-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, DItJI8hG0wMrLUZ0/gFjb8O1jvx8tWUw6RdzAtxlrSRKm+przBvFNB9swe+RRLsw b1pwb2RAnRBju0YlHIGgNA== 0000007536-94-000007.txt : 19940819 0000007536-94-000007.hdr.sgml : 19940819 ACCESSION NUMBER: 0000007536-94-000007 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19940630 FILED AS OF DATE: 19940811 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ARROW ELECTRONICS INC CENTRAL INDEX KEY: 0000007536 STANDARD INDUSTRIAL CLASSIFICATION: 5065 IRS NUMBER: 111806155 STATE OF INCORPORATION: NY FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-04482 FILM NUMBER: 94543161 BUSINESS ADDRESS: STREET 1: 25 HUB DR CITY: MELVILLE STATE: NY ZIP: 11747 BUSINESS PHONE: 5163911300 10-Q 1 FORM 10-Q 6/30/94 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 1994 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission file number 1-4482 ARROW ELECTRONICS, INC. (Exact name of Registrant as specified in its charter) New York 11-1806155 (State or other jurisdiction of (I.R.S. Employer Identifi- incorporation or organization) cation Number) 25 Hub Drive, Melville, New York 11747 (Address of principal executive (Zip Code) offices) Registrant's telephone number, including area code (516) 391-1300 Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. Common stock, $1 par value: 31,506,610 shares outstanding at August 1, 1994. PART I. FINANCIAL INFORMATION Item 1. Financial Statements. ARROW ELECTRONICS, INC. CONSOLIDATED STATEMENT OF OPERATIONS (IN THOUSANDS EXCEPT PER SHARE DATA) (UNAUDITED)
Six Months Ended Three Months Ended June 30 June 30 1994 1993 1994 1993 Sales $1,656,430 $1,135,460 $835,647 $584,069 Costs and expenses: Cost of products sold 1,329,417 894,522 668,997 463,222 Selling, general and administrative expenses 197,264 149,134 100,782 74,963 Depreciation and amortization 10,858 6,828 5,392 3,500 1,537,539 1,050,484 775,171 541,685 Operating income 118,891 84,976 60,476 42,384 Equity in earnings of affiliated company - 613 - 313 Interest expense 18,393 13,327 9,372 6,399 Earnings before income taxes and minority interest 100,498 72,262 51,104 36,298 Provision for income taxes 40,332 28,598 20,442 14,562 Earnings before minority interest 60,166 43,664 30,662 21,736 Minority interest 8,342 6,568 4,099 2,622 Net income $ 51,824 $ 37,096 $ 26,563 $ 19,114 Net income used in per common share calculation (reflecting deduction of preferred stock dividends) $ 51,824 $ 36,454 $ 26,563 $ 18,793 Net income per common share: Primary $1.62 $1.21 $ .83 $ .62 Fully diluted $1.51 $1.12 $ .78 $ .58 Average number of common shares and common share equivalents outstanding: Primary 31,903 30,147 31,895 30,306 Fully diluted 35,676 34,966 35,667 35,112 See accompanying notes
-2- ARROW ELECTRONICS, INC. CONSOLIDATED BALANCE SHEET (DOLLARS IN THOUSANDS)
June 30, December 31, 1994 1993 (Unaudited) ASSETS Current assets: $ 45,926 $ 60,730 Cash and short-term investments Accounts receivable, less allowance for doubtful accounts ($23,667 in 1994 and $16,491 in 1993) 498,413 363,084 Inventories 489,849 434,953 Prepaid expenses and other assets 14,965 10,841 Total current assets 1,049,153 869,608 Property, plant and equipment at cost: Land 5,700 5,700 Buildings and improvements 37,414 33,709 Machinery and equipment 62,919 55,148 106,033 94,557 Less accumulated depreciation and amortization 44,140 38,606 61,893 55,951 Investment in affiliated company - 13,371 Investments in net assets of acquired businesses 44,842 - Cost in excess of net assets of companies acquired, less accumulated amortization ($16,984 in 1994 and $13,514 in 1993) 238,126 199,383 Other assets 42,126 52,991 $1,436,140 $1,191,304
See accompanying notes. -3- ARROW ELECTRONICS, INC. CONSOLIDATED BALANCE SHEET (DOLLARS IN THOUSANDS)
June 30, December 31, 1994 1993 (Unaudited) LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable $ 265,454 $ 190,013 Accrued expenses 120,370 104,146 Accrued interest 6,353 5,421 Short-term borrowings, including current maturities of long-term debt 93,626 40,965 Total current liabilities 485,803 340,545 Long-term debt 172,550 153,828 Deferred income taxes and other liabilities 49,106 43,457 Subordinated debentures 125,000 125,000 Minority interest 84,244 71,459 Shareholders' equity: Common stock, par value $1: Authorized - 60,000,000 shares Issued - 31,510,957 shares in 1994 and 31,298,335 shares in 1993 31,511 31,298 Capital in excess of par value 315,906 310,203 Retained earnings 176,512 124,689 Foreign currency translation adjustment (1,596) (7,492) 522,333 458,698 Less: Treasury shares (11,247 in 1994 and 10,872 in 1993) at cost 13 12 Unamortized employee stock awards 2,883 1,671 519,437 457,015 $1,436,140 $1,191,304
See accompanying notes. -4- ARROW ELECTRONICS, INC. CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE SIX MONTHS ENDED JUNE 30, 1994 AND 1993 (IN THOUSANDS) (UNAUDITED)
1994 1993 Cash flows from operating activities: Net income $51,824 $37,096 Adjustments to reconcile net income to net cash provided by (used for) operations: Minority interest in earnings 8,342 6,568 Depreciation and amortization 11,996 7,827 Equity in undistributed earnings of affiliated company - (613) Deferred taxes 3,637 7,798 Change in assets and liabilities, net of effects of acquired businesses: Accounts receivable (57,755) (53,791) Inventories (21,400) (15,726) Prepaid expenses and other assets 557 2,836 Accounts payable 48,886 17,414 Accrued expenses (3,432) 13,037 Accrued interest 771 3,959 Other (3,307) (2,843) Net cash provided by operating activities 40,119 23,562 Cash flows from investing activities: Acquisitions of property, plant and equipment, net (6,630) (4,866) Cash consideration paid for acquired businesses (80,623) (57,715) Repayment by/(loan to) affiliate 7,730 (7,000) Net cash (used for) investing activities (79,523) (69,581) Cash flows from financing activities: Change in notes payable to banks 12,330 2,784 Repayment of long-term debt (7,740) (242) Proceeds from common stock offering - 17,746 Proceeds from exercise of stock options 2,443 1,464 Proceeds from long-term debt 24,351 38,652 Distribution to partners (7,696) (904) Dividends paid - (642) Financing fees paid (200) (1,032) Net cash provided by financing activities 23,488 57,826 Net increase (decrease) in cash and short-term investments (15,916) 11,807 Cash and short-term investments at beginning of period 60,730 30,450 Cash and short-term investments from affiliate at beginning of period 1,112 - Cash and short-term investments at end of period $45,926 $42,257 Supplemental disclosures of cash flow information Cash paid during the period: Income taxes $21,630 $ 8,000 Interest $20,473 $ 7,351
See accompanying notes -5- ARROW ELECTRONICS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS JUNE 30, 1994 (UNAUDITED) Note A -- Basis of presentation The accompanying consolidated financial statements reflect all adjustments, consisting only of normal recurring accruals, which are, in the opinion of management, necessary for a fair presentation of the consolidated financial position and results of operations at and for the periods presented. Such financial statements do not include all the information or footnotes necessary for a complete presentation and, accordingly, should be read in conjunction with the company's audited consolidated financial statements for the year ended December 31, 1993 and the notes thereto. The results of operations for the interim periods are not necessarily indicative of results for the full year. Note B -- Net income per common share Net income per common share for 1994 is based upon the weighted average number of shares of common stock and common stock equivalents outstanding. For the six months ended June 30, 1994 and 1993, the average number of common stock equivalents was 461,103 and 640,177 respectively. For the quarter ended June 30, 1994 and 1993, the average number of common stock equivalents was 409,705 and 628,324, respectively. Net income per common share on a fully diluted basis for 1994 assumes that the 5-3/4% convertible subordinated debentures (the "convertible subordinated debentures") were converted to common stock at the beginning of the period and the related interest expense, net of taxes, was eliminated. Net income per common share for 1993 is based upon the weighted average number of common stock and common stock equivalents outstanding after deducting preferred stock dividends related to the series B $19.375 convertible exchangeable preferred stock (the "convertible exchangeable preferred stock"), which was converted into common stock in September 1993. Net income per common share on a fully diluted basis for 1993 assumes that the convertible exchangeable preferred stock and the convertible subordinated debentures were converted to common stock at the beginning of the period. The dividends related to the convertible exchangeable preferred stock and the interest expense on the convertible subordinated debentures, net of taxes, were eliminated. Note C -- Acquisition of electronics distribution businesses In January 1994, the company acquired an additional 15% share, for approximately $23,400,000, in Spoerle Handelsgesellschaft mbH and Co. and its general partner, Spoerle GmbH (collectively, "Spoerle"), the largest distributor of electronic components in Germany, increasing its holdings to a 70% majority interest. During the first quarter of 1994, the company acquired an additional 11% share in Silverstar Ltd. S.p.A. ("Silverstar"), the largest distributor of electronic components in Italy, increasing its holdings to a 61% majority interest. The acquisitions are being accounted -6- for as purchase transactions, and Silverstar is consolidated with the company, effective January 1, 1994. Prior to 1994 the company's investment in Silverstar was accounted for under the equity method. In addition, in January 1994 the company acquired the electronic component distribution business of Field Oy, the largest distributor of electronic components in Finland, and in March 1994 the company acquired TH:s Elektronik AB and its subsidiaries, a group of electronic distribution companies serving Norway, Sweden, and Finland. In April 1994, the company acquired Exatec A/S, one of the largest distributors of semiconductors in Denmark. In May 1994, the company acquired Texny (Holdings) Limited, one of Hong Kong's leading distributors of electronic components. The acquisitions are being accounted for as purchase transactions beginning in their respective month of acquisition. In January 1993, the company acquired an additional 15% share in Spoerle, increasing its holdings to a then 55% majority interest. In May 1993, the company acquired the high-reliability electronic component distribution and value-added service businesses of Zeus Components, Inc. ("Zeus"). In June 1993, the company acquired Microprocessor & Memory Distribution Limited ("MMD"), a U.K.-based electronics distributor which focuses on the distribution of high-technology semiconductor products. In August 1993, the company acquired Components Agent Limited ("CAL"), one of the largest electronics distributors in Hong Kong. During the third quarter of 1993 the company acquired a majority interest in Amitron S.A. and the ATD Group, electronics distributors serving the Spanish and Portuguese markets. In November 1993, the company augmented its French operations by acquiring CCI Electronique. Set forth below for comparative purposes is the pro forma combined summary of operations for the six months ended June 30, 1993 as though the acquisitions in 1993 had occurred on January 1, 1993. Six Months Ended June 30, 1993 (In thousands except per share data) Sales $1,249,995 Operating income 87,970 Net income 38,020 Net income per common share: Primary 1.23 Fully diluted 1.13 Average number of common shares and common share equivalents outstanding: Primary 30,656 Fully diluted 35,505 The unaudited pro forma combined summary of operations has been prepared utilizing the historical financial statements of Arrow and the acquired businesses. The unaudited pro forma combined summary of operations includes the effect of the purchase price allocation adjustments and the additional interest expense on debt incurred in connection with the acquisitions as if the debt had been outstanding from the beginning of the period. The purchase price allocation adjustments include the adjustment of -7- the net assets acquired to fair market value and the estimated costs associated with the integration of the businesses. Such estimated costs include professional fees as well as real estate lease termination costs, costs associated with the elimination of certain redundant franchised lines, and severance and other expenses related to personnel performing duplicative functions, all of which are associated with facilities and personnel of the acquired businesses. The unaudited pro forma combined summary of operations does not purport to be indicative of the results which actually would have been obtained if the acquisitions had been made at the beginning of 1993. The unaudited pro forma combined summary of operations does not reflect sales attrition which may result from the combination of Zeus and MMD with Arrow's businesses. It also does not reflect the cost savings the company achieved from the combination of the Zeus businesses with its own and it expects to achieve when MMD is combined with the company's UK businesses. Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations. Included in 1994's consolidated results is Silverstar, which was accounted for under the equity method prior to January 1994 when Arrow increased its holdings to a majority interest. Sales Consolidated sales for the six months and second quarter of 1994 increased 45.9% and 43.1% compared with year-earlier periods. Excluding Silverstar, sales for the first six months and second quarter of 1994 were $1.5 billion and $777 million, respectively, an increase of 36.3% and 33% over the comparable year-earlier periods. Operating income The company recorded operating income of $118.9 million and $60.5 million in the first six months and second quarter of 1994, respectively, compared with $85 million and $42.4 million, respectively, in year-earlier periods. The improvement in operating income over the 1993 periods reflects the impact of increased sales, acquisitions, continued economies of scale and expense containment efforts reducing operating expenses as a percentage of sales, and the consolidation of Silverstar. Excluding Silverstar, operating income was $107.5 million and $54 million in the first six months and second quarter of 1994, respectively, and operating expenses as a percentage of sales decreased from 13.7% in the first six months of 1993 to 12.4% and from 13.4% in the second quarter of 1993 to 12.5%. Interest expense Interest expense of $18.4 million and $9.4 million in the first six months and second quarter of 1994, respectively, increased from $13.3 million during the first six months of 1993 and $6.4 million in the comparable quarter of 1993. The increase from the first six months and second quarter of 1993 reflects the borrowings associated with the consolidation of Silverstar, the acquisition of the incremental 15% of Spoerle in 1994, and the incremental interest associated with businesses acquired subsequent to the second quarter of 1993. -8- Income taxes During the first six months and second quarter of 1994, the company recorded a provision for taxes at an effective tax rate of 40.1% and 40% compared with 39.6% and 40.1%, respectively, in the earlier periods. Net income The company recorded net income of $51.8 and $26.6 million in the first six months and second quarter of 1994, respectively, compared with $37.1 million in the first six months of 1993 and $19.1 million in the second quarter of 1993. The increase in net income over the year-earlier periods is due to increased sales and lower operating expenses as a percentage of sales offset in part by an increase in interest expense as previously discussed. Liquidity and capital resources The company maintains a high level of current assets, primarily accounts receivable and inventories. Consolidated current assets as a percentage of total assets were approximately 75% and 74% at June 30, 1994 and 1993, respectively, excluding the effect of the investments in net assets of acquired businesses. The net amount of cash provided by the company's operating activities during the first six months of 1994 was $40.1 million, principally reflecting higher net earnings. The net amount of cash used for investing activities was $79.5 million, including $80.6 million for various acquisitions. The net amount of cash provided by financing activities was $23.5 million, principally reflecting the company's U.S. credit agreements and German bank borrowings, offset in part by the distribution to partners and the net repayment of debts. The net amount of cash provided by the company's operating activities during the first six months of 1993 was $23.6 million, principally reflecting increased earnings offset in part by increased working capital requirements supporting higher sales. The net amount of cash used for investing activities was $69.6 million, including approximately $57.7 million for the acquisition of Zeus, MMD, and an additional 15% interest in Spoerle. The net amount of cash provided by financing activities was $57.8 million, principally reflecting the proceeds from the company's U.S. credit agreement, German bank borrowings, and the company's May 1993 common stock offering, offset in part by the payment of financing fees and preferred stock dividends. The company believes that its working capital, funds available under its credit agreements, and additional funds generated from operations will be sufficient to satisfy its cash requirements at least through 1996. Item 4. Submission of Matters to a Vote of Security Holders. (a) The company's Annual Meeting of Shareholders was held on May 10, 1994 (the "Annual Meeting"). (c) The matters voted upon at the Annual Meeting and the results of the voting were as follows: -9- (i) The shareholders voted 25,096,973 shares in favor, 578,707 shares against, and 922,029 shares in abstention with respect to the adoption of the Chief Executive Officer Performance Bonus Plan. There were no broker non-votes to the adoption of this plan. (ii) The shareholders voted 26,408,572 shares in favor, 144,762 shares against, and 44,375 shares in abstention with respect to the appointment of Ernst & Young as auditors of the company. There were no broker non-votes to this appointment. (iii) The following individuals were elected by the shareholders to serve as Directors: Shares Broker Non- Board Member In Favor Against Abstention Votes Daniel W. Duval 26,325,205 272,504 - - Carlo Giersch 26,439,075 158,634 - - J. Spencer Gould 26,432,409 165,300 - - Stephen P. Kaufman 26,436,976 160,733 - - Lawrence R. Kem 26,436,553 161,156 - - Robert E. Klatell 26,439,605 158,104 - - Steven W. Menefee 26,323,997 273,712 - - Richard S. Rosenbloom 26,322,424 275,285 - - John C. Waddell 26,326,889 270,820 - - Item 6. Exhibits and Reports on Form 8-K. (a) Exhibits. 2 - Agreement and Plan of Merger dated as of June 24, 1994 by and among Arrow Electronics, Inc., AFG Acquisition Company and Gates/FA Distributing, Inc. (incorporated by reference to Exhibit 2 to the company's Registration Statement on Form S-4, Registration No. 33-54413). 11 - Statement Re: Computation of Earnings Per Share (b) Reports on Form 8-K. During the quarter ended June 30, 1994, the company filed no Current Reports on Form 8-K. -10- SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. ARROW ELECTRONICS, INC. Date: August 11, 1994 By:/s/ Robert E. Klatell Robert E. Klatell Senior Vice President and Chief Financial Officer Date: August 11, 1994 By:/s/ Paul J. Reilly Paul J. Reilly Controller -11- EX-11 2 EXHIBIT 11 Exhibit 11 ARROW ELECTRONICS, INC. STATEMENT RE: COMPUTATION OF EARNINGS PER SHARE (In thousands except per share data)
Six Months Ended Three Months Ended June 30 June 30 1994 1993 1994 1993 Primary Average shares of common stock outstanding 31,442 29,507 31,485 29,678 Net effect of dilutive stock options-based on the treasury method 461 640 410 628 Total 31,903 30,147 31,895 30,306 Net income $51,824 $37,096 $26,563 $19,114 Less preferred stock dividends - 642 - 321 Total $51,824 $36,454 $26,563 $18,793 Per share amount $ 1.62 $ 1.21 $ .83 $ .62 Fully Diluted Average shares of common stock outstanding 31,442 29,507 31,485 29,678 Net effect of dilutive stock options-based on the treasury method 461 677 409 652 Assumed conversion of 5-3/4% convertible subordinated debentures 3,773 3,773 3,773 3,773 Assumed conversion of preferred stock - 1,009 - 1,009 Total 35,676 34,966 35,667 35,112 Net income $51,824 $37,096 $26,563 $19,114 Add interest on 5-3/4% convertible subordinated debentures, net of income tax effect 2,156 2,201 1,078 1,101 Total $53,980 $39,297 $27,641 $20,215 Per share amount $ 1.51 $ 1.12 $ .78 $ .58
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