Exhibit 99.1
Arrow Electronics Announces First Quarter Results; Cash Flow from Operations in
Excess of $150 Million
MELVILLE, N.Y.--(BUSINESS WIRE)--April 27, 2005--Arrow
Electronics, Inc. (NYSE:ARW) today reported first quarter 2005 net
income of $57.2 million ($.49 and $.47 per share on a basic and
diluted basis, respectively) on sales of $2.73 billion, compared with
net income of $29.5 million ($.28 and $.27 per share on a basic and
diluted basis, respectively) on sales of $2.63 billion in the first
quarter of 2004. Cash flow from operations in the first quarter of
2005 was $150.4 million compared to a use of cash of $122.3 million in
the first quarter of 2004. The company's results for the first quarter
of 2005 and 2004 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 April 1, 2005 would have been
$58.7 million ($.50 and $.49 per share on a basic and diluted basis,
respectively) and 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).
Consolidated operating income of $110.9 million, excluding the
items impacting comparability, posted its ninth consecutive quarterly
year-on-year increase. Operating income as a percentage of sales,
excluding the previously mentioned items, increased by 10 basis points
sequentially and was flat year-on-year. The company also noted that,
in connection with a review of payroll withholding tax relating to
non-salary benefit items in Germany, it had recorded a charge of
approximately $5.0 million ($3.4 million net of related taxes or $.03
per share) in operating expenses covering the years 2001 through 2004.
"Our initiatives to be better organized, lower our cost structure
and manage working capital more efficiently continue to drive
improving operating results," said William E. Mitchell, President and
Chief Executive Officer of Arrow. "Ongoing operating expenses,
excluding the impact of the July 2004 Disway acquisition and a
weakening dollar, were down $12 million and we generated over $150
million in cash flow from operations."
Worldwide components sales of $2.09 billion were up 5% from $1.99
billion in the fourth quarter and up 3% from $2.03 billion in last
year's first quarter. Operating income as a percentage of sales was
4.6%, flat sequentially and down 80 basis points from last year's
first quarter.
Worldwide computer products sales totaled $632 million, down 14%
from the seasonally strong fourth quarter and up 7% over last year.
Operating income as a percentage of sales declined 10 basis points
from the fourth quarter and was up 210 basis points over last year.
"Our North American Computer Products businesses' focus on
expanding its product offerings and outgrowing the market while
strictly managing costs has resulted in their 15th consecutive quarter
of year-on-year growth in operating income," said Mr. Mitchell.
The company's results for the first quarter of 2005 and 2004
include a number of items outlined below that impact their
comparability:
-- The company announced, during the first quarter of 2005, that
it would be taking additional actions to better optimize the
use of its mainframe, reduce real estate costs, be more
efficient in its distribution centers, and to be more
productive. These actions are expected to further reduce costs
by approximately $50 million on an annual basis with $40
million to be realized in 2005. Approximately $7 million of
the expected 2005 cost reduction was achieved in the first
quarter. The estimated charges associated with these actions
are expected to total approximately $7.5 million. In the first
quarter of 2005, approximately $4.1 million ($2.6 million net
of related taxes or $.02 per share) of these charges were
recorded. The company expects to record the balance of
approximately $3.4 million over the next several quarters.
-- During the first quarter of 2005, the company received EUR 1.5
million ($2.0 million) in full settlement of claims for
indemnification under the purchase agreement relating to the
acquisition of a French company in 2000. The net amount of the
settlement of $1.7 million ($1.3 million net of related taxes
or $.01 per share on a basic basis) has been recorded as an
acquisition indemnification credit.
-- During the first quarter of 2005, the company repurchased
$13.2 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 $355 thousand
($212 thousand net of related taxes).
-- During the first quarter of 2004, the company repurchased
$91.9 million accreted value of its zero coupon convertible
debentures. The related loss on the repurchase, including the
premium paid and the write-off of related deferred financing
costs, aggregated $4.8 million ($2.9 million net of related
taxes or $.03 per share). In January 2004, 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 2004, the company repurchased and/or 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 and/or
redemption of this debt, net of the gain recognized by
terminating the related interest rate swaps, aggregated $18.9
million ($11.3 million net of related taxes or $.10 and $.09
per share on a basic and diluted basis, respectively).
-- During the first quarter of 2004 and 2003, the company
announced a series of steps to improve its operating
efficiencies and to become more effectively organized
resulting in annualized savings in excess of $100 million.
During the first quarter of 2004, the company recorded related
charges of $8.8 million ($6.5 million net of related taxes or
$.06 and $.05 per share on a basic and diluted basis,
respectively).
"The components markets continue to send mixed signals. Lead times
are short, product is readily available, and customer ordering
patterns have remained relatively consistent for several quarters. Yet
in certain regions our components book-to-bill was at its highest
level in three quarters," said Paul J. Reilly, Chief Financial Officer
of Arrow. "We expect the fewer number of shipping days in the second
quarter to negatively impact our level of revenue in the coming
quarter. Based upon all of the information known to us today, we
expect second quarter revenues to be between $2.7 billion and $2.8
billion with earnings per share on a diluted basis, excluding charges,
in the range of $.49 to $.53 per share," said Mr. Reilly.
"We remain committed to our strategy of outperforming the market,
operational excellence and continuous process improvement, a
philosophy of shared leadership, and greater financial stability,"
said Mr. Mitchell, "and we continue to focus on creating greater
levels of value for our shareholders."
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 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 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.
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.
EARNINGS RECONCILIATION
(In thousands except per share data)
Three Months Ended
----------------------
April 1, March 31,
2005 2004
---------- ----------
Operating income, as reported $ 108,493 $ 97,763
Acquisition indemnification credit (1,672) -
Restructuring charges 4,038 8,818
---------- ----------
Operating income, as adjusted $ 110,859 $ 106,581
========== ==========
Net income, as reported $ 57,191 $ 29,525
Acquisition indemnification credit (1,267) -
Restructuring charges 2,533 6,495
Loss on prepayment of debt 212 14,191
---------- ----------
Net income, as adjusted $ 58,669 $ 50,211
========== ==========
Net income per basic share, as reported $ .49 $ .28
Acquisition indemnification credit (.01) -
Restructuring charges .02 .06
Loss on prepayment of debt - .13
---------- ----------
Net income per basic share, as adjusted $ .50 $ .47
========== ==========
Net income per diluted share, as reported(a) $ .47 $ .27
Restructuring charges .02 .05
Loss on prepayment of debt - .12
---------- ----------
Net income per diluted share, as adjusted $ .49 $ .44
========== ==========
(a) In computing net income per diluted share for the three months
ended April 1, 2005 and March 31, 2004, net income was increased
by $1,673 and $3,370, 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 ended April 1, 2005 and March 31,
2004 includes 6,508 shares and 13,389 shares, respectively,
related to the convertible debentures.
ARROW ELECTRONICS, INC.
CONSOLIDATED STATEMENT OF OPERATIONS
(In thousands except per share data)
Three Months Ended
----------------------
April 1, March 31,
2005 2004
---------- ----------
Sales $2,726,871 $2,625,958
---------- ----------
Costs and expenses:
Cost of products sold 2,294,642 2,202,738
Selling, general and administrative
expenses 306,798 298,422
Depreciation and amortization 14,572 18,217
Acquisition indemnification credit (1,672) -
Restructuring charges 4,038 8,818
---------- ----------
2,618,378 2,528,195
---------- ----------
Operating income 108,493 97,763
Equity in earnings of affiliated companies 1,078 445
Loss on prepayment of debt 355 23,730
Interest expense, net 24,100 30,720
---------- ----------
Income before income taxes and minority
interest 85,116 43,758
Provision for income taxes 27,744 14,082
---------- ----------
Income before minority interest 57,372 29,676
Minority interest 181 151
---------- ----------
Net income $ 57,191 $ 29,525
========== ==========
Net income per share:
Basic $ .49 $ .28
========== ==========
Diluted $ .47 $ .27
========== ==========
Average number of shares outstanding:
Basic 116,212 106,753
Diluted 124,027 121,666
This interim report is subject to independent audit at year-end.
ARROW ELECTRONICS, INC.
CONSOLIDATED BALANCE SHEET
(In thousands)
April 1, December 31,
2005 2004
---------- ----------
ASSETS
Current assets:
Cash and cash equivalents $ 612,988 $ 305,294
Short-term investments - 158,600
---------- ----------
Total cash and short-term investments 612,988 463,894
Accounts receivable, net 2,009,229 1,984,122
Inventories 1,410,959 1,486,478
Prepaid expenses and other assets 109,338 93,039
---------- ----------
Total current assets 4,142,514 4,027,533
---------- ----------
Property, plant and equipment at cost:
Land 40,228 40,340
Buildings and improvements 183,071 184,344
Machinery and equipment 418,462 418,721
---------- ----------
641,761 643,405
Less: accumulated depreciation and
amortization (390,053) (380,422)
---------- ----------
Property, plant and equipment, net 251,708 262,983
---------- ----------
Investments in affiliated companies 36,607 34,302
Cost in excess of net assets of companies
acquired 952,980 974,285
Other assets 195,222 209,998
---------- ----------
Total assets $5,579,031 $5,509,101
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $1,338,883 $1,261,971
Accrued expenses 411,311 395,955
Short-term borrowings, including current
portion of long-term debt 301,170 8,462
---------- ----------
Total current liabilities 2,051,364 1,666,388
---------- ----------
Long-term debt 1,154,565 1,465,880
Other liabilities 181,920 182,647
Shareholders' equity:
Common stock, par value $1:
Authorized - 160,000 shares in 2005 and
2004
Issued - 117,675 shares in 2005 and 2004 117,675 117,675
Capital in excess of par value 796,207 797,828
Retained earnings 1,202,997 1,145,806
Foreign currency translation adjustment 113,938 190,595
---------- ----------
2,230,817 2,251,904
Less: Treasury stock (783 and 1,374
shares in 2005 and 2004,
respectively), at cost (20,938) (36,735)
Unamortized employee stock awards (3,290) (3,738)
Other (15,407) (17,245)
---------- ----------
Total shareholders' equity 2,191,182 2,194,186
---------- ----------
Total liabilities and shareholders'
equity $5,579,031 $5,509,101
========== ==========
This interim report is subject to independent audit at year-end.
ARROW ELECTRONICS, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(In thousands)
Three Months Ended
----------------------
April 1, March 31,
2005 2004
---------- ----------
Cash flows from operating activities:
Net income $ 57,191 $ 29,525
---------- ----------
Adjustments to reconcile net income to net
cash provided by (used for) operations:
Minority interest 181 151
Depreciation and amortization 15,544 19,820
Accretion of discount on convertible
debentures 2,797 5,636
Equity in earnings of affiliated
companies (1,078) (445)
Deferred income taxes (985) 2,793
Acquisition indemnification credit, net
of taxes (1,267) -
Restructuring charges, net of taxes 2,533 6,495
Loss on prepayment of debt, net of taxes 212 14,191
Change in assets and liabilities, net of
effects of acquired businesses:
Accounts receivable (52,515) (115,570)
Inventories 56,721 (94,345)
Prepaid expenses and other assets (14,749) (1,437)
Accounts payable 88,898 27,756
Accrued expenses (4,214) (9,389)
Other 1,122 (7,524)
---------- ----------
Net cash provided by (used for) operating
activities 150,391 (122,343)
---------- ----------
Cash flows from investing activities:
Acquisition of property, plant and equipment,
net (5,058) (6,175)
Cash consideration paid for acquired
businesses - (12,179)
Investments 2,662 464
Purchase of short-term investments (230,456) (72,100)
Proceeds from sale of short-term investments 389,056 50,800
---------- ----------
Net cash provided by (used for) investing
activities 156,204 (39,190)
---------- ----------
Cash flows from financing activities:
Change in short-term borrowings 4,495 2,144
Change in long-term debt (486) (718)
Repurchase of senior notes - (268,399)
Repurchase of convertible debentures (13,328) (95,384)
Proceeds from common stock offering - 312,789
Proceeds from exercise of stock options 11,945 3,791
---------- ----------
Net cash provided by (used for) financing
activities 2,626 (45,777)
---------- ----------
Effect of exchange rate changes on cash (1,527) (6,808)
---------- ----------
Net increase (decrease) in cash and cash
equivalents 307,694 (214,118)
Cash and cash equivalents at beginning of
period 305,294 612,404
---------- ----------
Cash and cash equivalents at end of period $ 612,988 $ 398,286
========== ==========
This interim report is subject to independent audit at year-end.
ARROW ELECTRONICS, INC.
SEGMENT INFORMATION
(In thousands)
Three Months Ended
----------------------
April 1, March 31,
2005 2004
---------- ----------
Sales:
Components $2,094,743 $2,033,853
Computer products 632,128 592,105
---------- ----------
Consolidated $2,726,871 $2,625,958
========== ==========
Operating income:
Components $ 95,747 $ 110,440
Computer products 35,684 20,618
Corporate (a) (22,938) (33,295)
---------- ----------
Consolidated $ 108,493 $ 97,763
========== ==========
(a) Includes an acquisition indemnification credit of $1.7 million and
restructuring charges of $4.0 million for the three months ended
April 1, 2005 and restructuring charges of $8.8 million for the
three months ended March 31, 2004.
This interim report is subject to independent audit at year-end.
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 Contact:
Jacqueline F. Strayer
Vice President, Corporate Communications
631-847-2101