Exhibit 99.1
Arrow Electronics' Fourth Quarter Net Income Advances 83% over Prior Year
----Sales Rise 12%----
MELVILLE, N.Y.--(BUSINESS WIRE)--Feb. 22, 2005--Arrow Electronics,
Inc. (NYSE:ARW) today reported fourth quarter 2004 net income of $47.7
million ($.41 and $.40 per share on a basic and diluted basis,
respectively) on sales of $2.72 billion, compared with net income of
$26.0 million ($.26 per share) on sales of $2.43 billion in the fourth
quarter of 2003. "Our ongoing commitment to operational excellence and
continuous process improvement drove a nearly doubling of net income
when compared to last year's fourth quarter," said William E.
Mitchell, President and Chief Executive Officer of Arrow, "with cash
flow from operations in excess of $270 million."
The company's results for the fourth quarters 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 December 31, 2004 would have
been $59.9 million ($.52 and $.50 per share on a basic and diluted
basis, respectively) and net income for the quarter ended December 31,
2003 would have been $32.6 million ($.33 and $.31 per share on a basic
and diluted basis, respectively).
The company announced that, based upon an evaluation of its
business and accounting practices, it had determined that revenue
related to the sale of service contracts should more appropriately be
classified on an agency basis rather than a gross basis. While this
change reduces reported sales and cost of sales, it has no impact on
gross profit, operating income, net income, cash flow or the balance
sheet. All prior period sales and cost of sales have been reclassified
to present the revenue related to the sale of service contracts on an
agency basis. Sales and cost of sales for the three months and year
ended December 31, 2003 have been reduced by $47.3 million and $151.0
million, respectively. Sales and cost of sales for the nine months
ended September 30, 2004 have been reduced by $171.0 million.
Consolidated fourth quarter 2004 operating income of $109.7
million, excluding the items impacting comparability, was up 34% over
last year's fourth quarter, marking the eighth consecutive quarterly
year-over-year increase. Operating income as a percentage of sales,
excluding the previously mentioned items, increased 60 basis points
year-over-year, marking the seventh consecutive year-over-year
increase. Sequentially, operating income increased 3.7% and operating
income as a percentage of sales was flat.
Worldwide components sales advanced 12% to $2.0 billion when
compared with sales of $1.8 billion in last year's fourth quarter with
operating income as a percentage of sales of 4.6% up 60 basis points
from last year. Component sales advanced by 2% in North America, 12%
in Europe in local currencies, and 26% in Asia/Pacific.
"Our components businesses continue to deliver very solid results
in a cautious marketplace," said Mr. Mitchell. "Each of these
businesses posted strong levels of profitability and cash flow
generation."
Worldwide computer products sales advanced nearly 12% to $733
million and operating income as a percentage of sales was 5.7%, a 110
basis point improvement over last year's fourth quarter. "Our North
American Computer Products group posted strong year-over-year earnings
growth for the 14th consecutive quarter," added Mr. Mitchell.
The company's results for the fourth quarter of 2004 and 2003
include the items outlined below that impact their comparability:
-- During the fourth quarter of 2004, the company repurchased an
additional $66.4 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 $2.3
million ($1.3 million net of related taxes or $.01 per share).
-- During the fourth quarter of 2004, the company recorded
restructuring charges of $3.4 million ($2.2 million net of
related taxes or $.02 per share). During the fourth quarter of
2003 the company had recorded restructuring charges of $7.6
million ($6.4 million net of related taxes or $.07 and $.05
per share on a basic and diluted basis, respectively).
-- During the fourth quarter of 2004, the company exited several
vacated facilities arising from past acquisitions at costs
less than originally estimated. Accordingly, the company
recorded an integration credit of $2.3 million ($1.4 million
net of related taxes or $.01 per share).
-- The company recorded an impairment charge related to cost in
excess of net assets of companies acquired of $10.0 million
($.09 and $.08 per share on a basic and diluted basis,
respectively) in the fourth quarter of 2004. This non-cash
charge principally relates to the company's operations in
Latin America.
The company announced that it has taken additional actions to
further reduce costs by approximately $50 million on an annual basis
with $40 million to be realized in 2005. "We have undertaken several
actions to better optimize the use of our mainframe, reduce real
estate costs, be more efficient in our distribution centers, and
further improve processes enabling our employees to be more
productive," said Mr. Mitchell. "We remain committed to being
best-in-class in all that we do." The company estimates the
restructuring charges associated with these actions to be
approximately $7.5 million, all of which is expected to be spent in
2005.
"Our drive for operational efficiencies and customer focused
strategies continue to deliver solid financial results," said Mr.
Mitchell. "Yet the markets we serve remain cautious with limited
visibility into the future. We fully expect to see normal seasonality
in the first quarter with our components business in North America and
Europe posting sequential increases in sales as a result of an
increase in the number of shipping days over the December quarter. And
we expect our computer products business to experience its traditional
seasonal decline."
"Based upon the information known to us today we expect first
quarter revenues to be between $2.73 billion and $2.83 billion.
Earnings per share on a diluted basis are estimated to be between $.52
and $.56 per share, excluding charges," added Mr. Mitchell.
Full Year Results
Arrow's net income for 2004 was $207.5 million ($1.83 and $1.75
per share on a basic and diluted basis, respectively) on sales of
$10.65 billion, compared with net income of $25.7 million ($.26 and
$.25 per share on a basic and diluted basis, respectively) on sales of
$8.53 billion in 2003.
Net income for 2004 included restructuring charges totaling $11.4
million ($6.9 million net of related taxes or $.07 and $.06 per share
on a basic and diluted basis, respectively), a charge of $33.9 million
($20.3 million net of related taxes or $.18 and $.16 per share on a
basic and diluted basis, respectively) associated with the prepayment
of $570 million of the company's debt, a loss on an investment of $1.3
million ($.01 per share), the aforementioned integration credit of
$2.3 million ($1.4 million net of related taxes or $.01 per share),
the aforementioned impairment charge of $10.0 million ($.09 and $.08
per share on a basic and diluted basis, respectively), and an
acquisition indemnification credit of $9.7 million ($.09 and $.08 per
share on a basic and diluted basis, respectively) associated with the
settlement of a value-added tax claim against a French subsidiary
relating to periods before Arrow owned the company.
Net income for 2003 includes restructuring charges of $38.0
million ($27.1 million net of taxes or $.27 per share), an acquisition
indemnification charge of $13.0 million ($.13 per share) related to
the aforementioned claim against a French subsidiary, an integration
charge of $6.9 million ($4.8 million net of taxes or $.05 per share)
related to the acquisition and integration of the IED business of
Agilysys, Inc., and a charge of $6.6 million ($3.9 million net of
taxes or $.04 per share) related to the repurchase of $253.8 million
of the company's debt.
Excluding the aforementioned items, net income would have been
$235.0 million ($2.08 and $1.97 per share on a basic and diluted
basis, respectively) in 2004 compared to net income of $74.6 million
($.75 and $.74 per share on a basic and diluted basis, respectively)
for 2003.
"We have accomplished much over the past year. Earnings grew at a
faster pace than sales. Our ongoing focus on operational efficiency
and effectiveness has positioned us to better serve our customers and
suppliers at a lower cost. And we strengthened our balance sheet
through better management of working capital, our equity offering
earlier in the year, and prepaying $570 million of debt. We remain
committed to creating value for 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
nearly 600 suppliers and 150,000 original equipment manufacturers,
contract manufacturers, and commercial customers through a global
network of more than 200 locations in 53 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, credits, and losses that
the company believes impact the comparability of its results of
operations. These charges, credits, and losses arise out of the
company's acquisitions of other companies, the sale of property,
impairment charges, 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, credits, 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 Year Ended
December 31, December 31,
------------------ -------------------
2004 2003 2004 2003
--------- -------- --------- ---------
Operating income, as reported $98,595 $74,231 $439,338 $184,045
Acquisition indemnification
charge (credit) - - (9,676) 13,002
Restructuring charges 3,407 7,623 11,391 37,965
Integration charge (credit) (2,323) - (2,323) 6,904
Impairment charge 9,995 - 9,995 -
--------- -------- --------- ---------
Operating income, as adjusted $109,674 $81,854 $448,725 $241,916
========= ======== ========= =========
Net income, as reported $47,723 $26,012 $207,504 $25,700
Acquisition indemnification
charge (credit) - - (9,676) 13,002
Restructuring charges 2,187 6,412 6,943 27,144
Integration charge (credit) (1,389) - (1,389) 4,822
Impairment charge 9,995 - 9,995 -
Loss on prepayment of debt 1,345 202 20,297 3,930
Loss on investment - - 1,318 -
--------- -------- --------- ---------
Net income, as adjusted $59,861 $32,626 $234,992 $74,598
========= ======== ========= =========
Net income per basic share,
as reported $.41 $.26 $1.83 $.26
Acquisition indemnification
charge (credit) - - (.09) .13
Restructuring charges .02 .07 .07 .27
Integration charge (credit) (.01) - (.01) .05
Impairment charge .09 - .09 -
Loss on prepayment of debt .01 - .18 .04
Loss on investment - - .01 -
--------- -------- --------- ---------
Net income per basic share,
as adjusted $.52 $.33 $2.08 $.75
========= ======== ========= =========
Net income per diluted share,
as reported* $.40 $.26 $1.75 $.25
Acquisition indemnification
charge (credit) - - (.08) .13
Restructuring charges .02 .05 .06 .27
Integration charge (credit) (.01) - (.01) .05
Impairment charge .08 - .08 -
Loss on prepayment of debt .01 - .16 .04
Loss on investment - - .01 -
--------- -------- --------- ---------
Net income per diluted share,
as adjusted** $.50 $.31 $1.97 $.74
========= ======== ========= =========
* In computing net income per diluted share for the three months and
year ended December 31, 2004, net income was increased by $2,014
and $10,063, respectively, for interest (net of taxes) related to
the zero coupon convertible debentures ("convertible debentures")
which are dilutive common stock equivalents. In addition, the
diluted weighted average number of shares outstanding for the
three months and year ended December 31, 2004 includes 7,744
shares and 9,857 shares, respectively, related to the convertible
debentures.
** In computing net income per diluted share for the three months
ended December 31, 2003, net income was increased by $3,675 for
interest (net of taxes) related to the convertible debentures
which are dilutive common stock equivalents. In addition, the
diluted weighted average number of shares outstanding for the
three months ended December 31, 2003 includes 14,252 shares
related to the 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, including statements addressing
future financial results, 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
electronic components and computer products 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 Year Ended
December 31, December 31,
----------------------- ------------------------
2004 2003 2004 2003
----------- ----------- ------------ -----------
Sales $2,722,722 $2,433,523 $10,646,113 $8,528,331
----------- ----------- ------------ -----------
Costs and expenses:
Cost of products
sold 2,293,988 2,046,295 8,922,962 7,107,378
Selling, general and
administrative
expenses 306,276 288,998 1,213,547 1,112,192
Depreciation and
amortization 12,784 16,376 60,879 66,845
Acquisition
indemnification
charge (credit) - - (9,676) 13,002
Restructuring
charges 3,407 7,623 11,391 37,965
Integration charge
(credit) (2,323) - (2,323) 6,904
Impairment charge 9,995 - 9,995 -
----------- ----------- ------------ -----------
2,624,127 2,359,292 10,206,775 8,344,286
----------- ----------- ------------ -----------
Operating income 98,595 74,231 439,338 184,045
Equity in earnings of
affiliated companies 1,194 1,661 4,106 4,797
Loss on prepayment of
debt 2,250 337 33,942 6,571
Loss on investment - - 1,318 -
Interest expense, net 23,638 33,620 103,201 134,987
----------- ----------- ------------ -----------
Income before income
taxes
and minority
interest 73,901 41,935 304,983 47,284
Provision for income
taxes 25,962 15,620 96,436 21,206
----------- ----------- ------------ -----------
Income before minority
interest 47,939 26,315 208,547 26,078
Minority interest 216 303 1,043 378
----------- ----------- ------------ -----------
Net income $47,723 $26,012 $207,504 $25,700
=========== =========== ============ ===========
Net income per share:
Basic $.41 $.26 $1.83 $.26
=========== =========== ============ ===========
Diluted $.40 $.26 $1.75 $.25
=========== =========== ============ ===========
Average number of
shares
outstanding:
Basic 115,576 100,329 113,109 100,142
Diluted 124,639 101,587 124,561 100,917
ARROW ELECTRONICS, INC.
CONSOLIDATED BALANCE SHEET
(In thousands)
December 31, December 31,
2004 2003
----------- ------------
Assets
- ------
Current assets:
Cash and short-term investments $463,894 $612,404
Accounts receivable, net 1,984,122 1,770,690
Inventories 1,486,478 1,327,523
Prepaid expenses and other assets 93,039 106,853
----------- -----------
Total current assets 4,027,533 3,817,470
Property, plant and equipment, net 262,983 288,129
Investments in affiliated companies 34,302 31,210
Cost in excess of net assets of
companies acquired 974,285 923,256
Other assets 209,998 283,625
----------- -----------
Total assets $5,509,101 $5,343,690
=========== ===========
Liabilities and Shareholders' Equity
- ------------------------------------
Current liabilities:
Accounts payable $1,261,971 $1,211,724
Accrued expenses 395,955 425,253
Short-term borrowings 8,462 14,349
----------- -----------
Total current liabilities 1,666,388 1,651,326
Long-term debt 1,465,880 2,016,627
Other liabilities 182,647 170,406
Shareholders' equity 2,194,186 1,505,331
----------- -----------
Total liabilities and
shareholders' equity $5,509,101 $5,343,690
=========== ===========
ARROW ELECTRONICS, INC.
SEGMENT INFORMATION
(In thousands)
Three Months Ended Year Ended
December 31, December 31,
----------------------- ------------------------
2004(A) 2003(B) 2004(C) 2003(D)
----------- ----------- ------------ -----------
Sales:
Components $1,989,734 $1,776,111 $8,058,541 $6,419,537
Computer products 732,988 657,412 2,587,572 2,108,794
----------- ----------- ------------ -----------
Consolidated $2,722,722 $2,433,523 $10,646,113 $8,528,331
=========== =========== ============ ===========
Operating income:
Components $90,640 $71,379 $419,380 $237,930
Computer products 42,004 30,540 125,234 78,180
Corporate (34,049) (27,688) (105,276) (132,065)
----------- ----------- ------------ -----------
Consolidated $98,595 $74,231 $439,338 $184,045
=========== =========== ============ ===========
(A) Includes a restructuring charge of $3.4 million, an integration
credit of $2.3 million, and an impairment charge of $10.0 million.
(B) Includes a restructuring charge of $7.6 million.
(C) Includes an acquisition indemnification credit of $9.7 million,
restructuring charges of $11.4 million, an integration credit of
$2.3 million, and an impairment charge of $10.0 million.
(D) Includes an acquisition indemnification charge of $13.0 million,
restructuring charges of $38.0 million, and an integration charge
of $6.9 million.
CONTACT: Arrow Electronics, Inc.
Ira M. Birns
Vice President and Treasurer
631-847-1657
Paul J. Reilly
Vice President and Chief Financial Officer
631-847-1872
or
Media:
Jacqueline F. Strayer
Vice President, Corporate Communications
631-847-2101