-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, IKiZTjxSVPEW4RJf1w2zG+L3A8oD9IjvYEQ2fUk7hMbFaALgHqaj9zKbT1Fn5a6h 3rw5+oj46wTgQ+e5SQD0Mg== 0001157523-03-003276.txt : 20030724 0001157523-03-003276.hdr.sgml : 20030724 20030724104858 ACCESSION NUMBER: 0001157523-03-003276 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20030724 ITEM INFORMATION: Regulation FD Disclosure FILED AS OF DATE: 20030724 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ARROW ELECTRONICS INC CENTRAL INDEX KEY: 0000007536 STANDARD INDUSTRIAL CLASSIFICATION: WHOLESALE-ELECTRONIC PARTS & EQUIPMENT, NEC [5065] IRS NUMBER: 111806155 STATE OF INCORPORATION: NY FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-04482 FILM NUMBER: 03799742 BUSINESS ADDRESS: STREET 1: 25 HUB DR CITY: MELVILLE STATE: NY ZIP: 11747 BUSINESS PHONE: 5163911300 MAIL ADDRESS: STREET 1: 50 MARCUS DR CITY: MELVILLE STATE: NY ZIP: 11747 8-K 1 a4440963.txt ARROW ELECTRONICS 8-K SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 FORM 8-K CURRENT REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 Date of Report (Date of earliest event reported): July 24, 2003 ARROW ELECTRONICS, INC. (Exact Name of Registrant as Specified in Charter) NEW YORK 1-4482 (State or Other Jurisdiction (Commission File of Incorporation) Number) 50 MARCUS DRIVE, MELVILLE, NEW YORK (Address of Principal Executive Offices) Registrant's telephone number, including area code: (631) 847-2000 N/A (Former Name or Former Address, if Changed Since Last Report) Item 9. Regulation FD Disclosure On July 24, 2003, the Registrant issued a press release announcing the corporation's second quarter 2003 results. A copy of the press release is attached hereto as an Exhibit (99.1). 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 hereunto duly authorized. ARROW ELECTRONICS, INC. By: /s/Peter S. Brown --------------------- Name: Peter S. Brown Title: Senior Vice President EXHIBIT INDEX The following exhibit is filed herewith: Exhibit Description - ------- ----------- 99.1 Press release issued by Arrow Electronics, Inc., dated July 24, 2003, announcing the corporation's second quarter 2003 earnings. EX-99 3 a4440963ex991.txt EXHIBIT 99.1 Exhibit 99.1 Arrow Electronics Posts Second Quarter Results; Continues Focus On Operating Efficiencies MELVILLE, N.Y.--(BUSINESS WIRE)--July 24, 2003--Arrow Electronics, Inc. (NYSE:ARW) today reported second quarter 2003 net income of $6.8 million ($.07 per share) on sales of $2.12 billion, compared with a net loss of $6 million ($.06 per share) on sales of $1.84 billion in last year's second quarter. The company's results for the second quarter of 2003 and 2002 include a number of items outlined below that impact their comparability. Excluding those items, net income for the quarter ended June 30, 2003 would have been $16.8 million ($.17 per share) and net income and net income per share from continuing operations in the second quarter of 2002 would have been $3.8 million and $.04 per share. -- During the first quarter of 2003, the company implemented actions to become more effectively organized in North America and to improve its operating efficiencies, with annualized savings of $40 million. The restructuring charge associated with these actions totaled $11.7 million, with $6.7 million ($4.7 million net of taxes or $.05 per share) recorded in the first quarter. The remaining $5 million ($3.4 million net of taxes or $.03 per share) was recorded in the second quarter. -- On May 28, 2003, the company announced a series of measures that further enhance efficiencies, with estimated annualized savings of $25 million. The restructuring charge associated with these actions is estimated to total $15 million, of which $9.6 million ($6.4 million net of taxes or $.06 per share) was recorded in the second quarter, with the balance to be recorded in the third quarter. -- During the second quarter of this year, the company repurchased $15 million of its 8.2% senior notes that mature in the fourth quarter of 2003. The premium paid, along with the write-off of related deferred issuance costs, resulted in a pre-tax charge of $.4 million. Under newly-effective accounting rules, the premium paid to repurchase a company's debt is no longer recorded as an extraordinary charge. -- In last year's second quarter, the company sold the Gates/Arrow commodity computer products business and, in accordance with Statement of Financial Accounting Standards No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets," accounted for the transaction as a discontinued operation. Its results were accounted for in a single line item on the income statement. In connection with the sale of Gates/Arrow, the company recorded a net loss of $6.1 million. The loss consists of costs related to personnel, surplus facilities, professional fees, and the write-down of the asset carrying value. -- Also included in last year's second quarter was a $5.4 million ($3.2 million net of taxes or $.03 per share) severance charge associated with the resignation of the company's chief executive officer. Worldwide components revenue of $1.57 billion increased 6% sequentially and 17% over last year's second quarter. Excluding foreign exchange and the estimated impact of the February 2003 acquisition of Pioneer-Standard's IED business, components revenue decreased 3.6% from the first quarter. Operating income as a percentage of sales was 3.5%, up 10 basis points sequentially but down 20 basis points from last year's second quarter. "Sales in our North American Components group were basically in line with our first quarter, when restated for the IED acquisition, which we integrated at the end of February," said William E. Mitchell, President and Chief Executive Officer of Arrow. "The operating margin for the group improved by over 100 basis points sequentially. We see this as confirmation that we have a cost structure that can be leveraged so that even modest sales growth will drive substantially improved operating performance," he added. Worldwide computer products sales totaled $549 million, up 12% from the first quarter and 9% over last year's second quarter. Operating income was 3.4% of sales, a 20 basis point sequential improvement and 80 basis points over last year's second quarter. "Our North American Computer Products business had another solid quarter, with both sales and operating margin increasing," Mr. Mitchell said. "Sales in our Enterprise Computing Solutions group were up 22% sequentially, and each line showed increases over last year's second quarter," he added. As part of on-going evaluations designed to enhance the company's operating efficiencies, several additional initiatives are being taken that will result in a more effective and productive logistics network. Over the next nine months, two primary distribution centers in England will be closed, and their operations will be centralized in the newer, state-of-the-art, pan-European facility in Venlo, the Netherlands. The primary distribution center in Brookhaven, New York will also be closed, and customers and suppliers will be served out of the newer, more efficient distribution center in Reno, Nevada. The anticipated annualized savings from these closures is approximately $5 million. The costs associated with the closures are estimated to total $5 million and will be recorded over several quarters. The company also announced that it will exit its PC component distribution business serving hardware integrators and resellers in Norway, Sweden, Denmark, and Finland. These businesses had quarterly sales of approximately $30 million and were running at an estimated annualized loss of $4 million. The anticipated costs associated with the closure of these businesses is estimated to be $5 million. "We must continue to identify opportunities to be more efficient, and we will continue to do so," stated Mr. Mitchell. "This is management's on-going responsibility, whether sales are increasing or decreasing," he added. "Though visibility remains very limited, we continue to believe that we are bouncing along the bottom of a very extended industry-wide downturn," said Mr. Mitchell. "While we cannot predict future financial performance with any degree of confidence, the realities are that our components businesses around the world continue to report a high level of 'turns' business and relatively flat demand and both our computer products and European businesses are entering a seasonally weak third quarter. We will continue to manage the business as efficiently as we can, but the fact is that we do not yet see any evidence of a sustained upturn in our industry," he added. Six-Month Results Arrow's net income for the first six months of 2003 was $5.9 million ($.06 per share) on sales of $4.1 billion, compared with a net loss of $607 million ($6.09 and $5.99 per share on a basic and diluted basis, respectively) on sales of $3.7 billion in the first six months of 2002. Net income for the first six months of 2003 includes the aforementioned restructuring charges as well as an integration charge of $6.9 million ($4.8 million net of taxes or $.05 per share) related to the acquisition and integration of Pioneer-Standard's IED business and a charge of $2.9 million ($1.8 million net of taxes or $.02 per share) related to the repurchase of $85 million of the company's 8.2% senior notes. Excluding these items, net income was $27 million ($.27 per share). Effective January 1, 2002 the company adopted Statement of Financial Accounting Standards No. 142, "Goodwill and Other Intangible Assets." As a result of this new rule the company recorded an impairment charge of $603.7 million ($6.06 and $5.96 per share on a basic and diluted basis, respectively), which has been recorded as a cumulative effect of a change in accounting principle. Excluding the aforementioned loss from discontinued operations ($5.9 million net of taxes or $.06 per share), severance charges, and cumulative effect of the change in accounting principle, net income from continuing operations for the first six months of 2002 was $5.9 million ($.06 per share). Arrow Electronics is one of the world's largest distributors of electronic components and computer products and a leading provider of services to the electronics industry. Headquartered in Melville, New York, Arrow serves as a supply channel partner for more than 600 suppliers and over 150,000 original equipment manufacturers, contract manufacturers, and commercial customers through more than 190 sales facilities and 21 distribution centers in 40 countries. Detailed information about Arrow's operations can be found at www.arrow.com. Pro Forma Results In addition to disclosing results that are determined in accordance with Generally Accepted Accounting Principles (GAAP), Arrow also discloses pro forma or non-GAAP results of operations that exclude certain items. Arrow discloses such pro forma information in order to reflect underlying operating performance and to permit shareholders and other readers to better assess the company's operating results. Such information is provided as a complement to results provided in accordance with GAAP. Safe Harbor The Private Securities Litigation Reform Act of 1995 provides a "safe harbor" for forward-looking statements. This press release contains forward-looking statements that are subject to certain 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, changes in product supply, pricing, and customer demand, competition, other vagaries in the computer and electronic components markets, changes in relationships with key suppliers 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). 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 forward-looking statements. ARROW ELECTRONICS, INC. CONSOLIDATED STATEMENT OF OPERATIONS (In thousands except per share data) Three Months Ended Six Months Ended June 30, June 30, ----------------------- ---------------------- 2003 2002 2003 2002 ---- ---- ---- ----- Sales $2,123,139 $ 1,843,317 $4,103,244 $3,687,856 ----------- ----------- ---------- ----------- Costs and expenses: Cost of products sold 1,768,036 1,523,729 3,413,084 3,053,736 Selling, general and administrative expenses 281,651 257,158 551,427 509,348 Depreciation and amortization 18,045 16,639 34,957 34,310 Restructuring charges 14,552 - 21,242 - Integration charge - - 6,904 - Severance charge - 5,375 - 5,375 ----------- ----------- ---------- ----------- 2,082,284 1,802,901 4,027,614 3,602,769 ----------- ----------- ---------- ----------- Operating income 40,855 40,416 75,630 85,087 Equity in earnings of affiliated companies 1,070 813 1,385 966 Loss on prepayment of debt 390 - 2,942 - Interest expense 31,869 40,830 65,165 82,072 ----------- ----------- ---------- ----------- Income before income taxes and minority interest 9,666 399 8,908 3,981 Provision for income taxes 2,653 33 2,698 1,404 ----------- ----------- ---------- ----------- Income before minority interest 7,013 366 6,210 2,577 Minority interest 186 (210) 288 (84) ----------- ----------- ---------- ----------- Income from continuing operations 6,827 576 5,922 2,661 Loss from discontinued operations, net of taxes (including loss from disposal of $6,120, net of tax benefit of $4,114)(A) - (6,610) - (5,911) ----------- ----------- ---------- ----------- Income (loss) before cumulative effect of change in accounting principle 6,827 (6,034) 5,922 (3,250) Cumulative effect of change in accounting principle (B) - - - (603,709) ----------- ----------- ---------- ----------- Net income (loss) $ 6,827 $ (6,034) $ 5,922 $ (606,959) =========== ============ ========= =========== ARROW ELECTRONICS, INC. CONSOLIDATED STATEMENT OF OPERATIONS (In thousands except per share data) Three Months Ended Six Months Ended June 30, June 30, ----------------------- ---------------------- 2003 2002 2003 2002 ---- ---- ---- ---- Net income (loss) per basic share: Income from continuing operations $ .07 $ .01 $ .06 $ .03 Loss from discontinued operations (A) - (.07) - (.06) Cumulative effect of change in accounting principle (B) - - - (6.06) ------ --------- --------- ---------- Net income (loss) per basic share $ .07 $ (.06) $ .06 $ (6.09) ======= ========== ========= ========== Net income (loss) per diluted share: Income from continuing operations $ .07 $ .01 $ .06 $ .03 Loss from discontinued operations (A) - (.07) - (.06) Cumulative effect of change in accounting principle (B) - - - (5.96) ------ --------- --------- ---------- Net income (loss) per diluted share $ .07 $ (.06) $ .06 $ (5.99) ======= ========== ========= ========== Average number of shares outstanding: Basic 100,127 99,813 100,036 99,667 Diluted 100,980 101,019 100,744 101,283 See accompanying notes. This interim report is subject to independent audit at year-end. ARROW ELECTRONICS, INC. NOTES (A) In May 2002, the company sold substantially all of the assets of Gates/Arrow Distributing, a business unit within the company's North American Computer Products group that sold commodity computer products such as printers, monitors, other peripherals, and software to value-added resellers in North America. This business is accounted for as a discontinued operation in accordance with Statement of Financial Accounting Standards No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets." Accordingly, its results have been included in the consolidated statement of operations as a single line item and all prior period information has been restated to reflect this presentation. (B) The company adopted Statement of Financial Accounting Standards No. 142, "Goodwill and Other Intangible Assets," as of January 1, 2002. As a result of the evaluation process, the company recorded an impairment charge of $603.7 million ($6.06 and $5.96 per share on a basic and diluted basis, respectively) for the six months ended June 30, 2002. In accordance with the transitional rules, the company has recorded the impairment charge as a cumulative effect of change in accounting principle effective with the first quarter of 2002. ARROW ELECTRONICS, INC. CONSOLIDATED BALANCE SHEET (In thousands) June 30, December 31, 2003 2002 --------- ------------ Assets Current assets: Cash and short-term investments $ 725,582 $ 694,092 Accounts receivable, net 1,593,751 1,378,562 Inventories 1,386,687 1,201,271 Other 53,956 59,810 ----------- ------------ Total current assets 3,759,976 3,333,735 Property, plant and equipment, net 290,523 299,518 Investments in affiliated companies 35,420 32,527 Cost in excess of net assets of companies acquired, net of amortization 865,581 748,368 Other assets 276,980 253,457 ----------- ------------ $5,228,480 $4,667,605 =========== ============ Liabilities and Shareholders' Equity Current liabilities: Accounts payable $1,009,345 $ 917,271 Accrued expenses 328,099 258,774 Short-term borrowings, including current portion of long-term debt 202,819 286,348 ----------- ------------ Total current liabilities 1,540,263 1,462,393 Long-term debt 2,174,621 1,807,113 Other 166,579 162,850 Shareholders' equity 1,347,017 1,235,249 ----------- ------------ $5,228,480 $4,667,605 =========== ============ This interim report is subject to independent audit at year-end. ARROW ELECTRONICS, INC. SEGMENT INFORMATION (In thousands) Three Months Ended Six Months Ended June 30, June 30, --------------------- ---------------------- 2003(A) 2002(B) 2003(C) 2002(B) -------- -------- ------- ------- Sales: Components $ 1,574,148 $1,340,379 $3,064,439 $2,689,646 Computer products 548,991 502,938 1,038,805 998,210 ----------- ---------- ---------- ----------- Consolidated $ 2,123,139 $1,843,317 $4,103,244 $3,687,856 =========== ========== ========== =========== Operating income: Components $ 55,214 $49,534 $ 104,749 $99,385 Computer products 18,675 12,898 34,291 24,654 Corporate (33,034) (22,016) (63,410) (38,952) ----------- ---------- ---------- ----------- Consolidated $ 40,855 $40,416 $ 75,630 $85,087 =========== ========== ========= =========== (A) Includes a restructuring charge of $14.6 million for the three months ended June 30, 2003. (B) Includes a severance charge of $5.4 million for the three and six months ended June 30, 2002. (C) Includes restructuring charges of $21.2 million and an integration charge of $6.9 million related to the acquisition and integration of the Industrial Electronics Distribution business of Pioneer-Standard Electronics, Inc. for the six months ended June 30, 2003. This interim report is subject to independent audit at year-end. ARROW ELECTRONICS, INC. EARNINGS RECONCILIATION (In thousands except per share data) Three Months Ended Six Months Ended June 30, June 30, --------------------- --------------------- 2003 2002 2003 2002 Net income (loss), as reported $6,827 $(6,034) $5,922 $(606,959) Restructuring charges, net of taxes 9,734 - 14,407 - Integration charge, net of taxes - - 4,822 - Severance charge, net of taxes - 3,214 - 3,214 Loss on prepayment of debt, net of taxes 233 - 1,759 - Loss from discontinued operations, net of taxes - 6,610 - 5,911 Cumulative effect of change in accounting principle - - - 603,709 -------- --------- --------- ---------- Net income, as adjusted $16,794 $3,790 $ 26,910 $ 5,875 ======== ========= ========= ========== Net income (loss) per diluted share, as reported $ .07 $(.06) $ .06 $(5.99) Restructuring charges, net of taxes .10 - .14 - Integration charge, net of taxes - - .05 - Severance charge, net of taxes - .03 - .03 Loss on prepayment of debt, net of taxes - - .02 - Loss from discontinued operations, net of taxes - .07 - .06 Cumulative effect of change in accounting principle - - - 5.96 -------- --------- --------- ---------- Net income per diluted share, as adjusted $ .17 $.04 $ .27 $.06 ======== ========= ========= ========== CONTACT: Arrow Electronics Robert E. Klatell Executive Vice President 631-847-1830 or Eileen M. O'Connor Vice President, Investor Relations 631-847-5740 -----END PRIVACY-ENHANCED MESSAGE-----