Exhibit 99.1
Arrow Electronics Posts Record First Quarter Sales and Earnings Per Share
-- Strong Cash Flow from Operations of $114 Million --
MELVILLE, N.Y.--(BUSINESS WIRE)--April 24, 2007--Arrow
Electronics, Inc. (NYSE:ARW) today reported first quarter 2007 net
income of $96.3 million ($.78 and $.77 per share on a basic and
diluted basis, respectively) on sales of $3.50 billion, compared with
net income of $81.6 million ($.68 and $.66 per share on a basic and
diluted basis, respectively) on sales of $3.19 billion in the first
quarter of 2006. Consolidated sales grew 10% over the first quarter of
2006, or 5% on a pro forma basis including the impact of acquisitions.
The company's results for the first quarters of 2007 and 2006 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 March 31, 2007 would have been $91.8 million ($.75
and $.74 per share on a basic and diluted basis, respectively) and net
income for the quarter ended March 31, 2006 would have been $84.1
million ($.70 and $.68 per share on a basic and diluted basis,
respectively).
"We once again executed well on our strategic and tactical
objectives this quarter. We outgrew the market, posted record first
quarter sales and earnings per share, grew earnings at twice the rate
of sales organically, generated strong operating cash flow of $114
million and for the 13th consecutive quarter return on invested
capital was well in excess of our cost of capital, all as we continue
to invest in our business ensuring continued value creation for our
business partners and our shareholders," said William E. Mitchell,
chairman, president and chief executive officer, Arrow Electronics,
Inc. "In the first quarter, we received favorable ratings changes from
both Moody's Investors Service and Fitch Ratings. Our strong cash flow
and solid balance sheet have enabled us to pursue strategic
initiatives while maintaining a strong credit profile," added Paul J.
Reilly, senior vice president and chief financial officer, Arrow
Electronics, Inc.
Worldwide computer products sales of $776.0 million increased 33%
over the first quarter of 2006, while sales for our enterprise
computing solutions business increased 12% on a pro forma basis
including the impact of the acquisitions of Alternative Technology,
Inc. and the storage and security distribution business of
InTechnology plc. "We achieved our 13th consecutive quarter of
year-over-year growth driven by strong double-digit increases in
industry standard servers, storage, software and services, which
significantly outpaced market growth in these segments. On March 31st,
we closed on our acquisition of the Agilysys KeyLink Systems Group and
successfully integrated KeyLink's people, systems and facilities. We
continue to transform our industry leading enterprise computing
solutions business into a much stronger organization with an expanded
geographic reach, increased exposure in faster growing product
segments, and a more robust customer and supplier base. With increased
scale and greater levels of operating efficiency, we will further
strengthen our industry leading financial performance, while
significant cross selling opportunities will further accelerate our
growth in the global enterprise computing solutions marketplace," said
Mr. Mitchell.
Worldwide components sales of $2.72 billion increased 4% over the
first quarter of 2006. "We achieved exceptional results in Europe with
record sales and the highest first quarter operating income since 2001
as we continue to drive results by investing in our sales and
marketing efforts and enhancing our existing strong local presence
with more consistent and disciplined processes across the region.
Double-digit growth in our core business serving small and medium
sized customers around the world was offset, in part, by the
well-publicized weakness in the large EMS segment in North America and
Asia Pacific. Our North American business posted the second highest
first quarter operating income since 2001 and in Asia Pacific
operating income advanced more than 70% year-over-year, further
demonstrating our ability to perform well regardless of market
conditions," stated Mr. Mitchell.
The company's results for the first quarter of 2007 and 2006
include the items outlined below that impact their comparability:
-- During the first quarter of 2007, the company recorded a net
restructuring credit of $8.3 million ($5.8 million net of
related taxes or $.05 per share on both a basic and diluted
basis), primarily related to the sale of the company's Harlow,
England facility.
-- During the first quarter of 2007, the company recorded an
integration charge of $2.1 million ($1.3 million net of
related taxes or $.01 per share on both a basic and diluted
basis), primarily related to the acquisition of KeyLink.
-- During the first quarter of 2006, the company recorded a $1.5
million ($.9 million net of related taxes or $.01 per share on
both a basic and diluted basis) restructuring charge.
-- During the first quarter of 2006, the company redeemed the
total amount outstanding of $283.2 million principal amount
($156.4 million accreted value) of its zero coupon convertible
debentures due in 2021 and repurchased $4.1 million principal
amount of its 7% senior notes due in January 2007. The related
loss on the redemption and repurchase, including any related
premium paid, write-off of deferred financing costs, and cost
of terminating a portion of related interest rate swaps,
aggregated $2.6 million ($1.6 million net of related taxes or
$.01 per share on both a basic and diluted basis) and is
recognized as a loss on prepayment of debt.
"Based upon the information known to us today, we expect to see
normal seasonality in all of our businesses in the second quarter. In
components, we expect our broad small and medium-sized customer base
to perform well, offset in part, by continued weakness in the large
EMS customers. In computer products, we expect to continue to post
solid growth in industry standard servers, storage, software and
services. We believe that total second quarter sales will be between
$3.85 and $4.15 billion, with worldwide component sales between $2.725
and $2.875 billion and worldwide computer product sales between $1.125
and $1.275 billion. Earnings per share, on a diluted basis, excluding
any charges, are expected to be in the range of $.78 to $.84, an
increase of 1% to 9% from last year's second quarter. These expected
results include the impact of the KeyLink acquisition," added Mr.
Reilly.
Arrow Electronics (www.arrow.com) is a 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 140,000 original equipment manufacturers,
contract manufacturers and commercial customers through a global
network of over 260 locations in 55 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 efficiency enhancement initiatives, the company's
acquisitions of other companies, and the prepayment of debt. A
reconciliation of the company's non-GAAP financial information to GAAP
is 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
March 31,
--------------------
2007 2006
--------- ---------
Operating income, as reported $162,659 $149,233
Restructuring (credit) charge (8,264) 1,521
Integration charge 2,117 -
--------- ---------
Operating income, as adjusted $156,512 $150,754
--------- ---------
Net income, as reported $ 96,294 $ 81,579
Restructuring (credit) charge (5,788) 920
Integration charge 1,266 -
Loss on prepayment of debt - 1,558
--------- ---------
Net income, as adjusted $ 91,772 $ 84,057
--------- ---------
Net income per basic share, as reported $ .78 $ .68
Restructuring (credit) charge (.05) .01
Integration charge .01 -
Loss on prepayment of debt - .01
--------- ---------
Net income per basic share, as adjusted $ .75 $ .70
--------- ---------
Net income per diluted share, as reported* $ .77 $ .66
Restructuring (credit) charge (.05) .01
Integration charge .01 -
Loss on prepayment of debt - .01
--------- ---------
Net income per diluted share, as adjusted $ .74 $ .68
--------- ---------
The sum of the components for basic and diluted net income per share,
as adjusted, may not agree to totals, as presented, due to rounding.
* In computing net income per diluted share for the three months ended
March 31, 2006, net income was increased by $524 for interest (net of
taxes) related to the then outstanding 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 ended March 31, 2006 includes 1,883
shares related to the convertible debentures.
Information Relating to Forward-Looking Statements
This press release 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, the company's planned implementation of its new
global financial system and new enterprise resource planning system,
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, the company's ability 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 of the forward-looking statements.
ARROW ELECTRONICS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands except per share data)
Three Months Ended
March 31,
------------------------
2007 2006
----------- -----------
Sales $3,497,564 $3,192,463
----------- -----------
Costs and expenses:
Cost of products sold 2,957,933 2,704,920
Selling, general and administrative
expenses 370,226 325,828
Depreciation and amortization 12,893 10,961
Restructuring (credit) charge (8,264) 1,521
Integration charge 2,117 -
----------- -----------
3,334,905 3,043,230
----------- -----------
Operating income 162,659 149,233
Equity in earnings of affiliated companies 1,985 945
Loss on prepayment of debt - 2,605
Interest expense, net 23,068 23,969
----------- -----------
Income before income taxes and minority
interest 141,576 123,604
Provision for income taxes 44,556 41,653
----------- -----------
Income before minority interest 97,020 81,951
Minority interest 726 372
----------- -----------
Net income $ 96,294 $ 81,579
----------- -----------
Net income per share:
Basic $ .78 $ .68
----------- -----------
Diluted $ .77 $ .66
----------- -----------
Average number of shares outstanding:
Basic 122,991 120,609
Diluted 124,350 123,513
This interim report is subject to independent audit at year-end.
ARROW ELECTRONICS, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands except par value)
March 31, December 31,
2007 2006
------------ ------------
ASSETS
Current assets:
Cash and cash equivalents $ 141,413 $ 337,730
Accounts receivable, net 2,838,900 2,710,321
Inventories 1,672,983 1,691,536
Prepaid expenses and other assets 161,064 156,034
------------ ------------
Total current assets 4,814,360 4,895,621
------------ ------------
Property, plant and equipment, at cost:
Land 42,201 41,810
Buildings and improvements 177,531 167,157
Machinery and equipment 503,036 481,689
------------ ------------
722,768 690,656
Less: Accumulated depreciation and
amortization (439,667) (428,283)
------------ ------------
Property, plant and equipment, net 283,101 262,373
------------ ------------
Investments in affiliated companies 43,284 41,960
Cost in excess of net assets of companies
acquired 1,700,807 1,231,281
Other assets 237,275 238,337
------------ ------------
Total assets $ 7,078,827 $ 6,669,572
------------ ------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 1,865,210 $ 1,795,089
Accrued expenses 412,480 402,536
Short-term borrowings, including current
portion of long-term debt 76,953 262,783
------------ ------------
Total current liabilities 2,354,643 2,460,408
------------ ------------
Long-term debt 1,327,678 976,774
Other liabilities 259,760 235,831
Shareholders' equity:
Common stock, par value $1:
Authorized - 160,000 shares in 2007 and
2006
Issued - 124,152 and 122,626 shares in
2007 and 2006, respectively 124,152 122,626
Capital in excess of par value 985,346 943,958
Retained earnings 1,873,246 1,787,746
Foreign currency translation adjustment 167,156 155,166
Other (8,962) (7,407)
------------ ------------
3,140,938 3,002,089
Less: Treasury stock (156 and 207 shares
in 2007 and 2006, respectively),
at cost (4,192) (5,530)
------------ ------------
Total shareholders' equity 3,136,746 2,996,559
------------ ------------
Total liabilities and shareholders'
equity $ 7,078,827 $ 6,669,572
------------ ------------
This interim report is subject to independent audit at year-end.
ARROW ELECTRONICS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
Three Months Ended
March 31,
----------------------
2007 2006
---------- ----------
Cash flows from operating activities:
Net income $ 96,294 $ 81,579
Adjustments to reconcile net income to net
cash provided by (used for) operations:
Depreciation and amortization 12,893 10,961
Amortization of deferred financing costs
and discount on notes 555 898
Amortization of stock-based compensation 6,442 4,092
Accretion of discount on zero coupon
convertible debentures - 876
Excess tax benefits from stock-based
compensation arrangements (5,006) (4,053)
Deferred income taxes 1,452 (915)
Restructuring (credit) charge (5,788) 920
Integration charge 1,266 -
Equity in earnings of affiliated companies (1,985) (945)
Loss on prepayment of debt - 1,558
Minority interest 726 372
Change in assets and liabilities, net of
effects of acquired businesses:
Accounts receivable 49,610 (56,954)
Inventories 73,100 (146,608)
Prepaid expenses and other assets 416 (21,971)
Accounts payable (126,070) 70,646
Accrued expenses 8,543 21,615
Other 1,089 5,520
---------- ----------
Net cash provided by (used for) operating
activities 113,537 (32,409)
---------- ----------
Cash flows from investing activities:
Acquisition of property, plant and equipment (21,984) (13,086)
Cash consideration paid for acquired
businesses (491,475) (18,143)
Proceeds from sale of facilities 8,810 -
Other 335 925
---------- ----------
Net cash used for investing activities (504,314) (30,304)
----------- ----------
Cash flows from financing activities:
Change in short-term borrowings (17,607) 3,844
Repayment of long-term borrowings (1,312) (15,510)
Proceeds from long-term borrowings 345,000 -
Repurchase/repayment of senior notes (169,136) (4,268)
Redemption of zero coupon convertible
debentures - (156,330)
Proceeds from exercise of stock options 32,759 30,097
Excess tax benefits from stock-based
compensation arrangements 5,006 4,053
---------- ----------
Net cash provided by (used for) financing
activities 194,710 (138,114)
---------- ----------
Effect of exchange rate changes on cash (250) 342
----------- ----------
Net decrease in cash and cash equivalents (196,317) (200,485)
Cash and cash equivalents at beginning of
period 337,730 580,661
---------- ----------
Cash and cash equivalents at end of period $ 141,413 $ 380,176
---------- ----------
This interim report is subject to independent audit at year-end.
ARROW ELECTRONICS, INC.
SEGMENT INFORMATION
(In thousands)
Three Months Ended
March 31,
-----------------------
2007 2006
----------- -----------
Sales:
Electronic components $2,721,529 $2,608,909
Computer products 776,035 583,554
----------- -----------
Consolidated $3,497,564 $3,192,463
----------- -----------
Operating income (loss):
Electronic components $ 154,075 $ 144,929
Computer products 29,986 23,863
Corporate (a) (21,402) (19,559)
----------- -----------
Consolidated $ 162,659 $ 149,233
----------- -----------
Effective January 1, 2007, stock option expense, which was
previously included in corporate, was allocated to electronic
components, computer products, and corporate. Prior period segment
data was adjusted to conform with the current period presentation.
(a) Includes a net restructuring credit of $8.3 million and a
restructuring charge of $1.5 million for the three months ended
March 31, 2007 and 2006, respectively. Also includes an
integration charge of $2.1 million for the three months ended
March 31, 2007.
This interim report is subject to independent audit at year-end.
CONTACT: Arrow Electronics, Inc.
Sabrina N. Weaver, 631-847-5359
Director, Investor Relations
or
Paul J. Reilly, 631-847-1872
Senior Vice President & Chief Financial Officer
or
Media:
Jacqueline F. Strayer, 631-847-2101
Vice President, Corporate Communications