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Arrow Electronics Reports Fourth-Quarter Non-GAAP Earnings Per Share of $1.22



  Arrow Electronics Reports Fourth-Quarter Non-GAAP Earnings Per Share of
  $1.22

    -- Full-Year 2012 Sales of $20.41 Billion and Non-GAAP EPS of $4.40 --

           -- Cash Flow from Operations of $675 Million in 2012 --

Business Wire

ENGLEWOOD, Colo. -- February 7, 2013

Arrow Electronics, Inc. (NYSE:ARW) today reported fourth-quarter 2012 net
income of $174.7 million, or $1.62 per share on a diluted basis, compared with
net income of $174.1 million, or $1.53 per share on a diluted basis in the
fourth quarter of 2011. Excluding certain items in both the fourth quarters of
2012 and 2011 as described in the non-GAAP earnings reconciliation table found
below, net income of $132.4 million, or $1.22 per share on a diluted basis, in
the fourth quarter of 2012 compared with net income of $157.3 million, or
$1.38 per share on a diluted basis, in the fourth quarter of 2011.

Fourth-quarter sales of $5.40 billion declined 1 percent from sales of $5.44
billion in the prior year. Pro forma for acquisitions and excluding the impact
of foreign currency, sales declined 3 percent year over year.

“We delivered strong results in the fourth quarter, with non-GAAP earnings per
share of $1.22 well ahead of our expectations, and strong cash flow from
operations. Our ECS business performed especially well with sales up 11
percent over last year’s fourth quarter,” said Michael J. Long, chairman,
president, and chief executive officer. “We had an excellent year, balancing
our short-term initiatives and our long-term strategic priorities.”

Global components fourth-quarter sales of $3.19 billion decreased 7 percent
year over year. Pro forma for acquisitions and excluding the impact of foreign
currency, sales declined 9 percent year over year. Sales in the Asia-Pacific
region increased 7 percent year over year, driven by strong growth in China
and the ASEAN region. In the Americas, sales declined 6 percent year over year
due to ongoing market weakness amid economic uncertainty. European sales were
down 20 percent year over year in local currency, reflecting a weakening in
the Euro Zone economies during the quarter and a prospective change in the
accounting for revenue related to certain fulfillment contracts.

Global enterprise computing solutions (“ECS”) fourth-quarter sales of $2.22
billion increased 11 percent year over year. Pro forma for acquisitions and
excluding the impact of foreign currency, sales increased 6 percent year over
year. On a global basis, ECS delivered impressive double-digit year-over-year
growth in storage, software, and services. In the Americas sales growth was at
the midpoint of normal seasonality in the core value-added distribution
business. In Europe, sales were at the high end of normal seasonality in local
currency with strength across all regions.

FULL-YEAR

Arrow’s net income for 2012 was $506.3 million, or $4.56 per share on a
diluted basis, compared with net income of $598.8 million, or $5.17 per share
on a diluted basis in 2011. Excluding certain items in both 2012 and 2011 as
described in the non-GAAP earnings reconciliation table found below, net
income of $488.4 million, or $4.40 per share on a diluted basis, in 2012
compared with net income of $601.4 million, or $5.19 per share on a diluted
basis, in 2011.

2012 sales of $20.41 billion declined 5 percent from sales of $21.39 billion
in 2011. Pro forma for acquisitions and excluding the impact of foreign
currency, sales also declined 5 percent year over year.

“Cash flow is again a great story as we generated $675 million in cash from
operations in 2012, again meaningfully exceeding our target for cash
conversion,” said Paul J. Reilly, executive vice president, finance and
operations, and chief financial officer. “In 2012, we returned over $250
million to shareholders through our stock repurchase program, bringing the
total returned to shareholders to more than $800 million over the past 5
years.”

GUIDANCE

Looking ahead to the first quarter of 2013, there remains economic uncertainty
in the United States due to the ongoing fiscal cliff and budget negotiations.
Fourth-quarter U.S. GDP numbers showed the first contraction in the U.S.
economy in over three years. The Euro Zone’s economy also contracted in the
fourth quarter and there are no meaningful signs of improvement for the near
term.

In light of these negative economic indicators, the company remains cautious
in the outlook for business activity in the first quarter and would expect
less than normal seasonality in the global components business. With this
economic uncertainty as a backdrop, the company is embarking on an incremental
productivity enhancement program that will include expense reductions of $40
million on an annual basis.

“As we look to the first quarter, we believe that total sales will be between
$4.6 billion and $5.0 billion, with global components sales between $3.05
billion and $3.25 billion and global enterprise computing solutions sales
between $1.55 billion and $1.75 billion. As a result of this outlook, we
expect earnings per share, on a diluted basis, excluding any charges to be in
the range of $.80 to $.92 per share. Our guidance assumes an average tax rate
in the range of 28 to 29 percent, average diluted shares outstanding are
expected to be 108.3 million, and the average Euro to USD exchange rate for
the first quarter is 1.35 to 1,” said Mr. Reilly.

Please refer to the CFO commentary as a supplement to the company’s earnings
release, which can be found at www.arrow.com/investor.

Arrow Electronics (www.arrow.com) is a global provider of products, services
and solutions to industrial and commercial users of electronic components and
enterprise computing solutions. Arrow serves as a supply channel partner for
more than 100,000 original equipment manufacturers, contract manufacturers and
commercial customers through a global network of more than 470 locations in 55
countries.

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 attributable to shareholders and net income per basic and diluted
share, each as adjusted for certain charges, credits, and gains and losses
that the company believes impact the comparability of its results of
operations. These charges, credits, and gains and losses arise out of the
company’s efficiency enhancement initiatives, acquisitions, and settlement of
certain legal and tax matters. 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 gains 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)
(unaudited)
                                                    
                         Quarter Ended               Year Ended
                         December 31,                December 31,
                         2012          2011          2012          2011
                                                                              
Operating income, as     $ 264,168     $ 232,183     $ 804,123     $ 908,843
reported
Restructuring,
integration, and other     11,285        14,135        47,437        37,811
charges
Settlement of legal        (79,158 )     -             (79,158 )     5,875
matters
Operating income, as     $ 196,295     $ 246,318     $ 772,402     $ 952,529
adjusted
                                                                              
Net income
attributable to          $ 174,704     $ 174,088     $ 506,332     $ 598,810
shareholders, as
reported
Restructuring,
integration, and other     6,320         11,223        30,739        28,054
charges
Settlement of legal        (48,623 )     -             (48,623 )     3,609
matters
Gain/(adjustment) on       -             410           -             (668    )
bargain purchase
Loss on prepayment of      -             549           -             549
debt
Reversal of valuation
allowance on deferred      -             (28,928 )     -             (28,928 )
tax assets
Net income
attributable to          $ 132,401     $ 157,342     $ 488,448     $ 601,426
shareholders, as
adjusted
                                                                              
Net income per basic     $ 1.64        $ 1.55        $ 4.64        $ 5.25
share, as reported
Restructuring,
integration, and other     .06           .10           .28           .25
charges
Settlement of legal        (.46    )     -             (.45    )     .03
matters
Gain/(adjustment) on       -             -             -             (.01    )
bargain purchase
Loss on prepayment of      -             -             -             -
debt
Reversal of valuation
allowance on deferred      -             (.26    )     -             (.25    )
tax assets
Net income per basic     $ 1.25        $ 1.40        $ 4.47        $ 5.27
share, as adjusted
                                                                              
Net income per diluted   $ 1.62        $ 1.53        $ 4.56        $ 5.17
share, as reported
Restructuring,
integration, and other     .06           .10           .28           .24
charges
Settlement of legal        (.45    )     -             (.44    )     .03
matters
Gain/(adjustment) on       -             -             -             (.01    )
bargain purchase
Loss on prepayment of      -             -             -             -
debt
Reversal of valuation
allowance on deferred      -             (.25    )     -             (.25    )
tax assets
Net income per diluted   $ 1.22        $ 1.38        $ 4.40        $ 5.19
share, as adjusted

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.
 

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
implementation of its new enterprise resource planning system, changes in
product supply, pricing and customer demand, competition, other vagaries in
the global components and global ECS markets, changes in relationships with
key suppliers, increased profit margin pressure, the effects of additional
actions taken to become more efficient or lower costs, risks related to the
integration of acquired businesses, changes in legal and regulatory matters,
and the company’s ability to generate additional cash flow. Forward-looking
statements are those statements, which are not statements of historical fact.
These forward-looking statements can be identified 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.

For a further discussion of factors to consider in connection with these
forward-looking statements, investors should refer to Item 1A Risk Factors of
the company’s Annual Report on Form 10-K for the year ended December 31, 2012.

 
ARROW ELECTRONICS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands except per share data)
                                              
                  Quarter Ended                 Year Ended
                  December 31,                  December 31,
                  2012           2011           2012            2011
                    (unaudited)               
                                                                              
Sales             $ 5,402,705    $ 5,440,473    $ 20,405,128    $ 21,390,264
Costs and
expenses:
Cost of sales       4,695,861      4,695,664      17,667,842      18,441,661
Selling,
general, and        480,103        469,757        1,849,534       1,892,592
administrative
expenses
Depreciation
and                 30,446         28,734         115,350         103,482
amortization
Restructuring,
integration,        11,285         14,135         47,437          37,811
and other
charges
Settlement of       (79,158   )    -              (79,158    )    5,875
legal matters
                    5,138,537      5,208,290      19,601,005      20,481,421
Operating           264,168        232,183        804,123         908,843
income
Equity in
earnings of         2,346          1,936          8,112           6,736
affiliated
companies
Interest and
other financing     22,233         28,443         101,876         105,971
expense, net
Other               -              1,562          -               (193       )
Income before       244,281        204,114        710,359         809,801
income taxes
Provision for       69,460         29,984         203,642         210,485
income taxes
Consolidated        174,821        174,130        506,717         599,316
net income
Noncontrolling      117            42             385             506
interests
Net income
attributable to   $ 174,704      $ 174,088      $ 506,332       $ 598,810
shareholders
Net income per
share:
Basic             $ 1.64         $ 1.55         $ 4.64          $ 5.25
Diluted           $ 1.62         $ 1.53         $ 4.56          $ 5.17
Average number
of shares
outstanding:
Basic               106,223        112,024        109,240         114,025
Diluted             108,105        113,878        111,077         115,932
                                                                              

 
ARROW ELECTRONICS, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands except par value)
                                               
                                                December 31,
                                                2012             2011
ASSETS
Current assets:
Cash and cash equivalents                       $ 409,684        $ 396,887
Accounts receivable, net                          4,923,898        4,482,117
Inventories                                       2,052,720        1,963,910
Other current assets                              328,999          181,677
                                                                              
Total current assets                              7,715,301        7,024,591
                                                                              
Property, plant and equipment, at cost:
Land                                              23,944           23,790
Buildings and improvements                        152,008          147,215
Machinery and equipment                           1,030,983        934,558
                                                  1,206,935        1,105,563
Less: Accumulated depreciation and                (607,294   )     (549,334  )
amortization
Property, plant and equipment, net                599,641          556,229
                                                                              
Investments in affiliated companies               65,603           60,579
Intangible assets, net                            414,033          392,763
Cost in excess of net assets of companies         1,711,703        1,473,333
acquired
Other assets                                      279,406          321,584
                                                                              
Total assets                                    $ 10,785,687     $ 9,829,079
                                                                              
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable                                $ 3,769,268      $ 3,264,088
Accrued expenses                                  776,586          660,996
Short-term borrowings, including current          364,357          33,843
portion of long-term debt
                                                                              
Total current liabilities                         4,910,211        3,958,927
                                                                              
Long-term debt                                    1,587,478        1,927,823
Other liabilities                                 300,636          267,069
                                                                              
Equity:
Shareholders' equity:
Common stock, par value $1:
Authorized – 160,000 shares in 2012 and 2011
Issued – 125,424 and 125,382 shares in 2012       125,424          125,382
and 2011, respectively
Capital in excess of par value                    1,086,239        1,076,275
Treasury stock (19,423 and 13,568 shares in       (652,867   )     (434,959  )
2012 and 2011, respectively), at cost
Retained earnings                                 3,279,289        2,772,957
Foreign currency translation adjustment           182,632          158,550
Other                                             (37,495    )     (29,393   )
                                                                              
Total shareholders' equity                        3,983,222        3,668,812
                                                                              
Noncontrolling interests                          4,140            6,448
                                                                              
Total equity                                      3,987,362        3,675,260
                                                                              
Total liabilities and equity                    $ 10,785,687     $ 9,829,079
                                                                              

 
ARROW ELECTRONICS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(unaudited)
 
                                                   Quarter Ended
                                                   December 31,
                                                   2012           2011
Cash flows from operating activities:
Consolidated net income                            $ 174,821      $ 174,130
Adjustments to reconcile consolidated net income
to net cash provided by operations:
Depreciation and amortization                        30,446         28,734
Amortization of stock-based compensation             9,685          8,945
Equity in earnings of affiliated companies           (2,346   )     (1,936   )
Deferred income taxes                                (23,380  )     (10,899  )
Restructuring, integration, and other charges        6,320          11,223
Excess tax benefits from stock-based                 54             (435     )
compensation arrangements
Other                                                (1,446   )     (554     )
Change in assets and liabilities, net of effects
of acquired businesses:
Accounts receivable                                  (554,201 )     (329,943 )
Inventories                                          37,140         214,783
Accounts payable                                     374,959        42,788
Accrued expenses                                     146,052        (10,755  )
Other assets and liabilities                         (10,354  )     20,423
Net cash provided by operating activities            187,750        146,504
                                                                              
Cash flows from investing activities:
Cash consideration paid for acquired businesses      (90,668  )     (9,238   )
Acquisition of property, plant and equipment         (36,650  )     (25,674  )
Net cash used for investing activities               (127,318 )     (34,912  )
                                                                              
Cash flows from financing activities:
Change in short-term and other borrowings            (17,607  )     1,984
Proceeds from (repayment of) long-term bank          19,600         (243,000 )
borrowings, net
Repurchase of senior notes                           -              (19,324  )
Proceeds from exercise of stock options              1,891          47
Excess tax benefits from stock-based                 (54      )     435
compensation arrangements
Repurchases of common stock                          (38,075  )     (242     )
Net cash used for financing activities               (34,245  )     (260,100 )
                                                                              
Effect of exchange rate changes on cash              24,947         829
Net increase (decrease) in cash and cash             51,134         (147,679 )
equivalents
Cash and cash equivalents at beginning of period     358,550        544,566
Cash and cash equivalents at end of period         $ 409,684      $ 396,887
                                                                              

 
ARROW ELECTRONICS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
                                                  
                                                   Year Ended
                                                   December 31,
                                                   2012           2011
Cash flows from operating activities:
Consolidated net income                            $ 506,717      $ 599,316
Adjustments to reconcile consolidated net income
to net cash provided by operations:
Depreciation and amortization                        115,350        103,482
Amortization of stock-based compensation             34,546         39,225
Equity in earnings of affiliated companies           (8,112   )     (6,736   )
Deferred income taxes                                (5,414   )     (11,377  )
Restructuring, integration, and other charges        30,739         28,054
Excess tax benefits from stock-based                 (5,029   )     (7,956   )
compensation arrangements
Other                                                (5,786   )     4,309
Change in assets and liabilities, net of effects
of acquired businesses:
Accounts receivable                                  (318,689 )     (193,492 )
Inventories                                          (62,383  )     105,150
Accounts payable                                     406,874        (465,603 )
Accrued expenses                                     38,858         (74,236  )
Other assets and liabilities                         (52,638  )     747
Net cash provided by operating activities            675,033        120,883
                                                                              
Cash flows from investing activities:
Cash consideration paid for acquired businesses      (281,918 )     (532,568 )
Acquisition of property, plant and equipment         (112,224 )     (113,941 )
Purchase of cost method investment                   (15,000  )     -
Net cash used for investing activities               (409,142 )     (646,509 )
                                                                              
Cash flows from financing activities:
Change in short-term and other borrowings            (9,812   )     (6,172   )
Proceeds from (repayment of) long-term bank          (5,400   )     354,000
borrowings, net
Repayment of bank term loan                          -              (200,000 )
Repurchase of senior notes                           -              (19,324  )
Proceeds from exercise of stock options              13,372         46,665
Excess tax benefits from stock-based                 5,029          7,956
compensation arrangements
Repurchases of common stock                          (260,870 )     (197,044 )
Net cash used for financing activities               (257,681 )     (13,919  )
                                                                              
Effect of exchange rate changes on cash              4,587          10,111
Net increase (decrease) in cash and cash             12,797         (529,434 )
equivalents
Cash and cash equivalents at beginning of year       396,887        926,321
Cash and cash equivalents at end of year           $ 409,684      $ 396,887
                                                                              

 
ARROW ELECTRONICS, INC.
SEGMENT INFORMATION
(In thousands)
 
               Quarter Ended                   Year Ended
               December 31,                    December 31,
               2012            2011            2012             2011
                 (unaudited)
Sales:
Global         $ 3,185,764     $ 3,443,034     $ 13,361,122     $ 14,853,823
components
Global ECS       2,216,941       1,997,439       7,044,006        6,536,441
Consolidated   $ 5,402,705     $ 5,440,473     $ 20,405,128     $ 21,390,264
                                                                              
Operating
income
(loss):
Global         $ 122,989       $ 176,680       $ 619,282        $ 823,774
components
Global ECS       114,249         106,413         290,970          262,893
Corporate        26,930          (50,910   )     (106,129   )     (177,824   )
(a)
Consolidated   $ 264,168       $ 232,183       $ 804,123        $ 908,843

      Includes restructuring, integration, and other charges of $11.3 million
      and $47.4 million for the quarter and year ended December 31, 2012 and
      $14.1 million and $37.8 million for the quarter and year ended December
(a)   31, 2011, respectively. Also includes a gain of $79.2 million for the
      quarter and year ended December 31, 2012 and a charge of $5.9 million
      for the year ended December 31, 2011, both of which are related to the
      settlement of legal matters.

Contact:

Arrow Electronics, Inc.
Greer Aviv, 303-824-3765
Senior Manager, Investor Relations
or
Paul J. Reilly, 631-847-1872
Executive Vice President, Finance and Operations & Chief Financial Officer
or
John Hourigan, 303-824-4586 (Media)
Director, Corporate Communications
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