-----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, OeAeIh12LqzmCPII7jwRKXcbX0d6tDinAuE17Zvtx72hS16diVW5sfKQJDmFHm1r zY2r1Hg4kCgkD3xMy8kcQA== 0001157523-06-007252.txt : 20060725 0001157523-06-007252.hdr.sgml : 20060725 20060725122420 ACCESSION NUMBER: 0001157523-06-007252 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20060725 ITEM INFORMATION: Results of Operations and Financial Condition ITEM INFORMATION: Financial Statements and Exhibits FILED AS OF DATE: 20060725 DATE AS OF CHANGE: 20060725 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: 06978333 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 a5195134.txt ARROW ELECTRONICS, INC. 8-K UNITED STATES 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 25, 2006 ------------- ARROW ELECTRONICS, INC. ----------------------- (Exact Name of Registrant as Specified in Charter) NEW YORK 1-4482 11-1806155 -------- ------ ---------- (State or Other Jurisdiction (Commission (IRS Employer of Incorporation) File Number) Identification No.) 50 MARCUS DRIVE, MELVILLE, NEW YORK 11747 - -------------------------------------------------------------------------------- (Address of Principal Executive Offices) Zip Code Registrant's telephone number, including area code: (631) 847-2000 -------------- Not Applicable -------------- (Former Name or Former Address, if Changed Since Last Report) Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below): [ ] Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) [ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) [ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) [ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) ITEM 2.02 RESULTS OF OPERATIONS AND FINANCIAL CONDITION On July 25, 2006, the Registrant issued a press release announcing the Registrant's second quarter 2006 earnings. A copy of the press release is attached hereto as an Exhibit (99.1). The information in this Current Report on Form 8-K and the Exhibit attached hereto is being furnished and shall not be deemed "filed" for purposes of Section 18 of the Securities Exchange Act of 1934 (the "Exchange Act") or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933 or the Exchange Act, regardless of any general incorporation language in such filing. ITEM 9.01 FINANCIAL STATEMENTS AND EXHIBITS (c) EXHIBITS 99.1 press release dated July 25, 2006. 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. Date: July 25, 2006 By: /s/Peter S. Brown ----------------- Name: Peter S. Brown Title: Senior Vice President EXHIBIT INDEX Exhibit Description - ------- ----------- 99.1 Press release issued by Arrow Electronics, Inc., dated July 25, 2006. EX-99.1 2 a5195134ex99_1.txt EXHIBIT 99.1 PRESS RELEASE Exhibit 99.1 Arrow Electronics' Net Income Advances 59% over Prior Year; EPS Ahead of Consensus MELVILLE, N.Y.--(BUSINESS WIRE)--July 25, 2006--Arrow Electronics, Inc. (NYSE:ARW) today reported second quarter 2006 net income of $92.8 million ($.76 per share on both a basic and diluted basis) on sales of $3.44 billion, compared with net income of $58.4 million ($.50 and $.48 per share on a basic and diluted basis, respectively) on sales of $2.77 billion in the second quarter of 2005. The 24% increase in sales year-over-year included 14% organic growth and 10% growth as a result of acquisitions. The company's results for the second quarters of 2006 and 2005 include a number of items outlined below that impact their comparability. A reconciliation of these items is provided under the heading "Certain Non-GAAP Financial Information." Excluding those items, net income for the quarter ended June 30, 2006 would have been $94.7 million ($.78 and $.77 per share on a basic and diluted basis, respectively) and net income for the quarter ended July 1, 2005 would have been $65.4 million ($.56 and $.54 per share on a basic and diluted basis, respectively). Included in the results for the second quarter of 2006 is $3.7 million ($2.1 million net of related taxes or $.02 per share on both a basic and diluted basis) related to the expensing of stock options in accordance with the provisions of Financial Accounting Standards Board Statement No. 123 (revised 2004), "Share Based Payment" ("FASB Statement No. 123(R)"). No such charge was recorded in 2005. Wall Street consensus, as reported by First Call, was $.73 on a diluted basis. Operating income in the second quarter of 2006 and 2005 was $163.1 million and $118.8 million, respectively. Excluding the items impacting comparability included in the reconciliation provided under the heading "Certain Non-GAAP Financial Information", second quarter 2006 operating income would have been $166.3 million, up 35% over last year's $123.6 million. Operating income as a percentage of sales, excluding the previously mentioned items, increased by 40 basis points year-over-year. "We once again had an excellent quarter as our ongoing initiatives, coupled with favorable conditions in the marketplace, led to record second quarter sales and earnings in excess of our expectations. We also delivered our highest second quarter return on invested capital in ten years," said William E. Mitchell, Chairman, President and Chief Executive Officer. "We continue on our path of consistent execution with 14 consecutive quarters of year-over-year sales growth, and we are very proud of our progress in driving operational excellence into all parts of our business." Worldwide components sales of $2.76 billion increased 6% sequentially and 27% over last year, while operating income increased 11% sequentially and 42% over last year. Sales on a pro forma basis, including Ultra Source Technology Corp. in the second quarter of 2005, increased 20% year-over-year. "Each of our components businesses around the world achieved sequential growth and impressive year-over-year increases in sales and operating income," stated Mr. Mitchell. "In North America, sales reached their highest level since the first quarter of 2001, while we drove operating expenses as a percentage of sales down 150 basis points year-over-year. Sales in Europe reached all-time highs while improving operating income almost 60% year-over-year, and Asia/Pacific sales broke records again with significant improvements in profitability," added Mr. Mitchell. Worldwide computer products sales increased 17% sequentially in this seasonally strong quarter, and increased 14% year-over-year. Sales for the Enterprise Computing Solutions business on a pro forma basis, including DNSint.com AG in the second quarter of 2005, decreased 2% year-over-year. "Our enterprise computing business continued to demonstrate solid profitability and returns. Growth was driven by strong performance in storage, industry standard servers, and our European enterprise business, offset by weakness in the broad proprietary server market and software in North America," said Mr. Mitchell. The company's results for the second quarter of 2006 and 2005 include the items outlined below that impact their comparability: -- During the second quarter of 2006, the company recorded $3.1 million ($1.9 million net of related taxes or $.02 per share on both a basic and diluted basis) of restructuring charges. Included in the restructuring charges is approximately $2.4 million related to previously announced actions the company has committed to take in an ongoing effort to improve its operating efficiencies. These previously announced actions are expected to generate annual cost savings of approximately $6 million beginning in 2007. The estimated restructuring charges to be recorded over the next several quarters associated with these actions total approximately $1 million. -- During the second quarter of 2005, the company recorded restructuring charges related to additional actions to better optimize the use of its mainframe, reduce real estate costs, be more efficient in its distribution centers, and to be more productive in the amount of $4.8 million ($2.9 million net of related taxes or $.02 per share on both a basic and diluted basis). -- During the second quarter of 2005, the company repurchased, through a series of transactions, $80.8 million accreted value of its zero coupon convertible debentures due in 2021, which could have been put to the company in February 2006 ("convertible debentures"). The related loss on the repurchase, including the premium paid and the write-off of related deferred financing costs, aggregated $1.7 million ($1.0 million net of related taxes or $.01 per share on both a basic and diluted basis). -- At July 1, 2005, the company determined that an other-than-temporary decline in the fair value of an investment occurred, and, accordingly, during the second quarter of 2005, the company recorded a loss on the write-down of an investment of $3.0 million ($.03 per share on both a basic and diluted basis) in accordance with Financial Accounting Standards Board Statement No. 115 and Emerging Issues Task Force Issue No.03-1. "We expect the components market to return to more normal, steady conditions in the third quarter after having experienced an uptick in demand over the last few quarters. Based upon the information known to us today, we anticipate traditional seasonality for our businesses next quarter, as markets remain rational and disciplined in all of the regions in which we operate. In Asia/Pacific, we expect to see an uptick in demand in preparation for the typical holiday build. Both Europe, because of its extended holiday period, and Enterprise Computing Solutions, due to typical third quarter seasonality, are expected to see a drop off in activity levels. In North American components, fewer shipping days may cause a corresponding drop in sales," said Paul J. Reilly, Senior Vice President and Chief Financial Officer. "We believe this will result in sales between $3.275 and $3.425 billion for the upcoming quarter. We anticipate worldwide components sales between $2.67 and $ 2.77 billion and sales for worldwide computer products to be between $605 and $655 million. Earnings per share on a diluted basis, including the impact of expensing stock options in accordance with FASB Statement No. 123(R) estimated at approximately $.02 per share, are expected to be in the range of $.68 to $.72, excluding any charges. Excluding the impact of restructuring and other charges, and the expensing of stock options, diluted earnings per share for the third quarter are expected to increase 35% to 42% from last year's third quarter," added Mr. Reilly. SIX MONTH RESULTS Arrow's net income for the first six months of 2006 was $174.3 million ($1.44 and $1.42 per share on a basic and diluted basis, respectively) on sales of $6.63 billion, compared with net income of $115.6 million ($.99 and $.96 per share on a basic and diluted basis, respectively) on sales of $5.49 billion in the first six months of 2005. Included in the results for the first six months of 2006 is $6.2 million ($3.9 million net of related taxes or $.03 per share on both a basic and diluted basis) related to the expensing of stock options in accordance with the provisions of FASB Statement No. 123(R). Net income for the first six months of 2006 includes restructuring charges of $4.6 million ($2.8 million net of related taxes or $.02 per share on both a basic and diluted basis) related to the aforementioned actions to continue improving its operating efficiencies and a loss on prepayment of debt of $2.6 million ($1.6 million net of related taxes or $.01 per share on both a basic and diluted basis) on the redemption of the total amount outstanding of $283.2 million principal amount ($156.4 million accreted value) of its convertible debentures and on the repurchase of $4.1 million principal amount of its 7% Senior Notes due in January 2007. Excluding these items, net income would have been $178.7 million ($1.47 and $1.46 per share on a basic and diluted basis, respectively) for the first six months of 2006. Net income for the first six months of 2005 includes restructuring charges of $8.9 million ($5.5 million net of related taxes or $.04 and $.03 per share on a basic and diluted basis, respectively) and an acquisition indemnification credit of $1.7 million ($1.3 million net of related taxes or $.01 per share on a basic basis). Net income for the first six months of 2005 also includes a loss on prepayment of debt of $2.1 million ($1.2 million net of related taxes or $.01 per share on both a basic and diluted basis) related to the repurchase of $94.0 million accreted value of its convertible debentures and the aforementioned loss on the write-down on an investment of $3.0 million ($.03 per share on both a basic and diluted basis). Excluding these items, net income would have been $124.1 million ($1.06 and $1.03 per share on a basic and diluted basis, respectively) for the first six months of 2005. Arrow Electronics is a major global provider of products, services and solutions to industrial and commercial users of electronic components and computer products. Headquartered in Melville, New York, Arrow serves as a supply channel partner for nearly 600 suppliers and more than 130,000 original equipment manufacturers, contract manufacturers and commercial customers through a global network of over 270 locations in 53 countries and territories. 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 and net income per basic and diluted share, each as adjusted for certain charges, credits and losses that the company believes impact the comparability of its results of operations. These charges, credits and losses arise out of the company's efficiency enhancement initiatives, the company's acquisitions of other companies, the prepayment of debt, and the write-down of an investment. 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 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) Three Months Ended Six Months Ended -------------------- -------------------- June 30, July 1, June 30, July 1, 2006 2005 2006 2005 --------- --------- --------- --------- Operating income, as reported $163,141 $118,758 $312,374 $227,251 Restructuring charges 3,118 4,847 4,639 8,885 Acquisition indemnification credit - - - (1,672) --------- --------- --------- --------- Operating income, as adjusted $166,259 $123,605 $317,013 $234,464 --------- --------- --------- --------- Net income, as reported $ 92,763 $ 58,449 $174,342 $115,640 Restructuring charges 1,894 2,925 2,814 5,458 Acquisition indemnification credit - - - (1,267) Loss on prepayment of debt - 1,035 1,558 1,247 Write-down of investment - 3,019 - 3,019 --------- --------- --------- --------- Net income, as adjusted $ 94,657 $ 65,428 $178,714 $124,097 --------- --------- --------- --------- Net income per basic share, as reported $ .76 $ .50 $ 1.44 $ .99 Restructuring charges .02 .02 .02 .04 Acquisition indemnification credit - - - (.01) Loss on prepayment of debt - .01 .01 .01 Write-down of investment - .03 - .03 --------- --------- --------- --------- Net income per basic share, as adjusted $ .78 $ .56 $ 1.47 $ 1.06 --------- --------- --------- --------- Net income per diluted share, as reported* $ .76 $ .48 $ 1.42 $ .96 Restructuring charges .02 .02 .02 .03 Loss on prepayment of debt - .01 .01 .01 Write-down of investment - .03 - .03 --------- --------- --------- --------- Net income per diluted share, as adjusted $ .77 $ .54 $ 1.46 $ 1.03 --------- --------- --------- --------- The sum of the components for basic and diluted net income per share, as adjusted, may not agree to the totals, as presented, due to rounding. Effective January 1, 2006, the company adopted the provisions of Financial Accounting Standards Board Statement No. 123 (revised 2004), "Share Based Payment" ("FASB Statement No. 123(R)"). The company adopted the modified prospective transition method provided for under FASB Statement No. 123(R) and, accordingly, has not restated prior period amounts. As a result of adopting FASB Statement No. 123(R), the company recorded a charge of $3,696 ($2,131 net of related taxes or $.02 per share on both a basic and diluted basis) and $6,156 ($3,936 net of related taxes or $.03 per share on both a basic and diluted basis) for the three and six months ended June 30, 2006, respectively, related to the expensing of stock options. The pre-tax compensation expense is included in selling, general and administrative expenses. *In computing net income per diluted share for the six months ended June 30, 2006, net income was increased by $524 for interest (net of taxes) related to the zero coupon convertible debentures ("convertible debentures") which are dilutive common stock equivalents. In addition, the diluted average number of shares outstanding for the six months ended June 30, 2006 includes 937 shares related to the convertible debentures. In computing net income per diluted share for the three and six months ended July 1, 2005, net income was increased by $1,553 and $3,226, respectively, for interest (net of taxes) related to the convertible debentures which are dilutive common stock equivalents. In addition, the diluted average number of shares outstanding for the three and six months ended July 1, 2005 includes 5,883 shares and 6,195 shares, respectively, related to the convertible debentures. Information Relating to Forward-Looking Statements - -------------------------------------------------- This report 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 ongoing planned implementation of its new global financial system, changes in product supply, pricing and customer demand, competition, other vagaries in the electronic components and computer products 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. 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) Three Months Ended Six Months Ended ------------------------ ------------------------ June 30, July 1, June 30, July 1, 2006 2005 2006 2005 ----------- ----------- ----------- ----------- Sales $3,437,032 $2,767,547 $6,629,495 $5,494,418 ----------- ----------- ----------- ----------- Costs and expenses: Cost of products sold 2,912,608 2,326,214 5,617,528 4,620,856 Selling, general and administrative expenses 346,828 304,235 672,656 613,078 Depreciation and amortization 11,337 13,493 22,298 26,020 Restructuring charges 3,118 4,847 4,639 8,885 Acquisition indemnification credit - - - (1,672) ----------- ----------- ----------- ----------- 3,273,891 2,648,789 6,317,121 5,267,167 ----------- ----------- ----------- ----------- Operating income 163,141 118,758 312,374 227,251 Equity in earnings of affiliated companies 1,045 562 1,990 1,640 Loss on prepayment of debt - 1,731 2,605 2,086 Write-down of investment - 3,019 - 3,019 Interest expense, net 23,993 24,375 47,962 48,475 ----------- ----------- ----------- ----------- Income before income taxes and minority interest 140,193 90,195 263,797 175,311 Provision for income taxes 47,084 31,627 88,737 59,371 ----------- ----------- ----------- ----------- Income before minority interest 93,109 58,568 175,060 115,940 Minority interest 346 119 718 300 ----------- ----------- ----------- ----------- Net income $ 92,763 $ 58,449 $ 174,342 $ 115,640 ----------- ----------- ----------- ----------- Net income per share: Basic $ .76 $ .50 $ 1.44 $ .99 ----------- ----------- ----------- ----------- Diluted $ .76 $ .48 $ 1.42 $ .96 ----------- ----------- ----------- ----------- Average number of shares outstanding: Basic 121,820 117,009 121,213 116,604 Diluted 122,551 124,241 123,020 124,136 This interim report is subject to independent audit at year-end. ARROW ELECTRONICS, INC. CONSOLIDATED BALANCE SHEETS (In thousands except par value) June 30, December 31, 2006 2005 ----------- ----------- ASSETS Current assets: Cash and cash equivalents $ 329,849 $ 580,661 Accounts receivable, net 2,629,110 2,316,932 Inventories 1,830,840 1,494,982 Prepaid expenses and other assets 155,498 124,899 ----------- ----------- Total current assets 4,945,297 4,517,474 ----------- ----------- Property, plant and equipment at cost: Land 42,042 41,855 Buildings and improvements 163,097 160,012 Machinery and equipment 457,540 426,239 ----------- ----------- 662,679 628,106 Less: accumulated depreciation and amortization (415,058) (392,641) ----------- ----------- Property, plant and equipment, net 247,621 235,465 ----------- ----------- Investments in affiliated companies 38,730 38,959 Cost in excess of net assets of companies acquired 1,118,242 1,053,266 Other assets 195,521 199,753 ----------- ----------- Total assets $6,545,411 $6,044,917 ----------- ----------- LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable $1,882,917 $1,628,568 Accrued expenses 470,342 434,644 Short-term borrowings, including current portion of long-term debt 320,313 268,666 ----------- ----------- Total current liabilities 2,673,572 2,331,878 ----------- ----------- Long-term debt 960,276 1,138,981 ----------- ----------- Other liabilities 208,177 201,172 ----------- ----------- Shareholders' equity: Common stock, par value $1: Authorized - 160,000 shares in 2006 and 2005 Issued - 122,358 and 120,286 shares in 2006 and 2005, respectively 122,358 120,286 Capital in excess of par value 927,306 861,880 Retained earnings 1,573,757 1,399,415 Foreign currency translation adjustment 99,769 13,308 ----------- ----------- 2,723,190 2,394,889 Less: Treasury stock (235 and 272 shares in 2006 and 2005, respectively), at cost (6,282) (7,278) Unamortized employee stock awards - (2,395) Other (13,522) (12,330) ----------- ----------- Total shareholders' equity 2,703,386 2,372,886 ----------- ----------- Total liabilities and shareholders' equity $6,545,411 $6,044,917 ----------- ----------- This interim report is subject to independent audit at year-end. ARROW ELECTRONICS, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) Three Months Ended ---------------------- June 30, July 1, 2006 2005 ---------- ---------- Cash flows from operating activities: Net income $ 92,763 $ 58,449 Adjustments to reconcile net income to net cash provided by (used for) operations: Depreciation and amortization 11,337 13,493 Accretion of discount on zero coupon convertible debentures - 2,598 Amortization of deferred financing costs and discount on notes 734 913 Amortization of restricted stock and performance awards 2,494 965 Amortization of employee stock options 3,696 - Excess tax benefits from stock-based compensation arrangements (2,378) - Equity in earnings of affiliated companies (1,045) (562) Deferred income taxes (1,680) 1,690 Restructuring charges 1,894 2,925 Minority interest 346 119 Loss on prepayment of debt - 1,035 Write-down of investment - 3,019 Change in assets and liabilities, net of effects of acquired businesses: Accounts receivable (189,937) (155,324) Inventories (155,771) 22,736 Prepaid expenses and other assets (1,191) 8,626 Accounts payable 149,115 132,586 Accrued expenses (11,299) (26,299) Other 2,485 (3,908) ---------- ---------- Net cash provided by (used for) operating activities (98,437) 63,061 ---------- ---------- Cash flows from investing activities: Acquisition of property, plant and equipment (14,454) 494 Cash consideration paid for acquired businesses (1,317) (2,461) Other 2,158 3,711 ---------- ---------- Net cash provided by (used for) investing activities (13,613) 1,744 ---------- ---------- Cash flows from financing activities: Change in short-term borrowings 34,692 4,998 Change in long-term debt (214) (1,450) Repurchase of zero coupon convertible debentures - (81,173) Proceeds from exercise of stock options 23,021 23,618 Excess tax benefits from stock-based compensation arrangements 2,378 - ---------- ---------- Net cash provided by (used for) financing activities 59,877 (54,007) ---------- ---------- Effect of exchange rate changes on cash 1,846 (7,573) ---------- ---------- Net increase (decrease) in cash and cash equivalents (50,327) 3,225 Cash and cash equivalents at beginning of period 380,176 612,988 ---------- ---------- Cash and cash equivalents at end of period $ 329,849 $ 616,213 ---------- ---------- This interim report is subject to independent audit at year-end. ARROW ELECTRONICS, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) Six Months Ended ---------------------- June 30, July 1, 2006 2005 ---------- ---------- Cash flows from operating activities: Net income $ 174,342 $ 115,640 Adjustments to reconcile net income to net cash provided by (used for) operations: Depreciation and amortization 22,298 26,020 Accretion of discount on zero coupon convertible debentures 876 5,395 Amortization of deferred financing costs and discount on notes 1,632 1,885 Amortization of restricted stock and performance awards 4,126 3,010 Amortization of employee stock options 6,156 - Excess tax benefits from stock-based compensation arrangements (6,431) - Equity in earnings of affiliated companies (1,990) (1,640) Deferred income taxes (2,595) 705 Restructuring charges 2,814 5,458 Loss on prepayment of debt 1,558 1,247 Minority interest 718 300 Acquisition indemnification credit - (1,267) Write-down of investment - 3,019 Change in assets and liabilities, net of effects of acquired businesses: Accounts receivable (246,891) (207,839) Inventories (302,379) 79,457 Prepaid expenses and other assets (23,162) (6,123) Accounts payable 219,761 221,484 Accrued expenses 14,253 (30,513) Other 4,068 (124) ---------- ---------- Net cash provided by (used for) operating activities (130,846) 216,114 ---------- ---------- Cash flows from investing activities: Acquisition of property, plant and equipment (27,540) (4,564) Cash consideration paid for acquired businesses (19,460) (2,461) Purchase of short-term investments - (230,456) Proceeds from sale of short-term investments - 389,056 Other 3,083 3,711 ---------- ---------- Net cash provided by (used for) investing activities (43,917) 155,286 ---------- ---------- Cash flows from financing activities: Change in short-term borrowings 38,536 9,493 Change in long-term debt (15,724) (1,936) Repurchase of senior notes (4,268) - Repurchase of zero coupon convertible debentures (156,330) (94,501) Proceeds from exercise of stock options 53,118 35,563 Excess tax benefits from stock-based compensation arrangements 6,431 - ---------- ---------- Net cash used for financing activities (78,237) (51,381) ---------- ---------- Effect of exchange rate changes on cash 2,188 (9,100) ---------- ---------- Net increase (decrease) in cash and cash equivalents (250,812) 310,919 Cash and cash equivalents at beginning of period 580,661 305,294 ---------- ---------- Cash and cash equivalents at end of period $ 329,849 $ 616,213 ---------- ---------- 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, July 1, June 30, July 1, 2006 2005 2006 2005 ----------- ----------- ----------- ----------- Sales: Components $2,757,058 $2,169,514 $5,365,967 $4,355,891 Computer products 679,974 598,033 1,263,528 1,138,527 ----------- ----------- ----------- ----------- Consolidated $3,437,032 $2,767,547 $6,629,495 $5,494,418 ----------- ----------- ----------- ----------- Operating income: Components $ 163,766 $ 115,665 $ 310,949 $ 218,244 Computer products 29,833 30,558 53,839 59,410 Corporate (a) (30,458) (27,465) (52,414) (50,403) ----------- ----------- ----------- ----------- Consolidated $ 163,141 $ 118,758 $ 312,374 $ 227,251 ----------- ----------- ----------- ----------- Effective January 1, 2006, the OEM Computing Solutions business, which was previously included in the worldwide computer products business, has been transitioned into the company's worldwide components business to further leverage customer overlap and to take advantage of greater opportunities for selling synergies. Prior period segment data has been adjusted to conform with the current period presentation. (a)Includes restructuring charges of $3.1 million and $4.8 million for the three months ended June 30, 2006 and July 1, 2005, respectively, and $4.6 million and $8.9 million for the six months ended June 30, 2006 and July 1, 2005, respectively. Also included is an acquisition indemnification credit of $1.7 million for the six months ended July 1, 2005. This interim report is subject to independent audit at year-end. CONTACT: Ira M. Birns, 631-847-1657 Vice President & Treasurer or Paul J. Reilly, 631-847-1872 Senior Vice President & Chief Financial Officer or Media Contact: Jacqueline F. Strayer, 631-847-2101 Vice President, Corporate Communications -----END PRIVACY-ENHANCED MESSAGE-----