Exhibit 99.1
Arrow Electronics Fourth Quarter Results Ahead of Consensus; Full Year 2005 Cash
Flow More Than Double 2004
MELVILLE, N.Y.--(BUSINESS WIRE)--Feb. 22, 2006--Arrow Electronics,
Inc. (NYSE:ARW) today reported fourth quarter 2005 net income of $74.4
million ($.62 and $.60 per share on a basic and diluted basis,
respectively) on sales of $2.96 billion, compared with net income of
$47.7 million ($.41 and $.40 per share on a basic and diluted basis,
respectively) on sales of $2.72 billion in the fourth quarter of 2004.
The company's results for the fourth quarters 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 December 31, 2005 would have been $77.4 million
($.65 and $.63 per share on a basic and diluted basis, respectively)
and 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). Wall Street consensus, as reported by First Call, was
$.58 on a diluted basis.
Operating income in the fourth quarter of 2005 and 2004 was $134.8
million and $98.6 million, respectively. Excluding the items impacting
comparability, fourth quarter operating income would have been $138.5
million, up 26% over last year's $109.7 million. Operating income as a
percentage of sales, excluding the previously mentioned items,
increased by 30 basis points sequentially and increased 70 basis
points year-over-year.
"We again delivered strong results across all of our businesses
with operating income growing three times faster than sales and cash
flow well ahead of our expectations," said William E. Mitchell,
President and Chief Executive Officer. "Our initiatives to drive for
greater earnings growth and to better manage our balance sheet drove
return on invested capital to its highest quarterly level since 2000."
The company noted that return on invested capital, as defined in Note
A, reached 11.6% in the fourth quarter of 2005.
Worldwide components sales of $2.2 billion increased 6%
sequentially and 10% over last year. "Operating income advanced by 27%
when compared with the fourth quarter of 2004, as our business in
Asia/Pacific posted record sales and North America reached its highest
level of sales since the first quarter of 2001," added Mr. Mitchell,
"while Europe posted a 6% year-over-year increase in sales in constant
dollars."
Worldwide computer products sales advanced 20% sequentially to
$761 million, with sales to core enterprise computing customers
advancing 22%. "Arrow Enterprise Computing Solutions achieved its 11th
consecutive quarter of year-over-year sales growth, 18th consecutive
quarter of year-over-year growth in operating income, and record
returns on working capital," added Mr. Mitchell.
The company's results for the fourth quarter of 2005 and 2004
include the items outlined below that impact their comparability:
-- During the fourth quarter of 2005, the company recorded
restructuring charges of $3.7 million ($2.3 million net of
related taxes or $.03 per share).
-- During the fourth quarter of 2005, the company repurchased
$26.8 million principal amount of its 7% senior notes due in
January 2007. The related loss on the repurchase, including
the premium paid, the write-off of related deferred financing
costs, and the loss for terminating the related interest rate
swaps, aggregated $1.1 million ($.7 million net of related
taxes).
-- 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 2004, the company repurchased
$66.4 million accreted value of its zero coupon convertible
debentures due in 2021 ("convertible debentures"), which could
have been 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 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).
-- During the fourth quarter of 2004, 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). This non-cash
charge principally related to the company's operations in
Latin America.
"Based upon the information known to us today, we believe that
sales in the upcoming quarter will be between $3.075 and $3.175
billion," said Paul J. Reilly, Senior Vice President and Chief
Financial Officer. "With continued stability in North America, early
signs of an improving market in Europe, and normal seasonality in
Asia/Pacific, we believe that worldwide components sales will be
between $2.35 and $2.40 billion. We expect the traditional seasonal
slowdown in our Enterprise Computing Solutions business in the first
quarter to be generally offset by the impact of the company's
acquisition of DNS in December 2005, resulting in worldwide computer
products sales between $725 and $775 million. We anticipate earnings
per share on a diluted basis, including the impact of expensing stock
options in accordance with FASB Statement No. 123(R) estimated at
approximately $.02 per share but excluding any charges, to be in the
range of $.58 to $.61. Excluding the impact of expensing stock options
and any charges, diluted earnings per share for the first quarter are
expected to increase 22% to 29% from last year's first quarter," added
Mr. Reilly. "Charges in the first quarter of 2006 are expected to
include a pre-tax loss of approximately $2.5 million ($.01 per share)
relating to the previously-announced redemption of our convertible
debentures, completed yesterday, and pre-tax restructuring charges of
approximately $2.5 million ($.01 per share)."
Full Year Results
Arrow's net income for 2005 was $253.6 million ($2.15 and $2.09
per share on a basic and diluted basis, respectively) on sales of
$11.16 billion, compared with net income of $207.5 million ($1.83 and
$1.75 per share on a basic and diluted basis, respectively) on sales
of $10.65 billion in 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 these
items, net income would have been $265.3 million ($2.25 and $2.18 per
share on a basic and diluted basis, respectively) in 2005 compared to
net income of $235.0 million ($2.08 and $1.97 per share on a basic and
diluted basis, respectively) for 2004.
"Each of our businesses performed well throughout the year. Sales
advanced to their highest level in five years and earnings per share
were at the second highest level in the company's history. Cash flow
from operations was in excess of $400 million, or more than double
2004, and return on invested capital was well ahead of our cost of
capital. We are managing the company for steady and continuous
progress towards the goals we set out to achieve: to grow faster than
the markets we serve, grow earnings faster than sales, to be cash
positive, and to generate returns well in excess of our cost of
capital, thereby ensuring we create value for our shareholders,
employees, and supplier and customer partners," said Mr. Mitchell.
Net income for 2005 includes restructuring charges totaling $12.7
million ($7.3 million net of related taxes or $.06 and $.05 per share
on a basic and diluted basis, respectively), a loss of $4.3 million
($2.6 million net of related taxes or $.02 and $.01 per share on a
basic and diluted basis, respectively) associated with the prepayment
of approximately $179 million of the company's debt, a write-down of
an investment of $3.0 million ($.03 per share), and an acquisition
indemnification credit of $1.7 million ($1.3 million net of related
taxes or $.01 per share on a basic basis).
Net income for 2004 includes 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 loss 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 approximately $570 million of the company's debt, a write-down of
an investment of $1.3 million ($.01 per share), an integration credit
of $2.3 million ($1.4 million net of related taxes or $.01 per share),
an 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.
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
more than 130,000 original equipment manufacturers, contract
manufacturers and commercial customers through a global network of
over 270 locations in 53 countries and territories.
Note A -- Return on Invested Capital Definition
Return on invested capital ("ROIC") is defined as annualized,
tax-effected operating income excluding certain charges, credits and
losses for the quarterly periods presented below, divided by average
invested capital (average shareholders' equity and debt, less excess
cash (average cash in excess of $150 million)), for the same periods.
(In thousands) Three Three Three
Months Months Months
Ended Ended Ended
December September December
31, 2005(1) 30, 2005 31, 2004
---------- ---------- ----------
Annualized, tax-effected operating
income, excluding certain charges,
credits and losses $ 358,572 $ 309,208 $ 300,648
========== ========== ==========
Average invested capital $3,097,841 $3,102,568 $3,412,456
========== ========== ==========
ROIC 11.6% 10.0% 8.8%
========== ========== ==========
(1) Excludes impact of acquisitions closed in December 2005
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, impairment charges, 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 Year Ended
December 31, December 31,
-------------------- --------------------
2005 2004 2005 2004
--------- --------- --------- ---------
Operating income, as
reported $134,769 $ 98,595 $480,258 $439,338
Acquisition
indemnification credit - - (1,672) (9,676)
Restructuring charges 3,719 3,407 12,716 11,391
Integration credit - (2,323) - (2,323)
Impairment charge - 9,995 - 9,995
--------- --------- --------- ---------
Operating income, as
adjusted $138,488 $109,674 $491,302 $448,725
========= ========= ========= =========
Net income, as reported $ 74,446 $ 47,723 $253,609 $207,504
Acquisition
indemnification credit - - (1,267) (9,676)
Restructuring charges 2,294 2,187 7,310 6,943
Integration credit - (1,389) - (1,389)
Impairment charge - 9,995 - 9,995
Loss on prepayment of
debt 677 1,345 2,596 20,297
Write-down of investments - - 3,019 1,318
--------- --------- --------- ---------
Net income, as adjusted $ 77,417 $ 59,861 $265,267 $234,992
========= ========= ========= =========
Net income per basic share,
as reported $ .62 $ .41 $ 2.15 $ 1.83
Acquisition
indemnification credit - - (.01) (.09)
Restructuring charges .03 .02 .06 .07
Integration credit - (.01) - (.01)
Impairment charge - .09 - .09
Loss on prepayment of
debt - .01 .02 .18
Write-down of investments - - .03 .01
--------- --------- --------- ---------
Net income per basic share,
as adjusted $ .65 $ .52 $ 2.25 $ 2.08
========= ========= ========= =========
Net income per diluted
share, as reported* $ .60 $ .40 $ 2.09 $ 1.75
Acquisition
indemnification credit - - - (.08)
Restructuring charges .03 .02 .05 .06
Integration credit - (.01) - (.01)
Impairment charge - .08 - .08
Loss on prepayment of
debt - .01 .01 .16
Write-down of investments - - .03 .01
--------- --------- --------- ---------
Net income per diluted
share, as adjusted $ .63 $ .50 $ 2.18 $ 1.97
========= ========= ========= =========
* In computing net income per diluted share for the three months
and year ended December 31, 2005, net income was increased by $916 and
$5,201, 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 months and year ended
December 31, 2005 includes 3,390 shares and 4,906 shares,
respectively, related to the convertible debentures.
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
convertible debentures which are dilutive common stock equivalents. In
addition, the diluted 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.
Information Relating to Forward-Looking Statements
This report includes forward-looking statements that are subject
to numerous assumptions, 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,
increased profit margin pressure, the effects of additional actions
taken to become more efficient or lower costs, and the company's
ability to generate additional cash flow. 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 of the 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,
------------------------ --------------------------
2005 2004 2005 2004
----------- ----------- ------------ ------------
Sales $2,959,610 $2,722,722 $11,164,196 $10,646,113
----------- ----------- ------------ ------------
Costs and
expenses:
Cost of products
sold 2,512,818 2,293,988 9,424,586 8,922,962
Selling, general
and
administrative
expenses 297,372 306,023 1,200,826 1,219,888
Depreciation and
amortization 10,932 13,037 47,482 54,538
Acquisition
indemnification
credit - - (1,672) (9,676)
Restructuring
charges 3,719 3,407 12,716 11,391
Integration
credit - (2,323) - (2,323)
Impairment
charge - 9,995 - 9,995
----------- ----------- ------------ ------------
2,824,841 2,624,127 10,683,938 10,206,775
----------- ----------- ------------ ------------
Operating income 134,769 98,595 480,258 439,338
Equity in earnings
of affiliated
companies 1,479 1,194 4,492 4,106
Loss on prepayment
of debt 1,133 2,250 4,342 33,942
Write-down of
investments - - 3,019 1,318
Interest expense,
net 21,062 23,638 91,828 103,201
----------- ----------- ------------ ------------
Income before
income taxes and
minority
interest 114,053 73,901 385,561 304,983
Provision for
income taxes 39,478 25,962 131,248 96,436
----------- ----------- ------------ ------------
Income before
minority interest 74,575 47,939 254,313 208,547
Minority interest 129 216 704 1,043
----------- ----------- ------------ ------------
Net income $ 74,446 $ 47,723 $ 253,609 $ 207,504
=========== =========== ============ ============
Net income per
share:
Basic $ .62 $ .41 $ 2.15 $ 1.83
=========== =========== ============ ============
Diluted $ .60 $ .40 $ 2.09 $ 1.75
=========== =========== ============ ============
Average number of
shares
outstanding:
Basic 119,482 115,576 117,819 113,109
Diluted 124,646 124,639 124,080 124,561
ARROW ELECTRONICS, INC.
CONSOLIDATED BALANCE SHEET
(In thousands)
December 31, December 31,
2005 2004
------------ ------------
ASSETS
Current assets:
Cash and cash equivalents $ 580,661 $ 305,294
Short-term investments - 158,600
------------ ------------
Total cash and short-term investments 580,661 463,894
Accounts receivable, net 2,316,932 1,984,122
Inventories 1,494,982 1,486,478
Prepaid expenses and other assets 124,899 93,039
------------ ------------
Total current assets 4,517,474 4,027,533
------------ ------------
Property, plant and equipment at cost:
Land 41,855 40,340
Buildings and improvements 160,012 182,610
Machinery and equipment 426,239 420,455
------------ ------------
628,106 643,405
Less: accumulated depreciation and
amortization (392,641) (380,422)
------------ ------------
Property, plant and equipment, net 235,465 262,983
------------ ------------
Investments in affiliated companies 38,959 34,302
Cost in excess of net assets of companies
acquired 1,053,266 974,285
Other assets 199,753 209,998
------------ ------------
Total assets $ 6,044,917 $ 5,509,101
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 1,628,568 $ 1,261,971
Accrued expenses 434,644 395,955
Short-term borrowings, including current
portion of long-term debt 268,666 8,462
------------ ------------
Total current liabilities 2,331,878 1,666,388
------------ ------------
Long-term debt 1,138,981 1,465,880
Other liabilities 201,172 182,647
Shareholders' equity:
Common stock, par value $1:
Authorized - 160,000 shares in 2005 and
2004
Issued - 120,286 and 117,675 shares in
2005 and 2004, respectively 120,286 117,675
Capital in excess of par value 861,880 797,828
Retained earnings 1,399,415 1,145,806
Foreign currency translation adjustment 13,308 190,595
------------ ------------
2,394,889 2,251,904
Less: Treasury stock (272 and 1,374
shares in 2005 and 2004,
respectively), at cost (7,278) (36,735)
Unamortized employee stock awards (2,395) (3,738)
Other (12,330) (17,245)
------------ ------------
Total shareholders' equity 2,372,886 2,194,186
------------ ------------
Total liabilities and shareholders'
equity $ 6,044,917 $ 5,509,101
============ ============
ARROW ELECTRONICS, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(In thousands)
Year Ended
December 31,
--------------------------
2005 2004
------------ ------------
Cash flows from operating activities:
Net income $ 253,609 $ 207,504
------------ ------------
Adjustments to reconcile net income to net
cash provided by operations:
Depreciation and amortization 47,482 54,538
Accretion of discount on convertible
debentures 8,698 16,827
Amortization of deferred financing
costs and discount on notes 3,589 4,796
Amortization of restricted stock and
performance awards 6,953 6,341
Equity in earnings of affiliated
companies (4,492) (4,106)
Deferred income taxes 21,920 44,732
Acquisition indemnification credit (1,267) (9,676)
Restructuring charges 7,310 6,943
Loss on prepayment of debt 2,596 20,297
Write-down of investments 3,019 1,318
Integration credit - (1,389)
Impairment charge - 9,995
Minority interest 704 1,043
Change in assets and liabilities, net
of effects of acquired businesses
and dispositions:
Accounts receivable (188,235) (122,882)
Inventories 11,707 (97,083)
Prepaid expenses and other assets (17,300) 1,843
Accounts payable 258,485 11,588
Accrued expenses (11,738) 23,423
Other (492) 11,454
------------ ------------
Net cash provided by operating activities 402,548 187,506
------------ ------------
Cash flows from investing activities:
Acquisition of property, plant and
equipment (33,179) (23,516)
Proceeds from sale of facilities 18,353 10,507
Cash consideration paid for acquired
businesses (178,998) (34,979)
Proceeds from notes receivable 1,318 9,627
Purchase of short-term investments (230,456) (452,587)
Proceeds from sale of short-term
investments 389,056 293,987
Other 1,111 524
------------ ------------
Net cash used for investing activities (32,795) (196,437)
------------ ------------
Cash flows from financing activities:
Change in short-term borrowings 11,994 (39,875)
Change in long-term debt (2,400) (3,144)
Repurchase of senior notes (27,762) (268,399)
Repurchase of convertible debentures (152,449) (329,639)
Proceeds from common stock offering - 312,507
Proceeds from exercise of stock options 82,176 27,925
------------ ------------
Net cash used for financing activities (88,441) (300,625)
------------ ------------
Effect of exchange rate changes on cash (5,945) 2,446
------------ ------------
Net increase (decrease) in cash and cash
equivalents 275,367 (307,110)
Cash and cash equivalents at beginning of
year 305,294 612,404
------------ ------------
Cash and cash equivalents at end of year $ 580,661 $ 305,294
============ ============
ARROW ELECTRONICS, INC.
SEGMENT INFORMATION
(In thousands)
Three Months Ended Year Ended
December 31, December 31,
------------------------ --------------------------
2005 2004 2005 2004
----------- ----------- ------------ ------------
Sales:
Components $2,198,434 $1,989,734 $ 8,448,218 $ 8,058,541
Computer
Products 761,176 732,988 2,715,978 2,587,572
----------- ----------- ------------ ------------
Consolidated $2,959,610 $2,722,722 $11,164,196 $10,646,113
=========== =========== ============ ============
Operating income:
Components $ 115,106 $ 90,640 $ 422,384 $ 419,380
Computer
Products 47,627 42,004 159,829 125,234
Corporate (a) (27,964) (34,049) (101,955) (105,276)
----------- ----------- ------------ ------------
Consolidated $ 134,769 $ 98,595 $ 480,258 $ 439,338
=========== =========== ============ ============
(a) Includes an acquisition indemnification credit of $1.7 million for
the year ended December 31, 2005, as well as restructuring charges
of $3.7 million and $12.7 million for the three months and year
ended December 31, 2005, respectively. Also included is an
acquisition indemnification credit of $9.7 million for the year
ended December 31, 2004, restructuring charges of $3.4 million and
$11.4 million for the three months and year ended December 31,
2004, respectively, as well as an integration credit of $2.3
million and an impairment charge of $10.0 million for the three
months and year ended December 31, 2004.
CONTACT: Arrow Electronics, Inc.
Ira M. Birns
Vice President & Treasurer
631-847-1657
or
Paul J. Reilly
Senior Vice President & Chief Financial Officer
631-847-1872
or
Media:
Jacqueline F. Strayer
Vice President, Corporate Communications
631-847-2101