Arrow Electronics Reports First-Quarter Results

  Arrow Electronics Reports First-Quarter Results

                  -- Non-GAAP earnings per share of $.89 –-

-- Global ECS posts 13^th consecutive quarter of year-over-year organic growth
                                      --

Business Wire

ENGLEWOOD, Colo. -- May 01, 2013

Arrow Electronics, Inc. (NYSE:ARW) today reported first-quarter 2013 net
income of $77.9 million, or $.72 per share on a diluted basis, compared with
net income of $113.6 million, or $1.00 per share on a diluted basis in the
first quarter of 2012. Excluding certain items in both the first quarters of
2013 and 2012 as described in the non-GAAP earnings reconciliation table found
below, net income would have been $96.0 million, or $.89 per share on a
diluted basis, in the first quarter of 2013 compared with net income of $119.8
million, or $1.05 per share on a diluted basis, in the first quarter of 2012.
First-quarter sales of $4.85 billion declined 1 percent from sales of $4.89
billion in the prior year.

“We performed well in the first quarter. Sales of $4.8 billion were in line
with our expectations and earnings per share of $.89 were above the midpoint
of our guidance. Our ECS business continues to deliver excellent performance,
reaching record-level first-quarter sales, while posting the 13^th consecutive
quarter of organic growth,” said Michael J. Long, chairman, president, and
chief executive officer. “As we look to the second quarter, we would expect
the world’s economies to be consistent with what we experienced in the first
quarter, and therefore we would expect to see normal seasonality across our
businesses.”

Global components first-quarter sales of $3.19 billion decreased 5 percent
year over year. Sales, as adjusted in the non-GAAP sales reconciliation table
below, declined 2 percent year over year. In the Americas, sales declined 5
percent year over year as market conditions weakened and customers maintained
a cautious stance. European sales were down 16 percent year over year, due to
a prospective change in the accounting for revenue related to a certain
fulfillment contract, and to a lesser extent, a worsening of the economic
conditions in the region over the past nine months. Sales in Europe, as
adjusted in the non-GAAP sales reconciliation table below, declined 6 percent.
Sales in the Asia-Pacific region increased 11 percent year over year, driven
by strength in the core business.

Global enterprise computing solutions (“ECS”) first-quarter sales of $1.66
billion increased 8 percent year over year. Sales, as adjusted in the non-GAAP
sales reconciliation table below, increased 2 percent year over year. Storage,
software, and services grew at a healthy rate year over year as customers
focus on productivity and efficiency enhancements for their organizations. In
the Americas, sales growth was above normal seasonality in the core
value-added distribution business with a stronger-than-expected close to the
quarter. In Europe, as expected, sales were modestly below normal seasonality,
as the European economies further weakened in the first quarter.

GUIDANCE

“In February we committed to delivering $40 million in annual expense
reductions during 2013. With a more thorough review of our processes and
productivity enhancement opportunities, in part driven by new systems, we will
be able to exceed that commitment and reduce expenses by more than $75 million
on an annual basis, all while selectively investing in the long-term future of
the company,” said Paul J. Reilly, executive vice president, finance and
operations, and chief financial officer.

In the second quarter the company believes that total sales will be between
$4.9 billion and $5.3 billion, with global components sales between $3.15
billion and $3.35 billion and global enterprise computing solutions sales
between $1.75 billion and $1.95 billion. As a result of this outlook, earnings
per share, on a diluted basis, excluding any charges should be in the range of
$.95 to $1.07 per share. The company’s guidance assumes an average tax rate in
the range of 27 to 29 percent, average diluted shares outstanding of 107.1
million, and an average Euro to USD exchange rate for the second quarter of
1.30 to 1.

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

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 financial results that are determined in accordance
with accounting principles generally accepted in the United States (“GAAP”),
the company also 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, gains,
and losses that the company believes impact the comparability of its results
of operations. These charges, credits, gains, and losses arise out of the
company’s efficiency enhancement initiatives, acquisitions, and prepayment of
debt. The company also provides sales on a non-GAAP basis adjusted for the
impact of foreign currency and certain other items that impact the year over
year comparison. These other items include a prospective revision of sales
related to a certain fulfillment contract to present these revenues on an
agency basis as net fees, as compared to presenting gross sales and costs of
sales (referred to as “change in presentation of sales”) and the impact of
acquisitions by adjusting the company's prior periods to include the sales of
businesses acquired as if the acquisitions had occurred at the beginning of
the period presented (referred to as "impact of acquisitions"). 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 these items 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,
sales, 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.
(In thousands except per share data)
(Unaudited)

EARNINGS RECONCILIATION
                                         Quarter Ended
                                          March 30,           March 31,
                                          2013                 2012
                                                                    
Operating income, as reported             $    137,552         $    187,449
Restructuring, integration, and               21,610              8,243
other charges
Operating income, as adjusted             $    159,162         $    195,692
                                                                    
Net income attributable to                $    77,875          $    113,628
shareholders, as reported
Restructuring, integration, and                15,495               6,141
other charges
Loss on prepayment of debt                    2,627               -
Net income attributable to                $    95,997          $    119,769
shareholders, as adjusted
                                                                    
Net income per basic share, as            $    .74             $    1.01
reported
Restructuring, integration, and                .15                  .05
other charges
Loss on prepayment of debt                    .02                 -
Net income per basic share, as            $    .91             $    1.07
adjusted
                                                                    
Net income per diluted share, as          $    .72             $    1.00
reported
Restructuring, integration, and                .14                  .05
other charges
Loss on prepayment of debt                    .02                 -
Net income per diluted share, as          $    .89             $    1.05
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.

                                                                   
SALES RECONCILIATION
                                      Quarter Ended
                                       March 30,    March 31,      % Change
                                       2013          2012
                                                                     
Consolidated sales, as reported        $ 4,849,629   $ 4,889,529     (1   )%
Impact of foreign currency               -             9,142
Impact of acquisitions                   3,219         127,454
Change in presentation of sales         -            (131,488  )   
Consolidated sales, as adjusted        $ 4,852,848   $ 4,894,637    (1   )%
                                                                     
Global components sales, as reported   $ 3,192,580   $ 3,349,554     (5   )%
Impact of foreign currency               -             11,135
Impact of acquisitions                   3,219         33,830
Change in presentation of sales         -            (131,488  )   
Global components sales, as adjusted   $ 3,195,799   $ 3,263,031    (2   )%
                                                                     
Global ECS sales, as reported          $ 1,657,049   $ 1,539,975     8    %
Impact of foreign currency               -             (1,993    )
Impact of acquisitions                  -            93,624       
Global ECS sales, as adjusted          $ 1,657,049   $ 1,631,606    2    %
                                                                     
Europe components sales, as reported   $ 886,636     $ 1,056,631     (16  )%
Impact of foreign currency               -             13,456
Change in presentation of sales         -            (131,488  )   
Europe components sales, as adjusted   $ 886,636     $ 938,599      (6   )%
                                                                          

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)
(Unaudited)
                                              
                                                Quarter Ended
                                                March 30,    March 31,
                                                2013          2012
                                                                
Sales                                           $ 4,849,629   $ 4,889,529
Costs and expenses:
Cost of sales                                     4,207,557     4,208,950
Selling, general, and administrative expenses     451,405       455,837
Depreciation and amortization                     31,505        29,050
Restructuring, integration, and other charges    21,610       8,243
                                                 4,712,077    4,702,080
Operating income                                  137,552       187,449
Equity in earnings of affiliated companies        1,983         2,184
Loss on prepayment of debt                        4,277         -
Interest and other financing expense, net        29,530       27,132
Income before income taxes                        105,728       162,501
Provision for income taxes                       27,770       48,778
Consolidated net income                           77,958        113,723
Noncontrolling interests                         83           95
Net income attributable to shareholders         $ 77,875      $ 113,628
Net income per share:
Basic                                           $ .74         $ 1.01
Diluted                                         $ .72         $ 1.00
Average number of shares outstanding:
Basic                                             105,889       112,002
Diluted                                           107,824       114,077
                                                                

ARROW ELECTRONICS, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands except par value)
                                                             
                                               March 30,        December 31,
                                               2013             2012
                                               (Unaudited)
ASSETS
Current assets:
Cash and cash equivalents                      $ 364,151        $ 409,684
Accounts receivable, net                         4,493,418        4,923,898
Inventories                                      2,066,516        2,052,720
Other current assets                            381,398        328,999    
Total current assets                            7,305,483      7,715,301  
Property, plant, and equipment, at cost:
Land                                             23,871           23,944
Buildings and improvements                       151,576          152,008
Machinery and equipment                         1,050,207      1,030,983  
                                                 1,225,654        1,206,935
Less: Accumulated depreciation and              (624,115   )    (607,294   )
amortization
Property, plant, and equipment, net             601,539        599,641    
Investments in affiliated companies              66,547           65,603
Intangible assets, net                           403,972          414,033
Cost in excess of net assets of companies        1,704,241        1,711,703
acquired
Other assets                                    278,347        279,406    
Total assets                                   $ 10,360,129    $ 10,785,687 
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable                               $ 3,282,020      $ 3,769,268
Accrued expenses                                 608,362          776,586
Short-term borrowings, including current        36,957         364,357    
portion of long-term debt
Total current liabilities                       3,927,339      4,910,211  
                                                                  
Long-term debt                                   2,204,806        1,587,478
Other liabilities                                319,310          300,636
Equity:
Shareholders' equity:
Common stock, par value $1:
Authorized – 160,000 shares in both 2013 and
2012
Issued –125,424 shares in both 2013 and 2012     125,424          125,424
Capital in excess of par value                   1,046,374        1,086,239
Treasury stock (20,378 and 19,423 shares in      (704,043   )     (652,867   )
2013 and 2012, respectively), at cost
Retained earnings                                3,357,164        3,279,289
Foreign currency translation adjustment          116,462          182,632
Other                                           (36,930    )    (37,495    )
Total shareholders' equity                       3,904,451        3,983,222
Noncontrolling interests                        4,223          4,140      
Total equity                                    3,908,674      3,987,362  
Total liabilities and equity                   $ 10,360,129    $ 10,785,687 
                                                                             

ARROW ELECTRONICS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
                                                 
                                                   Quarter Ended
                                                   March 30,     March 31,
                                                   2013           2012
Cash flows from operating activities:
Consolidated net income                            $ 77,958       $ 113,723
Adjustments to reconcile consolidated net income
to net cash provided by (used for) operations:
Depreciation and amortization                        31,505         29,050
Amortization of stock-based compensation             5,983          7,255
Equity in earnings of affiliated companies           (1,983   )     (2,184   )
Deferred income taxes                                19,584         18,961
Restructuring, integration, and other charges        15,495         6,141
Excess tax benefits from stock-based                 (6,475   )     (4,947   )
compensation arrangements
Loss on prepayment of debt                           2,627          -
Other                                                (1,031   )     (1,457   )
Change in assets and liabilities, net of effects
of acquired businesses:
Accounts receivable                                  388,980        334,014
Inventories                                          (25,377  )     (24,357  )
Accounts payable                                     (467,797 )     (135,198 )
Accrued expenses                                     (173,437 )     (64,564  )
Other assets and liabilities                        (45,436  )    (26,102  )
Net cash provided by (used for) operating           (179,404 )    250,335  
activities
Cash flows from investing activities:
Cash consideration paid for acquired businesses      (9,382   )     (160,543 )
Acquisition of property, plant, and equipment        (26,751  )     (22,253  )
Other                                               (3,000   )    -        
Net cash used for investing activities              (39,133  )    (182,796 )
Cash flows from financing activities:
Change in short-term and other borrowings            (14,342  )     (9,074   )
Proceeds from long-term bank borrowings, net         44,300         329,700
Net proceeds from note offering                      591,156        -
Redemption of senior notes                           (338,184 )     -
Proceeds from exercise of stock options              10,600         10,138
Excess tax benefits from stock-based                 6,475          4,947
compensation arrangements
Repurchases of common stock                         (113,504 )    (57,684  )
Net cash provided by financing activities           186,501      278,027  
Effect of exchange rate changes on cash             (13,497  )    (2,745   )
Net increase (decrease) in cash and cash             (45,533  )     342,821
equivalents
Cash and cash equivalents at beginning of period    409,684      396,887  
Cash and cash equivalents at end of period         $ 364,151     $ 739,708  
                                                                             

ARROW ELECTRONICS, INC.
SEGMENT INFORMATION
(In thousands)
(unaudited)
                        
                             Quarter Ended
                             March 30,                  March 31,
                             2013                        2012
                                                         
Sales:
Global components            $    3,192,580              $    3,349,554
Global ECS                       1,657,049                 1,539,975    
Consolidated                 $    4,849,629             $    4,889,529    
                                                         
Operating income
(loss):
Global components            $    128,280                $    170,708
Global ECS                        61,591                      55,487
Corporate (a)                    (52,319      )             (38,746      )
Consolidated                 $    137,552               $    187,449      

(a) Includes restructuring, integration, and other charges of $21.6 million
and $8.2 million for the first quarters of 2013 and 2012, respectively.


Contact:

Arrow Electronics, Inc.
Contacts:
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
Media Contact:
John Hourigan, 303-824-4586
Vice President, Global Communications
 
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