Arrow Electronics, Inc. (NYSE:ARW) today reported first-quarter
2012 net income of $113.6 million ($1.01 and $1.00 per share on a
basic and diluted basis, respectively) on sales of $4.89 billion,
compared with net income of $136.3 million ($1.18 and $1.16 per
share on a basic and diluted basis, respectively) on sales of $5.22
billion in the first quarter of 2011. Cash flow from operations for
the quarter ended March 31, 2012 was $250 million.
The company's results for the first quarters of 2012 and 2011
include a number of items that impact their comparability. A
complete reconciliation of these items is provided under the
heading “Certain Non-GAAP Financial Information.” Excluding those
items, on a non-GAAP basis, net income for the quarter ended March
31, 2012, would have been $119.8 million ($1.07 and $1.05 per share
on a basic and diluted basis, respectively) and net income for the
quarter ended April 2, 2011, would have been $146.0 million ($1.27
and $1.24 per share on a basic and diluted basis,
respectively).
“We executed well in the first quarter with sales and earnings
per share in line with our expectations. Cash flow generation was a
bright spot in the first quarter, as we generated $250 million in
cash flow from operations, with contributions from both business
segments,” said Michael J. Long, chairman, president, and chief
executive officer.
“Our return on capital continues to be strong with return on
invested capital well in excess of our weighted average cost of
capital,” said Paul J. Reilly, executive vice president, finance
and operations and chief financial officer. “We continue to invest
in businesses that will provide above market growth opportunities
over the long-term.”
Global enterprise computing solutions (“ECS”) first-quarter
sales of $1.54 billion increased 15 percent year over year. “We had
very impressive results in the first quarter with sales well above
normal seasonality, especially in our North American value-added
distribution business. Globally, we saw robust product line
performance in storage, software, and services, which each grew in
excess of 20% year over year,” said Mr. Long.
Global components first-quarter sales of $3.35 billion decreased
14 percent year over year. “The Americas region performed well
while weaker macroeconomic conditions in Asia and Europe have had a
negative impact on our results. Our global book-to-bill of 1.04 to
1 is at its highest level in six quarters with sequential increases
seen in all regions. Our global teams remain committed to driving
increased market share in all regions while providing the highest
possible level of service to our customers,” Mr. Long said.
The company's results for the first quarters of 2012 and 2011
include the items outlined below that impact their
comparability:
- restructuring, integration, and other
charges of $8.2 million ($6.1 million net of related taxes or $.05
per share on both a basic and diluted basis) in the first quarter
of 2012 and $9.6 million ($7.2 million net of related taxes or $.06
per share on a both basic and diluted basis) in the first quarter
of 2011;
- a charge of $5.9 million ($3.6 million
net of related taxes or $.03 per share on both a basic and diluted
basis) in connection with the settlement of a legal matter in 2011;
and
- a gain on bargain purchase of $1.8
million ($1.1 million net of related taxes or $.01 per share on
both a basic and diluted basis).
GUIDANCE
“Looking ahead, we believe that total second-quarter sales will
be between $5.04 and $5.44 billion, with global components sales
between $3.37 and $3.57 billion and global enterprise computing
solutions sales between $1.67 and $1.87 billion. Earnings per
share, on a diluted basis, excluding any charges, are expected to
be in the range of $1.08 to $1.20. Our guidance assumes that the
average Euro to USD exchange rate for the first quarter is 1.31 to
1,” said Mr. Reilly.
Please refer to the CFO commentary as a supplement to the
company’s earnings release, which can be found at
www.arrow.com/investor.
Arrow Electronics (www.arrow.com) is a global provider of
products, services and solutions to industrial and commercial users
of electronic components and enterprise computing solutions. Arrow
serves as a supply channel partner for more than 120,000 original
equipment manufacturers, contract manufacturers and commercial
customers through a global network of more than 390 locations in 53
countries.
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 attributable to
shareholders 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, acquisitions, and settlement of
certain legal matters. 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)
Quarter Ended
March 31,2012
April 2,2011
(Unaudited) Operating income, as reported $ 187,449 $
219,168 Restructuring, integration, and other charges 8,243 9,607
Settlement of legal matter - 5,875 Operating income,
as adjusted $ 195,692 $ 234,650 Net income attributable to
shareholders, as reported $ 113,628 $ 136,309 Restructuring,
integration, and other charges 6,141 7,199 Settlement of legal
matter - 3,609 Gain on bargain purchase - (1,078 )
Net income attributable to shareholders, as adjusted $ 119,769 $
146,039 Net income per basic share, as reported $ 1.01 $
1.18 Restructuring, integration, and other charges .05 .06
Settlement of legal matter - .03 Gain on bargain purchase -
(.01 ) Net income per basic share, as adjusted $ 1.07 $ 1.27
Net income per diluted share, as reported $ 1.00 $ 1.16
Restructuring, integration, and other charges .05 .06 Settlement of
legal matter - .03 Gain on bargain purchase - (.01 )
Net income per diluted share, as adjusted $ 1.05 $ 1.24
The sum of the components for basic and
diluted net income per share, as adjusted, may not agree to totals,
as presented, due to rounding.
Information Relating to Forward-Looking
Statements
This press release includes forward-looking statements that are
subject to numerous assumptions, risks, and uncertainties, which
could cause actual results or facts to differ materially from such
statements for a variety of reasons, including, but not limited to:
industry conditions, the company’s implementation of its new
enterprise resource planning system, changes in product supply,
pricing and customer demand, competition, other vagaries in the
global components and global ECS markets, changes in relationships
with key suppliers, increased profit margin pressure, the effects
of additional actions taken to become more efficient or lower
costs, and the company’s ability to generate additional cash flow.
Forward-looking statements are those statements, which are not
statements of historical fact. These forward-looking statements can
be identified by forward-looking words such as “expects,”
“anticipates,” “intends,” “plans,” “may,” “will,” “believes,”
“seeks,” “estimates,” and similar expressions. Shareholders and
other readers are cautioned not to place undue reliance on these
forward-looking statements, which speak only as of the date on
which they are made. The company undertakes no obligation to update
publicly or revise any of the forward-looking statements.
ARROW ELECTRONICS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands except per share data)
(Unaudited)
Quarter Ended
March 31,2012
April 2,2011
Sales $ 4,889,529 $ 5,223,003 Costs and expenses: Cost of
sales 4,208,950 4,500,495 Selling, general and administrative
expenses 455,837 464,920 Depreciation and amortization 29,050
22,938 Restructuring, integration, and other charges 8,243 9,607
Settlement of legal matter - 5,875 4,702,080
5,003,835 Operating income 187,449 219,168 Equity in
earnings of affiliated companies 2,184 1,213 Gain on bargain
purchase - 1,755 Interest and other financing expense, net
27,132 25,767 Income before income taxes 162,501 196,369
Provision for income taxes 48,778 59,872 Consolidated
net income 113,723 136,497 Noncontrolling interests 95
188 Net income attributable to shareholders $ 113,628 $
136,309 Net income per share: Basic $ 1.01 $ 1.18 Diluted $ 1.00 $
1.16 Average number of shares outstanding: Basic 112,002 115,215
Diluted 114,077 117,428
ARROW ELECTRONICS, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands except par value)
March 31,2012
December 31,2011
(unaudited) ASSETS Current assets: Cash and cash equivalents $
739,708 $ 396,887 Accounts receivable, net 4,207,647 4,482,117
Inventories 2,011,442 1,963,910 Other current assets 210,854
181,677 Total current assets 7,169,651
7,024,591 Property, plant and equipment, at cost: Land 23,925
23,790 Buildings and improvements 149,936 147,215 Machinery and
equipment 962,053 934,558 1,135,914 1,105,563 Less:
Accumulated depreciation and amortization (572,395 )
(549,334 ) Property, plant and equipment, net 563,519
556,229 Investments in affiliated companies 63,487 60,579
Intangible assets, net 420,728 392,763 Cost in excess of net assets
of companies acquired 1,615,210 1,473,333 Other assets
306,153 321,584 Total assets $ 10,138,748 $ 9,829,079
LIABILITIES AND EQUITY Current liabilities: Accounts payable $
3,160,135 $ 3,264,088 Accrued expenses 608,652 660,996
Short-term borrowings, including current
portion of long-term debt
30,554 33,843 Total current liabilities
3,799,341 3,958,927 Long-term debt 2,250,463
1,927,823 Other liabilities 280,142 267,069 Equity: Shareholders'
equity: Common stock, par value $1: Authorized – 160,000 shares in
2012 and 2011
Issued – 125,424 and 125,382 shares in
2012 and 2011, respectively
125,424 125,382 Capital in excess of par value 1,062,542 1,076,275
Treasury stock (13,877 and 13,568 shares
in 2012 and 2011, respectively), at cost
(456,672 ) (434,959 ) Retained earnings 2,886,585 2,772,957 Foreign
currency translation adjustment 206,585 158,550 Other
(19,511 ) (29,393 ) Total shareholders' equity 3,804,953
3,668,812 Noncontrolling interests 3,849 6,448 Total
equity 3,808,802 3,675,260 Total liabilities and
equity $ 10,138,748 $ 9,829,079
ARROW ELECTRONICS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
Quarter Ended
March 31,2012
April 2,2011
Cash flows from operating activities: Consolidated net income $
113,723 $ 136,497
Adjustments to reconcile consolidated net
income to net cash provided by (used for)
operations:
Depreciation and amortization 29,050 22,938 Amortization of
stock-based compensation 7,255 10,357 Equity in earnings of
affiliated companies (2,184 ) (1,213 ) Deferred income taxes 18,961
(1,057 ) Restructuring, integration, and other charges 6,141 7,199
Settlement of legal matter - 3,609 Excess tax benefits from
stock-based compensation arrangements (4,947 ) (5,728 ) Other
(1,457 ) (361 )
Change in assets and liabilities, net of
effects of acquired businesses:
Accounts receivable 334,014 278,549 Inventories (24,357 ) 37,981
Accounts payable (135,198 ) (574,003 ) Accrued expenses (64,564 )
(43,109 ) Other assets and liabilities (26,102 )
(51,328 ) Net cash provided by (used for) operating activities
250,335 (179,669 ) Cash flows from investing
activities: Cash consideration paid for acquired businesses
(160,543 ) (379,013 ) Acquisition of property, plant and equipment
(22,253 ) (18,177 ) Net cash used for investing
activities (182,796 ) (397,190 ) Cash flows from
financing activities: Change in short-term and other borrowings
(9,074 ) (3,900 ) Proceeds from long-term bank borrowings, net
329,700 190,800 Proceeds from exercise of stock options 10,138
27,150 Excess tax benefits from stock-based compensation
arrangements 4,947 5,728 Repurchases of common stock (57,684
) (46,447 ) Net cash provided by financing activities
278,027 173,331 Effect of exchange rate changes on cash
(2,745 ) (1,491 ) Net increase (decrease) in cash and
cash equivalents 342,821 (405,019 ) Cash and cash equivalents at
beginning of period 396,887 926,321 Cash and cash
equivalents at end of period $ 739,708 $ 521,302
ARROW ELECTRONICS, INC.
SEGMENT INFORMATION
(In thousands)
(unaudited)
Quarter Ended
March 31,2012
April 2,2011
Sales: Global components $ 3,349,554 $ 3,886,600 Global ECS
1,539,975 1,336,403
Consolidated
$ 4,889,529 $ 5,223,003 Operating income (loss): Global
components $ 170,708 $ 228,881 Global ECS 55,487 39,080 Corporate
(a) (38,746 ) (48,793 ) Consolidated $ 187,449 $
219,168 (a) Includes restructuring,
integration, and other charges of $8.2 million and $9.6 million for
the first quarters of 2012 and 2011, respectively. Also included in
the first quarter of 2011 is a charge of $5.9 million related to
the settlement of a legal matter.
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