 includes the
aforementioned net restructuring charges (gain) and the charge
associated with the loss on prepayment of debt. Additionally, during
the first quarter of 2004, restructuring charges of $8.8 million ($6.5
million net of taxes or $.06 and $.05 per share on a basic and diluted
basis, respectively) were recorded. Also, the company repurchased,
through a series of transactions, $250.0 million principal amount of
its 8.7% senior notes due in October 2005 and $91.9 million accreted
value of its zero coupon convertible debentures due in 2021. As a
result of these repurchases, a loss on prepayment of debt of $23.7
million ($14.2 million net of taxes or $.13 and $.12 per share on a
basic and diluted basis, respectively) was recorded in the first
quarter of 2004. Excluding these items, net income would have been
$119.4 million ($1.08 and $1.01 per share on a basic and diluted
basis, respectively) for the six months ended June 30, 2004.
Net income for the first six months of 2003 includes the
aforementioned charges as well as an integration charge of $6.9
million ($4.8 million net of taxes or $.05 per share) related to the
acquisition and integration of Pioneer-Standard's IED business, a
restructuring charge of $6.6 million ($4.7 million net of taxes or
$.05 per share), and a charge of $2.9 million ($1.8 million net of
taxes or $.02 per share) related to the repurchase of $84.8 million of
the company's 8.2% senior notes. Excluding these items, net income
would have been $26.9 million ($.27 per share).
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, gain, and losses that the
company believes impact the comparability of its results of
operations. These charges, gain, and losses arise out of the company's
acquisitions of other companies, the sale of property, 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, gain, 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 and net income per basic
and diluted share determined in accordance with GAAP. Analysis of
results and outlook on a non-GAAP basis should be used as a complement
to, and in conjunction with, data presented in accordance with GAAP.
ARROW ELECTRONICS, INC.
EARNINGS RECONCILIATION
(In thousands except per share data)
Three Months Ended Six Months Ended
June 30, June 30,
------------------ -------------------
2004 2003 2004 2003
--------- -------- --------- ---------
Operating income, as reported $127,933 $40,855 $225,696 $75,630
Restructuring charges (gain) (1,241) 14,552 7,577 21,242
Integration charge - - - 6,904
--------- -------- --------- ---------
Operating income, as adjusted $126,692 $55,407 $233,273 $103,776
========= ======== ========= =========
Net income, as reported $66,859 $6,827 $96,384 $5,922
Restructuring charges (gain) (1,914) 9,734 4,581 14,407
Integration charge - - - 4,822
Loss on prepayment of debt 4,216 233 18,407 1,759
--------- -------- --------- ---------
Net income, as adjusted $69,161 $16,794 $119,372 $26,910
========= ======== ========= =========
Net income per basic share,
as reported $.58 $.07 $.87 $.06
Restructuring charges (gain) (.02) .10 .04 .14
Integration charge - - - .05
Loss on prepayment of debt .04 - .17 .02
--------- -------- --------- ---------
Net income per basic share,
as adjusted $.60 $.17 $1.08 $.27
========= ======== ========= =========
Net income per diluted share,
as reported* $.55 $.07 $.82 $.06
Restructuring charges (gain) (.01) .10 .04 .14
Integration charge - - - .05
Loss on prepayment of debt .03 - .15 .02
--------- -------- --------- ---------
Net income per diluted share,
as adjusted* $.57 $.17 $1.01 $.27
========= ======== ========= =========
* In computing net income per diluted share for the three and six
months ended June 30, 2004, net income was increased by $2,536 and
$5,906, respectively, for interest (net of taxes) related to the
zero coupon convertible debentures which are dilutive common stock
equivalents. In addition, the diluted weighted average number of
shares outstanding for the three and six months ended June 30,
2004 includes 9,892 shares and 11,659 shares, respectively,
related to the zero coupon convertible debentures.
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 Six Months Ended
June 30, June 30,
----------------------- -----------------------
2004 2003 2004 2003
----------- ----------- ----------- -----------
Sales $2,750,236 $2,123,139 $5,425,694 $4,103,244
----------- ----------- ----------- -----------
Costs and expenses:
Cost of products sold 2,299,202 1,768,036 4,551,440 3,413,084
Selling, general and
administrative
expenses 307,534 281,651 605,956 551,427
Depreciation and
amortization 16,808 18,045 35,025 34,957
Restructuring charges
(gain) (1,241) 14,552 7,577 21,242
Integration charge - - - 6,904
----------- ----------- ----------- -----------
2,622,303 2,082,284 5,199,998 4,027,614
----------- ----------- ----------- -----------
Operating income 127,933 40,855 225,696 75,630
Equity in earnings of
affiliated companies 901 1,070 1,346 1,385
Loss on prepayment of debt 7,051 390 30,781 2,942
Interest expense, net 24,493 31,869 55,213 65,165
----------- ----------- ----------- -----------
Income before income taxes
and minority interest 97,290 9,666 141,048 8,908
Provision for income taxes 30,000 2,653 44,082 2,698
----------- ----------- ----------- -----------
Income before minority
interest 67,290 7,013 96,966 6,210
Minority interest 431 186 582 288
----------- ----------- ----------- -----------
Net income $66,859 $6,827 $96,384 $5,922
=========== =========== =========== ===========
Net income per share:
Basic $.58 $.07 $.87 $.06
=========== =========== =========== ===========
Diluted $.55 $.07 $.82 $.06
=========== =========== =========== ===========
Average number of
shares outstanding:
Basic 114,917 100,127 110,764 100,036
Diluted 126,698 100,980 124,198 100,744
This interim report is subject to independent audit at year-end.
ARROW ELECTRONICS, INC.
CONSOLIDATED BALANCE SHEET
(In thousands)
June 30, December 31,
2004 2003
-------------- ---------------
Assets
- ------
Current assets:
Cash and short-term investments $261,947 $612,404
Accounts receivable, net 2,008,812 1,770,690
Inventories 1,519,292 1,327,523
Prepaid expenses and other assets 62,708 59,030
-------------- ---------------
Total current assets 3,852,759 3,769,647
Property, plant and equipment, net 264,193 288,129
Investments in affiliated companies 37,957 36,738
Cost in excess of net assets of
companies acquired 924,172 923,256
Other assets 277,245 315,218
-------------- ---------------
Total assets $5,356,326 $5,332,988
============== ===============
Liabilities and Shareholders' Equity
- ------------------------------------
Current liabilities:
Accounts payable $1,308,172 $1,211,724
Accrued expenses 389,635 414,551
Short-term borrowings 13,136 14,349
-------------- ---------------
Total current liabilities 1,710,943 1,640,624
Long-term debt 1,539,047 2,016,627
Other liabilities 164,732 170,406
Shareholders' equity 1,941,604 1,505,331
-------------- ---------------
Total liabilities and
shareholders' equity $5,356,326 $5,332,988
============== ===============
This interim report is subject to independent audit at year-end.
ARROW ELECTRONICS, INC.
SEGMENT INFORMATION
(In thousands)
Three Months Ended Six Months Ended
June 30, June 30,
----------------------- -----------------------
2004(A) 2003(B) 2004(C) 2003(D)
----------- ----------- ----------- -----------
Sales:
Components $2,043,329 $1,574,148 $4,077,182 $3,064,439
Computer products 706,907 548,991 1,348,512 1,038,805
----------- ----------- ----------- -----------
Consolidated $2,750,236 $2,123,139 $5,425,694 $4,103,244
=========== =========== =========== ===========
Operating income:
Components $119,882 $55,214 $230,322 $104,749
Computer products 31,694 18,675 52,312 34,291
Corporate (23,643) (33,034) (56,938) (63,410)
----------- ----------- ----------- -----------
Consolidated $127,933 $40,855 $225,696 $75,630
=========== =========== =========== ===========
(A) Includes a net restructuring gain of $1.2 million.
(B) Includes a restructuring charge of $14.6 million.
(C) Includes net restructuring charges of $7.6 million.
(D) Includes restructuring charges of $21.2 million and an integration
charge of $6.9 million.
This interim report is subject to independent audit at year-end.
CONTACT: Arrow Electronics, Inc.
Eileen M. O'Connor
Vice President, Investor Relations
631-847-5740
or
Paul J. Reilly
Vice President and Chief Financial Officer
631-847-1872