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Arrow Electronics Reports Third-Quarter Results

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)

(unaudited)

 

Quarter Ended

Nine Months Ended

September 29,2012

   

October 1,2011

September 29,2012

   

October 1,2011

 
Operating income, as reported $ 163,817 $ 209,162 $ 539,955 $ 676,660
Restructuring, integration, and other charges 14,562 8,848 36,152 23,676
Settlement of legal matter   -   -   -   5,875
Operating income, as adjusted $ 178,379 $ 218,010 $ 576,107 $ 706,211
 
Net income attributable to shareholders,

as reported

$ 103,617 $ 132,216 $ 331,628 $ 424,722
Restructuring, integration, and other charges 8,576 6,048 24,419 16,831
Settlement of legal matter - - - 3,609
Gain on bargain purchase   -   -   -   (1,078 )
Net income attributable to shareholders,

as adjusted

$ 112,193 $ 138,264 $ 356,047 $ 444,084
 
Net income per basic share, as reported $ .96 $ 1.17 $ 3.01 $ 3.70
Restructuring, integration, and other charges .08 .05 .22 .15
Settlement of legal matter - - - .03
Gain on bargain purchase   -   -   -   (.01 )
Net income per basic share, as adjusted $ 1.04 $ 1.22 $ 3.23 $ 3.87
 
Net income per diluted share, as reported $ .94 $ 1.15 $ 2.96 $ 3.64
Restructuring, integration, and other charges .08 .05 .22 .14
Settlement of legal matter - - - .03
Gain on bargain purchase   -   -   -   (.01 )
Net income per diluted share, as adjusted $ 1.02 $ 1.20 $ 3.18 $ 3.81
 
  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, 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.

   

ARROW ELECTRONICS, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(In thousands except per share data)

(unaudited)

 
Quarter Ended Nine Months Ended

September 29,2012

 

October 1,2011

September 29,2012

 

October 1,2011

     
Sales $ 4,962,331 $ 5,186,857 $ 15,002,423 $ 15,949,791
Costs and expenses:
Cost of sales 4,299,612 4,475,718 12,971,981 13,745,997
Selling, general and administrative expenses 456,521 467,325 1,369,431 1,422,835
Depreciation and amortization 27,819 25,804 84,904 74,748
Restructuring, integration, and other charges 14,562 8,848 36,152 23,676
Settlement of legal matter   -   -   -   5,875
  4,798,514   4,977,695   14,462,468   15,273,131
Operating income 163,817 209,162 539,955 676,660
Equity in earnings of affiliated companies 2,154 2,179 5,766 4,800
Gain on bargain purchase - - - 1,755
Interest and other financing expense, net   23,956   25,225   79,643   77,528
Income before income taxes 142,015 186,116 466,078 605,687
Provision for income taxes   38,323   53,738   134,182   180,501
Consolidated net income 103,692 132,378 331,896 425,186
Noncontrolling interests   75   162   268   464
Net income attributable to shareholders $ 103,617 $ 132,216 $ 331,628 $ 424,722
Net income per share:
Basic $ .96 $ 1.17 $ 3.01 $ 3.70
Diluted $ .94 $ 1.15 $ 2.96 $ 3.64
Average number of shares outstanding:
Basic 108,301 113,378 110,245 114,680
Diluted 109,894 114,940 112,096 116,557
 

     

ARROW ELECTRONICS, INC.

CONSOLIDATED BALANCE SHEETS

(In thousands except par value)

 
September 29, December 31,
2012 2011
ASSETS (unaudited)
Current assets:
Cash and cash equivalents $ 358,550 $ 396,887

Accounts receivable, net

4,336,757 4,482,117
Inventories 2,079,446 1,963,910
Other current assets   189,800   181,677
Total current assets   6,964,553   7,024,591
Property, plant and equipment, at cost:
Land 23,855 23,790
Buildings and improvements 149,226 147,215
Machinery and equipment   1,003,816   934,558
1,176,897 1,105,563
Less: Accumulated depreciation and amortization   (593,744 )   (549,334 )
Property, plant and equipment, net   583,153   556,229
Investments in affiliated companies 64,232 60,579
Intangible assets, net 424,548 392,763
Cost in excess of net assets of companies acquired 1,705,811 1,473,333
Other assets   333,066   321,584
Total assets $ 10,075,363 $ 9,829,079
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable $ 3,372,036 $ 3,264,088
Accrued expenses 702,546 660,996
Short-term borrowings, including current portion of

long-term debt

  379,470   33,843
Total current liabilities   4,454,052   3,958,927
 
Long-term debt 1,561,976 1,927,823
Other liabilities 264,006 267,069
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 and 2011,

respectively

125,424 125,382
Capital in excess of par value 1,077,936 1,076,275
Treasury stock (18,742 and 13,568 shares in 2012 and

2011, respectively), at cost

(629,231 ) (434,959 )
Retained earnings 3,104,585 2,772,957
Foreign currency translation adjustment 140,858 158,550
Other   (28,266 )   (29,393 )
Total shareholders' equity 3,791,306 3,668,812
Noncontrolling interests   4,023   6,448
Total equity   3,795,329   3,675,260
Total liabilities and equity $ 10,075,363 $ 9,829,079
 

   

ARROW ELECTRONICS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(unaudited)

 
Quarter Ended

September 29,2012

 

October 1,2011

Cash flows from operating activities:
Consolidated net income $ 103,692 $ 132,378
Adjustments to reconcile consolidated net income to net cash provided by operations:
Depreciation and amortization 27,819 25,804
Amortization of stock-based compensation 10,715 9,102
Equity in earnings of affiliated companies (2,154 ) (2,179 )
Deferred income taxes 1,634 6
Restructuring, integration, and other charges 8,576 6,048
Excess tax benefits from stock-based compensation arrangements (102 ) (641 )
Other (1,443 ) 881
Change in assets and liabilities, net of effects of acquired businesses:
Accounts receivable 115,535 22,867
Inventories 6,298 4,171
Accounts payable (77,510 ) (97,476 )
Accrued expenses (32,565 ) (18,230 )
Other assets and liabilities   15,834   36,350
Net cash provided by operating activities   176,329   119,081
Cash flows from investing activities:
Cash consideration paid for acquired businesses (4,053 ) (80,993 )
Acquisition of property, plant and equipment   (26,710 )   (27,927 )
Net cash used for investing activities   (30,763 )   (108,920 )
Cash flows from financing activities:
Change in short-term and other borrowings 20,372 (1,792 )
Proceeds from (repayment of) long-term bank borrowings, net (62,800 ) 304,500
Repayment of bank term loan - (200,000 )
Proceeds from exercise of stock options 715 472
Excess tax benefits from stock-based compensation arrangements 102 641
Repurchases of common stock   (64,997 )   (99,941 )
Net cash provided by (used for) financing activities   (106,608 )   3,880
Effect of exchange rate changes on cash   (6,240 )   (499 )
Net increase in cash and cash equivalents 32,718 13,542
Cash and cash equivalents at beginning of period   325,832   531,024
Cash and cash equivalents at end of period $ 358,550 $ 544,566
 
 

   

ARROW ELECTRONICS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(unaudited)

 
Nine Months Ended

September 29,2012

 

October 1,2011

Cash flows from operating activities:
Consolidated net income $ 331,896 $ 425,186

Adjustments to reconcile consolidated net income to net cash provided by (used for) operations:

Depreciation and amortization 84,904 74,748
Amortization of stock-based compensation 24,861 30,280
Equity in earnings of affiliated companies (5,766 ) (4,800 )
Deferred income taxes 17,966 (478 )
Restructuring, integration, and other charges 24,419 16,831
Settlement of legal matter - 3,609
Excess tax benefits from stock-based compensation arrangements (5,083 ) (7,521 )
Other (4,340 ) 1,254
Change in assets and liabilities, net of effects of acquired businesses:
Accounts receivable 235,512 136,451
Inventories (99,523 ) (109,633 )
Accounts payable 31,915 (508,391 )
Accrued expenses (107,194 ) (63,481 )
Other assets and liabilities   (42,284 )   (19,676 )
Net cash provided by (used for) operating activities   487,283   (25,621 )
Cash flows from investing activities:
Cash consideration paid for acquired businesses (191,250 ) (523,330 )
Acquisition of property, plant and equipment (75,574 ) (88,267 )
Purchase of cost method investment   (15,000 )   -
Net cash used for investing activities   (281,824 )   (611,597 )
Cash flows from financing activities:
Change in short-term and other borrowings 7,795 (8,156 )
Proceeds from (repayment of) long-term bank borrowings, net (25,000 ) 597,000
Repayment of bank term loan - (200,000 )
Proceeds from exercise of stock options 11,481 46,618
Excess tax benefits from stock-based compensation arrangements 5,083 7,521
Repurchases of common stock   (222,795 )   (196,802 )
Net cash provided by (used for) financing activities   (223,436 )   246,181
Effect of exchange rate changes on cash   (20,360 )   9,282
Net decrease in cash and cash equivalents (38,337 ) (381,755 )
Cash and cash equivalents at beginning of period   396,887   926,321
Cash and cash equivalents at end of period $ 358,550 $ 544,566
 

     

ARROW ELECTRONICS, INC.

SEGMENT INFORMATION

(In thousands)

(unaudited)

 
Quarter Ended Nine Months Ended

September 29,2012

 

October 1,2011

September 29,2012

 

October 1,2011

Sales:
Global components $ 3,372,117 $ 3,648,858 $ 10,175,358 $ 11,410,789
Global ECS   1,590,214   1,537,999   4,827,065   4,539,002
Consolidated $ 4,962,331 $ 5,186,857 $ 15,002,423 $ 15,949,791
 
Operating income (loss):
Global components $ 155,061 $ 194,178 $ 496,293 $ 647,094
Global ECS 55,273 53,710 176,721 156,480
Corporate (a)   (46,517 )   (38,726 )   (133,059 )   (126,914 )
Consolidated $ 163,817 $ 209,162 $ 539,955 $ 676,660
 
(a)   Includes restructuring, integration, and other charges of $14.6 million and $36.2 million for the third quarter and first nine months of 2012 and $8.8 million and $23.7 million for the third quarter and first nine months of 2011, respectively. Also included in the first nine months of 2011 is a charge of $5.9 million related to the settlement of a legal matter.




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