-----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, B8mg443HV8sp64ZQqW2Tb5zri3woTDWjGocBh5jgVdLBHF/LLGdZoAwj0XY+qD2O c4a6Jbl24kSyRWLh82OW5Q== 0001157523-07-003948.txt : 20070424 0001157523-07-003948.hdr.sgml : 20070424 20070424120602 ACCESSION NUMBER: 0001157523-07-003948 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20070424 ITEM INFORMATION: Results of Operations and Financial Condition ITEM INFORMATION: Financial Statements and Exhibits FILED AS OF DATE: 20070424 DATE AS OF CHANGE: 20070424 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: 07783664 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 a5384559.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): April 24, 2007 -------------- 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) 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 20.14a-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 April 24, 2007, the Registrant issued a press release announcing the corporation's first quarter 2007 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 April 24, 2007. 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: April 24, 2007 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 April 24, 2007. EX-99.1 2 a5384559ex99-1.txt EXHIBIT 99.1 Exhibit 99.1 Arrow Electronics Posts Record First Quarter Sales and Earnings Per Share -- Strong Cash Flow from Operations of $114 Million -- MELVILLE, N.Y.--(BUSINESS WIRE)--April 24, 2007--Arrow Electronics, Inc. (NYSE:ARW) today reported first quarter 2007 net income of $96.3 million ($.78 and $.77 per share on a basic and diluted basis, respectively) on sales of $3.50 billion, compared with net income of $81.6 million ($.68 and $.66 per share on a basic and diluted basis, respectively) on sales of $3.19 billion in the first quarter of 2006. Consolidated sales grew 10% over the first quarter of 2006, or 5% on a pro forma basis including the impact of acquisitions. The company's results for the first quarters of 2007 and 2006 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 March 31, 2007 would have been $91.8 million ($.75 and $.74 per share on a basic and diluted basis, respectively) and net income for the quarter ended March 31, 2006 would have been $84.1 million ($.70 and $.68 per share on a basic and diluted basis, respectively). "We once again executed well on our strategic and tactical objectives this quarter. We outgrew the market, posted record first quarter sales and earnings per share, grew earnings at twice the rate of sales organically, generated strong operating cash flow of $114 million and for the 13th consecutive quarter return on invested capital was well in excess of our cost of capital, all as we continue to invest in our business ensuring continued value creation for our business partners and our shareholders," said William E. Mitchell, chairman, president and chief executive officer, Arrow Electronics, Inc. "In the first quarter, we received favorable ratings changes from both Moody's Investors Service and Fitch Ratings. Our strong cash flow and solid balance sheet have enabled us to pursue strategic initiatives while maintaining a strong credit profile," added Paul J. Reilly, senior vice president and chief financial officer, Arrow Electronics, Inc. Worldwide computer products sales of $776.0 million increased 33% over the first quarter of 2006, while sales for our enterprise computing solutions business increased 12% on a pro forma basis including the impact of the acquisitions of Alternative Technology, Inc. and the storage and security distribution business of InTechnology plc. "We achieved our 13th consecutive quarter of year-over-year growth driven by strong double-digit increases in industry standard servers, storage, software and services, which significantly outpaced market growth in these segments. On March 31st, we closed on our acquisition of the Agilysys KeyLink Systems Group and successfully integrated KeyLink's people, systems and facilities. We continue to transform our industry leading enterprise computing solutions business into a much stronger organization with an expanded geographic reach, increased exposure in faster growing product segments, and a more robust customer and supplier base. With increased scale and greater levels of operating efficiency, we will further strengthen our industry leading financial performance, while significant cross selling opportunities will further accelerate our growth in the global enterprise computing solutions marketplace," said Mr. Mitchell. Worldwide components sales of $2.72 billion increased 4% over the first quarter of 2006. "We achieved exceptional results in Europe with record sales and the highest first quarter operating income since 2001 as we continue to drive results by investing in our sales and marketing efforts and enhancing our existing strong local presence with more consistent and disciplined processes across the region. Double-digit growth in our core business serving small and medium sized customers around the world was offset, in part, by the well-publicized weakness in the large EMS segment in North America and Asia Pacific. Our North American business posted the second highest first quarter operating income since 2001 and in Asia Pacific operating income advanced more than 70% year-over-year, further demonstrating our ability to perform well regardless of market conditions," stated Mr. Mitchell. The company's results for the first quarter of 2007 and 2006 include the items outlined below that impact their comparability: -- During the first quarter of 2007, the company recorded a net restructuring credit of $8.3 million ($5.8 million net of related taxes or $.05 per share on both a basic and diluted basis), primarily related to the sale of the company's Harlow, England facility. -- During the first quarter of 2007, the company recorded an integration charge of $2.1 million ($1.3 million net of related taxes or $.01 per share on both a basic and diluted basis), primarily related to the acquisition of KeyLink. -- During the first quarter of 2006, the company recorded a $1.5 million ($.9 million net of related taxes or $.01 per share on both a basic and diluted basis) restructuring charge. -- During the first quarter of 2006, the company redeemed the total amount outstanding of $283.2 million principal amount ($156.4 million accreted value) of its zero coupon convertible debentures due in 2021 and repurchased $4.1 million principal amount of its 7% senior notes due in January 2007. The related loss on the redemption and repurchase, including any related premium paid, write-off of deferred financing costs, and cost of terminating a portion of related interest rate swaps, aggregated $2.6 million ($1.6 million net of related taxes or $.01 per share on both a basic and diluted basis) and is recognized as a loss on prepayment of debt. "Based upon the information known to us today, we expect to see normal seasonality in all of our businesses in the second quarter. In components, we expect our broad small and medium-sized customer base to perform well, offset in part, by continued weakness in the large EMS customers. In computer products, we expect to continue to post solid growth in industry standard servers, storage, software and services. We believe that total second quarter sales will be between $3.85 and $4.15 billion, with worldwide component sales between $2.725 and $2.875 billion and worldwide computer product sales between $1.125 and $1.275 billion. Earnings per share, on a diluted basis, excluding any charges, are expected to be in the range of $.78 to $.84, an increase of 1% to 9% from last year's second quarter. These expected results include the impact of the KeyLink acquisition," added Mr. Reilly. Arrow Electronics (www.arrow.com) is a 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 more than 600 suppliers and 140,000 original equipment manufacturers, contract manufacturers and commercial customers through a global network of over 260 locations in 55 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, and the prepayment of debt. 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 March 31, -------------------- 2007 2006 --------- --------- Operating income, as reported $162,659 $149,233 Restructuring (credit) charge (8,264) 1,521 Integration charge 2,117 - --------- --------- Operating income, as adjusted $156,512 $150,754 --------- --------- Net income, as reported $ 96,294 $ 81,579 Restructuring (credit) charge (5,788) 920 Integration charge 1,266 - Loss on prepayment of debt - 1,558 --------- --------- Net income, as adjusted $ 91,772 $ 84,057 --------- --------- Net income per basic share, as reported $ .78 $ .68 Restructuring (credit) charge (.05) .01 Integration charge .01 - Loss on prepayment of debt - .01 --------- --------- Net income per basic share, as adjusted $ .75 $ .70 --------- --------- Net income per diluted share, as reported* $ .77 $ .66 Restructuring (credit) charge (.05) .01 Integration charge .01 - Loss on prepayment of debt - .01 --------- --------- Net income per diluted share, as adjusted $ .74 $ .68 --------- --------- 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. * In computing net income per diluted share for the three months ended March 31, 2006, net income was increased by $524 for interest (net of taxes) related to the then outstanding zero coupon convertible debentures ("convertible debentures") which are dilutive common stock equivalents. In addition, the diluted average number of shares outstanding for the three months ended March 31, 2006 includes 1,883 shares related to the convertible debentures. 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 planned implementation of its new global financial system and new enterprise resource planning 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, the company's ability to generate additional cash flow 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). Forward-looking statements are those statements, which are not statements of historical fact. You can identify these forward-looking statements 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) Three Months Ended March 31, ------------------------ 2007 2006 ----------- ----------- Sales $3,497,564 $3,192,463 ----------- ----------- Costs and expenses: Cost of products sold 2,957,933 2,704,920 Selling, general and administrative expenses 370,226 325,828 Depreciation and amortization 12,893 10,961 Restructuring (credit) charge (8,264) 1,521 Integration charge 2,117 - ----------- ----------- 3,334,905 3,043,230 ----------- ----------- Operating income 162,659 149,233 Equity in earnings of affiliated companies 1,985 945 Loss on prepayment of debt - 2,605 Interest expense, net 23,068 23,969 ----------- ----------- Income before income taxes and minority interest 141,576 123,604 Provision for income taxes 44,556 41,653 ----------- ----------- Income before minority interest 97,020 81,951 Minority interest 726 372 ----------- ----------- Net income $ 96,294 $ 81,579 ----------- ----------- Net income per share: Basic $ .78 $ .68 ----------- ----------- Diluted $ .77 $ .66 ----------- ----------- Average number of shares outstanding: Basic 122,991 120,609 Diluted 124,350 123,513 This interim report is subject to independent audit at year-end. ARROW ELECTRONICS, INC. CONSOLIDATED BALANCE SHEETS (In thousands except par value) March 31, December 31, 2007 2006 ------------ ------------ ASSETS Current assets: Cash and cash equivalents $ 141,413 $ 337,730 Accounts receivable, net 2,838,900 2,710,321 Inventories 1,672,983 1,691,536 Prepaid expenses and other assets 161,064 156,034 ------------ ------------ Total current assets 4,814,360 4,895,621 ------------ ------------ Property, plant and equipment, at cost: Land 42,201 41,810 Buildings and improvements 177,531 167,157 Machinery and equipment 503,036 481,689 ------------ ------------ 722,768 690,656 Less: Accumulated depreciation and amortization (439,667) (428,283) ------------ ------------ Property, plant and equipment, net 283,101 262,373 ------------ ------------ Investments in affiliated companies 43,284 41,960 Cost in excess of net assets of companies acquired 1,700,807 1,231,281 Other assets 237,275 238,337 ------------ ------------ Total assets $ 7,078,827 $ 6,669,572 ------------ ------------ LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable $ 1,865,210 $ 1,795,089 Accrued expenses 412,480 402,536 Short-term borrowings, including current portion of long-term debt 76,953 262,783 ------------ ------------ Total current liabilities 2,354,643 2,460,408 ------------ ------------ Long-term debt 1,327,678 976,774 Other liabilities 259,760 235,831 Shareholders' equity: Common stock, par value $1: Authorized - 160,000 shares in 2007 and 2006 Issued - 124,152 and 122,626 shares in 2007 and 2006, respectively 124,152 122,626 Capital in excess of par value 985,346 943,958 Retained earnings 1,873,246 1,787,746 Foreign currency translation adjustment 167,156 155,166 Other (8,962) (7,407) ------------ ------------ 3,140,938 3,002,089 Less: Treasury stock (156 and 207 shares in 2007 and 2006, respectively), at cost (4,192) (5,530) ------------ ------------ Total shareholders' equity 3,136,746 2,996,559 ------------ ------------ Total liabilities and shareholders' equity $ 7,078,827 $ 6,669,572 ------------ ------------ This interim report is subject to independent audit at year-end. ARROW ELECTRONICS, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) Three Months Ended March 31, ---------------------- 2007 2006 ---------- ---------- Cash flows from operating activities: Net income $ 96,294 $ 81,579 Adjustments to reconcile net income to net cash provided by (used for) operations: Depreciation and amortization 12,893 10,961 Amortization of deferred financing costs and discount on notes 555 898 Amortization of stock-based compensation 6,442 4,092 Accretion of discount on zero coupon convertible debentures - 876 Excess tax benefits from stock-based compensation arrangements (5,006) (4,053) Deferred income taxes 1,452 (915) Restructuring (credit) charge (5,788) 920 Integration charge 1,266 - Equity in earnings of affiliated companies (1,985) (945) Loss on prepayment of debt - 1,558 Minority interest 726 372 Change in assets and liabilities, net of effects of acquired businesses: Accounts receivable 49,610 (56,954) Inventories 73,100 (146,608) Prepaid expenses and other assets 416 (21,971) Accounts payable (126,070) 70,646 Accrued expenses 8,543 21,615 Other 1,089 5,520 ---------- ---------- Net cash provided by (used for) operating activities 113,537 (32,409) ---------- ---------- Cash flows from investing activities: Acquisition of property, plant and equipment (21,984) (13,086) Cash consideration paid for acquired businesses (491,475) (18,143) Proceeds from sale of facilities 8,810 - Other 335 925 ---------- ---------- Net cash used for investing activities (504,314) (30,304) ----------- ---------- Cash flows from financing activities: Change in short-term borrowings (17,607) 3,844 Repayment of long-term borrowings (1,312) (15,510) Proceeds from long-term borrowings 345,000 - Repurchase/repayment of senior notes (169,136) (4,268) Redemption of zero coupon convertible debentures - (156,330) Proceeds from exercise of stock options 32,759 30,097 Excess tax benefits from stock-based compensation arrangements 5,006 4,053 ---------- ---------- Net cash provided by (used for) financing activities 194,710 (138,114) ---------- ---------- Effect of exchange rate changes on cash (250) 342 ----------- ---------- Net decrease in cash and cash equivalents (196,317) (200,485) Cash and cash equivalents at beginning of period 337,730 580,661 ---------- ---------- Cash and cash equivalents at end of period $ 141,413 $ 380,176 ---------- ---------- This interim report is subject to independent audit at year-end. ARROW ELECTRONICS, INC. SEGMENT INFORMATION (In thousands) Three Months Ended March 31, ----------------------- 2007 2006 ----------- ----------- Sales: Electronic components $2,721,529 $2,608,909 Computer products 776,035 583,554 ----------- ----------- Consolidated $3,497,564 $3,192,463 ----------- ----------- Operating income (loss): Electronic components $ 154,075 $ 144,929 Computer products 29,986 23,863 Corporate (a) (21,402) (19,559) ----------- ----------- Consolidated $ 162,659 $ 149,233 ----------- ----------- Effective January 1, 2007, stock option expense, which was previously included in corporate, was allocated to electronic components, computer products, and corporate. Prior period segment data was adjusted to conform with the current period presentation. (a) Includes a net restructuring credit of $8.3 million and a restructuring charge of $1.5 million for the three months ended March 31, 2007 and 2006, respectively. Also includes an integration charge of $2.1 million for the three months ended March 31, 2007. This interim report is subject to independent audit at year-end. CONTACT: Arrow Electronics, Inc. Sabrina N. Weaver, 631-847-5359 Director, Investor Relations or Paul J. Reilly, 631-847-1872 Senior Vice President & Chief Financial Officer or Media: Jacqueline F. Strayer, 631-847-2101 Vice President, Corporate Communications -----END PRIVACY-ENHANCED MESSAGE-----