Exhibit 99.1
Arrow Electronics Posts Strong Third Quarter Results
MELVILLE, N.Y.--(BUSINESS WIRE)--Oct. 27, 2005--
Generates $80 Million of Cash Flow from Operations;
Year-to-Date Cash Flow from Operations Nearly $300 Million
Arrow Electronics, Inc. (NYSE:ARW) today reported third quarter
2005 net income of $63.5 million ($.54 and $.52 per share on a basic
and diluted basis, respectively) on sales of $2.71 billion, compared
with net income of $63.4 million ($.55 and $.52 per share on a basic
and diluted basis, respectively) on sales of $2.62 billion in the
third quarter of 2004. Cash flow from operations in the third quarter
of 2005 was $79.9 million, compared with $51.9 million in the third
quarter of 2004. The company's results for 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 September 30, 2005 would have been $63.8 million
($.54 and $.52 per share on a basic and diluted basis, respectively)
and net income for the quarter ended September 30, 2004 would have
been $55.8 million ($.48 and $.46 per share on a basic and diluted
basis, respectively).
Consolidated operating income of $118.4 million, excluding the
items impacting comparability, was up 12% from $105.8 million over
last year's third quarter. Operating income as a percentage of sales,
excluding the previously mentioned items impacting comparability,
decreased by 10 basis points sequentially, and increased by 40 basis
points year-over-year.
"We delivered strong results against the backdrop of traditional
seasonal weakness in Europe and the computer products business in the
third quarter," said William E. Mitchell, President and Chief
Executive Officer. "In addition to posting our 11th consecutive
quarter of year-over-year sales growth, we again increased operating
income at a faster pace than sales as a result of our ability to
leverage our cost structure to drive further operating efficiencies,"
added Mr. Mitchell.
Worldwide components sales of $2.08 billion were flat sequentially
and up 4% from last year's third quarter. "Component sales in our
Asia/Pacific region advanced to a new record level and North America
had strong profitability gains on its second consecutive quarterly
increase in daily shipping rates," said Mr. Mitchell, "while our
European business experienced normal seasonality as well as continued
difficult macroeconomic conditions."
Worldwide computer products sales of $632 million decreased 8%
sequentially in this seasonally weak quarter and increased 1%
year-over-year. The sequential decline in computer products sales was
generally consistent with prior years. "Our North American Computer
Products business achieved its 10th consecutive quarter of
year-over-year sales increases as well as its 17th consecutive quarter
of year-over-year growth in operating income," added Mr. Mitchell.
The company's results for the third quarter of 2005 and 2004
include a number of items outlined below that impact their
comparability:
-- During the third quarter of 2005, the company repurchased,
through a series of transactions, an additional $57.8 million
accreted value of its zero coupon convertible debentures due
in 2021, which could have been initially put to the company in
February 2006 ("convertible debentures"). The related loss on
the repurchases, including the premium paid and the write-off
of related deferred financing costs, aggregated $1.1 million
($.7 million net of related taxes or $.01 per share).
-- During the third quarter of 2005, in connection with
previously announced restructuring initiatives, the company
recorded a net charge of $.1 million (a gain of $.4 million
net of related taxes or $.01 per share). Included in the
restructuring charge is a gain on the sale of property that,
because of existing capital tax loss carryforwards, will not
be taxed.
-- During the third quarter of 2004, the company recorded an
acquisition indemnification credit of $9.7 million ($.09 and
$.08 per share on a basic and diluted basis, respectively)
resulting from the settlement of a claim related to its French
subsidiary, Tekelec SA.
-- During the third quarter of 2004, the company recorded a net
restructuring charge of $.4 million ($.2 million net of
related taxes).
-- During the third quarter of 2004, the company repurchased
$19.8 million accreted value of its convertible debentures.
The related loss on the repurchase, including the premium paid
and the write-off of related deferred financing costs,
aggregated $.9 million ($.5 million net of related taxes or
$.01 per share).
-- During the third quarter of 2004, the company recorded a loss
on the write-down of an investment security of $1.3 million
($.01 per share) for an other-than-temporary decline in the
fair value of this investment in accordance with Statement of
Financial Accounting Standards No. 115.
"Looking to the fourth quarter, we fully expect our computer
products business to experience a combination of continued organic
growth and traditional seasonality. In the components business, we
expect normal seasonality in Asia/Pacific, stability in North America
with an increase in daily shipping rates offset by fewer shipping
days, and continued weak business conditions in Europe," said Paul J.
Reilly, Senior Vice President and Chief Financial Officer. "Based upon
all of the information known to us today, we expect fourth quarter
revenues to be between $2.8 billion and $2.9 billion, with worldwide
component sales between $2.05 billion and $2.1 billion and worldwide
computer product sales between $750 million and $800 million. We
expect earnings per share on a diluted basis, excluding charges, in
the range of $.56 to $.59 per share," said Mr. Reilly.
"We continued to execute well and achieve our overarching
objectives of growing earnings faster than sales, growing sales faster
than the market, and being cash positive on a consistent basis," said
Mr. Mitchell. "We remain focused on our goal to deliver premium
investment results to our shareholders," added Mr. Mitchell.
NINE MONTH RESULTS
Arrow's net income for the first nine months of 2005 was $179.2
million ($1.53 and $1.48 per share on a basic and diluted basis,
respectively) on sales of $8.2 billion, compared with net income of
$159.8 million ($1.42 and $1.36 per share on a basic and diluted
basis, respectively) on sales of $7.9 billion in the first nine months
of 2004. Year-to-date cash flow from operations of $296.1 million
compares to a use of $107.9 million for the first nine months of 2004.
Net income for the first nine months of 2005 includes the
aforementioned restructuring charges and charges associated with the
loss on prepayment of debt. Additionally, during the first six months
of 2005, restructuring charges of $8.9 million ($5.5 million net of
related taxes or $.04 and $.03 per share on a basic and diluted basis,
respectively), a loss of $2.1 million ($1.2 million net of related
taxes or $.01 per share) on the repurchase of $94.0 million accreted
value of its convertible debentures, an acquisition indemnification
credit of $1.7 million ($1.3 million net of related taxes or $.01 per
share on a basic basis), and a write-down of an investment of $3.0
million ($.03 per share) were recorded.
Net income for the first nine months of 2004 includes the
aforementioned acquisition indemnification credit, restructuring
charges, a charge associated with the loss on prepayment of debt, and
a write-down of an investment. Additionally, during the first six
months of 2004, restructuring charges of $7.6 million ($4.6 million
net of related taxes or $.04 per share) 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
$233.6 million accreted value of its convertible debentures. As a
result of these repurchases, a loss on prepayment of debt of $30.8
million ($18.4 million net of related taxes or $.17 and $.15 per share
on a basic and diluted basis, respectively) was recorded. Excluding
these items, net income would have been $187.9 million ($1.60 and
$1.55 per share on a basic and diluted basis, respectively) and $175.1
million ($1.56 and $1.48 per share on a basic and diluted basis,
respectively) for the first nine months of 2005 and 2004,
respectively.
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 company's efficiency
enhancement initiatives, the prepayment of debt, and the write-down of
investments. 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
may use 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 Nine Months Ended
September 30, September 30,
-------------------- --------------------
2005 2004 2005 2004
--------- --------- --------- ---------
Operating income, as
reported $118,238 $115,047 $345,489 $340,743
Acquisition
indemnification credit - (9,676) (1,672) (9,676)
Restructuring charges 112 407 8,997 7,984
--------- --------- --------- ---------
Operating income, as
adjusted $118,350 $105,778 $352,814 $339,051
========= ========= ========= =========
Net income, as reported $ 63,523 $ 63,397 $179,163 $159,781
Acquisition
indemnification credit - (9,676) (1,267) (9,676)
Restructuring charges
(gain) (442) 175 5,016 4,756
Loss on prepayment of
debt 672 545 1,919 18,952
Write-down of investments - 1,318 3,019 1,318
--------- --------- --------- ---------
Net income, as adjusted $ 63,753 $ 55,759 $187,850 $175,131
========= ========= ========= =========
Net income per basic share,
as reported $ .54 $ .55 $ 1.53 $ 1.42
Acquisition
indemnification credit - (.09) (.01) (.09)
Restructuring charges
(gain) (.01) - .03 .05
Loss on prepayment of
debt .01 .01 .02 .17
Write-down of investments - .01 .03 .01
--------- --------- --------- ---------
Net income per basic share,
as adjusted $ .54 $ .48 $ 1.60 $ 1.56
========= ========= ========= =========
Net income per diluted
share, as reported(a) $ .52 $ .52 $ 1.48 $ 1.36
Acquisition
indemnification credit - (.08) - (.08)
Restructuring charges
(gain) (.01) - .03 .04
Loss on prepayment of
debt .01 .01 .01 .15
Write-down of investments - .01 .03 .01
--------- --------- --------- ---------
Net income per diluted
share, as adjusted $ .52 $ .46 $ 1.55 $ 1.48
========= ========= ========= =========
(a) In computing net income per diluted share for the three and
nine months ended September 30, 2005, net income was increased by
$1,059 and $4,285, 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
average number of shares outstanding for the three and nine months
ended September 30, 2005 includes 3,844 shares and 5,412 shares,
respectively, related to the convertible debentures.
In computing net income per diluted share for the three and nine
months ended September 30, 2004, net income was increased by $2,143
and $9,085, respectively, for interest (net of taxes) related to the
convertible debentures which are dilutive common stock equivalents. In
addition, the diluted average number of shares outstanding for the
three and nine months ended September 30, 2004 includes 8,331 shares
and 10,558 shares, respectively, 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 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 products 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 Nine Months Ended
September 30, September 30,
---------------------- ----------------------
2005 2004 2005 2004
---------- ---------- ---------- ----------
Sales $2,710,168 $2,619,143 $8,204,586 $7,923,391
---------- ---------- ---------- ----------
Costs and expenses:
Cost of products
sold 2,290,912 2,198,980 6,911,768 6,628,974
Selling, general
and
administrative
expenses 290,376 301,973 903,454 913,865
Depreciation and
amortization 10,530 12,412 36,550 41,501
Acquisition
indemnification
credit - (9,676) (1,672) (9,676)
Restructuring
charges 112 407 8,997 7,984
---------- ---------- ---------- ----------
2,591,930 2,504,096 7,859,097 7,582,648
---------- ---------- ---------- ----------
Operating income 118,238 115,047 345,489 340,743
Equity in earnings
of affiliated
companies 1,373 1,566 3,013 2,912
Loss on prepayment
of debt 1,123 911 3,209 31,692
Write-down of
investments - 1,318 3,019 1,318
Interest expense,
net 22,291 24,350 70,766 79,563
---------- ---------- ---------- ----------
Income before
income taxes and
minority interest 96,197 90,034 271,508 231,082
Provision for
income taxes 32,399 26,392 91,770 70,474
---------- ---------- ---------- ----------
Income before
minority interest 63,798 63,642 179,738 160,608
Minority interest 275 245 575 827
---------- ---------- ---------- ----------
Net income $ 63,523 $ 63,397 $ 179,163 $ 159,781
========== ========== ========== ==========
Net income per share:
Basic $ .54 $ .55 $ 1.53 $ 1.42
========== ========== ========== ==========
Diluted $ .52 $ .52 $ 1.48 $ 1.36
========== ========== ========== ==========
Average number of
shares
outstanding:
Basic 118,594 115,175 117,265 112,217
Diluted 124,162 124,862 124,010 124,500
This interim report is subject to independent audit at year-end.
ARROW ELECTRONICS, INC.
CONSOLIDATED BALANCE SHEET
(In thousands)
September 30, December 31,
2005 2004
----------- -----------
ASSETS
Current assets:
Cash and cash equivalents $ 653,667 $ 305,294
Short-term investments - 158,600
----------- -----------
Total cash and short-term investments 653,667 463,894
Accounts receivable, net 2,068,476 1,984,122
Inventories 1,382,718 1,486,478
Prepaid expenses and other assets 107,629 93,039
----------- -----------
Total current assets 4,212,490 4,027,533
----------- -----------
Property, plant and equipment at cost:
Land 35,951 40,340
Buildings and improvements 156,198 182,610
Machinery and equipment 412,593 420,455
----------- -----------
604,742 643,405
Less: accumulated depreciation and
amortization (383,732) (380,422)
----------- -----------
Property, plant and equipment, net 221,010 262,983
----------- -----------
Investments in affiliated companies 36,580 34,302
Cost in excess of net assets of companies
acquired 926,689 974,285
Other assets 188,019 209,998
----------- -----------
Total assets $5,584,788 $5,509,101
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $1,389,363 $1,261,971
Accrued expenses 404,620 395,955
Short-term borrowings, including current
portion of long-term debt 173,572 8,462
----------- -----------
Total current liabilities 1,967,555 1,666,388
----------- -----------
Long-term debt 1,154,900 1,465,880
Other liabilities 177,840 182,647
Shareholders' equity:
Common stock, par value $1:
Authorized - 160,000 shares in 2005 and
2004
Issued - 119,740 shares in 2005 and
117,675 in 2004 119,740 117,675
Capital in excess of par value 846,524 797,828
Retained earnings 1,324,969 1,145,806
Foreign currency translation adjustment 14,289 190,595
----------- -----------
2,305,522 2,251,904
Less: Treasury stock (265 and 1,374
shares in 2005 and 2004,
respectively), at cost (7,093) (36,735)
Unamortized employee stock awards (3,007) (3,738)
Other (10,929) (17,245)
----------- -----------
Total shareholders' equity 2,284,493 2,194,186
----------- -----------
Total liabilities and shareholders'
equity $5,584,788 $5,509,101
=========== ===========
This interim report is subject to independent audit at year-end.
ARROW ELECTRONICS, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(In thousands)
Nine Months Ended
September 30,
----------------------
2005 2004
---------- ----------
Cash flows from operating activities:
Net income $ 179,163 $ 159,781
---------- ----------
Adjustments to reconcile net income to net
cash provided by (used for) operations:
Minority interest 575 827
Depreciation and amortization 36,550 41,501
Accretion of discount on convertible
debentures 7,166 13,459
Amortization of deferred financing costs
and discount
on notes 2,796 3,867
Amortization of restricted stock and
performance awards 5,209 6,594
Equity in earnings of affiliated
companies (3,013) (2,912)
Deferred income taxes 94 2,060
Acquisition indemnification credit, net
of taxes (1,267) (9,676)
Restructuring charges, net of taxes 5,016 4,756
Loss on prepayment of debt, net of taxes 1,919 18,952
Write-down of investments 3,019 1,318
Change in assets and liabilities, net of
effects of acquired businesses:
Accounts receivable (152,656) (146,519)
Inventories 57,221 (197,096)
Prepaid expenses and other assets (5,072) (492)
Accounts payable 156,910 (32,498)
Accrued expenses 1,977 5,636
Other 447 22,532
---------- ----------
Net cash provided by (used for) operating
activities 296,054 (107,910)
---------- ----------
Cash flows from investing activities:
Acquisition of property, plant and equipment,
net (19,789) (16,701)
Proceeds from sale of facilities 18,353 8,616
Cash consideration paid for acquired
businesses (24,624) (34,725)
Proceeds from notes receivable 1,113 8,333
Purchase of short-term investments (230,456) (203,486)
Proceeds from sale of short-term investments 389,056 203,486
Other 3,711 (140)
---------- ----------
Net cash provided by (used for) investing
activities 137,364 (34,617)
---------- ----------
Cash flows from financing activities:
Change in short-term borrowings 9,036 (29,827)
Change in long-term debt (2,037) (1,904)
Repurchase of senior notes - (268,399)
Repurchase of convertible debentures (152,449) (262,172)
Proceeds from common stock offering - 312,789
Proceeds from exercise of stock options 69,355 13,900
---------- ----------
Net cash used for financing activities (76,095) (235,613)
---------- ----------
Effect of exchange rate changes on cash (8,950) 3,294
---------- ----------
Net increase (decrease) in cash and cash
equivalents 348,373 (374,846)
Cash and cash equivalents at beginning of
period 305,294 612,404
---------- ----------
Cash and cash equivalents at end of period $ 653,667 $ 237,558
========== ==========
This interim report is subject to independent audit at year-end.
ARROW ELECTRONICS, INC.
SEGMENT INFORMATION
(In thousands)
Three Months Ended Nine Months Ended
September 30, September 30,
----------------------- -----------------------
2005 2004 2005 2004
---------- ----------- ---------- -----------
Sales:
Components $2,078,106 $1,991,625 $6,249,784 $ 6,068,807
Computer Products 632,062 627,518 1,954,802 1,854,584
---------- ----------- ---------- -----------
Consolidated $2,710,168 $2,619,143 $8,204,586 $ 7,923,391
========== =========== ========== ===========
Operating income:
Components $ 105,981 $ 98,418 $ 307,278 $ 328,740
Computer Products 35,845 30,918 112,202 83,230
Corporate (a) (23,588) (14,289) (73,991) (71,227)
---------- ----------- ---------- -----------
Consolidated $ 118,238 $ 115,047 $ 345,489 $ 340,743
========== =========== ========== ===========
(a) Includes an acquisition indemnification credit of $1.7 million for
the nine months ended September 30, 2005, as well as restructuring
charges of $.1 million and $9.0 million for the three and nine
months ended September 30, 2005, respectively. Also included is an
acquisition indemnification credit of $9.7 million for the three
and nine months ended September 30, 2004, and restructuring
charges of $.4 million and $8.0 million for the three and nine
months ended September 30, 2004, respectively.
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
or
Paul J. Reilly
Senior Vice President and Chief Financial Officer
631-847-1872
or
Media:
Jacqueline F. Strayer
Vice President, Corporate Communications
631-847-2101