Arrow Electronics Reports Strong Sales Growth of 17% Year over Year.Strong Cash Flow Generation MELVILLE, N.Y. -- Arrow Electronics Arrow Electronics NYSE: ARW is a Fortune 500 company headquartered in Melville, New York. This company specializes in products and services of electronic components and computer products. , Inc. (NYSE NYSE See: New York Stock Exchange :ARW ARW Air Refueling Wing ARW Advanced Research Workshop ARW Associated Resume Writers ARW Army Ranger Wing (Irish Special Forces) ARW American Revolutionary War ARW Angle Random Walk ARW Aeroelastic Research Wing ) today reported third quarter 2007 net income of $98.3 million ($.80 and $.79 per share on a basic and diluted di·lute tr.v. di·lut·ed, di·lut·ing, di·lutes 1. To make thinner or less concentrated by adding a liquid such as water. 2. To lessen the force, strength, purity, or brilliance of, especially by admixture. basis, respectively) on sales of $4.03 billion, compared with net income of $85.9 million ($.70 per share on both a basic and diluted basis) on sales of $3.45 billion in the third quarter of 2006. Sales increased 17 percent year over year. On a pro forma As a matter of form or for the sake of form. Used to describe accounting, financial, and other statements or conclusions based upon assumed or anticipated facts. The phrase pro forma basis, sales increased 4 percent year over year as acquisitions also benefited sales growth. The company's results for the third quarters of 2007 and 2006 include a number of items outlined below 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 September 30, 2007 would have been $95.0 million ($.77 and $.76 per share on a basic and diluted basis, respectively) and net income for the quarter ended September 30, 2006, would have been $87.0 million ($.71 per share on both a basic and diluted basis). "We performed well in a market that was challenging. Our level of sales, as well as working capital to sales, remained near record levels and we generated the highest level of cash flow for a third quarter in six years and the highest return on working capital for a third quarter in seven years, all while we continued to invest in the long-term future of Arrow," said William E. Mitchell, chairman, president and chief executive officer of Arrow Electronics, Inc. Global enterprise computing Refers to information technology in the larger company. See enterprise data and enterprise networking. solutions ("ECS See eComStation. ") sales of $1.17 billion increased 97 percent year over year and decreased 8 percent sequentially in the seasonally soft third quarter. Year-over-year growth was aided by the impact of the acquisitions of KeyLink Systems Group, Alternative Technology, Inc. and the storage and security distribution business of InTechnology plc. On a pro forma basis, sales increased 15 percent year over year. "We again outgrew out·grew v. Past tense of outgrow. the market with strong double-digit performance in industry standard servers, storage, software, and services, as well as modest growth in proprietary servers. While we achieved strong top-line performance with revenue near the high end of our guidance, our mix of products and investments in the business to accelerate future growth had an unfavorable impact on profitability this quarter. We expect to continue to outgrow outgrow verb To change the relationship with a condition or structure by dint of ↑ age or size; while children outgrow clothing, and certain behaviors, they rarely outgrow diseases–eg, asthma the market and return to more normal levels of profitability in the fourth quarter," said Mr. Mitchell. Global components sales of $2.86 billion increased 3 percent compared with the second quarter and were flat year over year as the well-publicized weakness within the large EMS customer base continued. "We again gained market share on a worldwide basis and added to our industry leading position in the face of an increasingly more competitive market in all regions this quarter. We were particularly pleased with our success in Asia Pacific, where we generated record operating income Operating Income The profit realized from a business' own operations. Notes: This would not include income from things such as investments in other firms. Also referred to as operating profit or recurring profit. dollars for a third quarter as earnings increased 173 percent year over year. We had good success with efficiency initiatives to drive down our operating expenses Operating expenses The amount paid for asset maintenance or the cost of doing business, excluding depreciation. Earnings are distributed after operating expenses are deducted. worldwide going forward, and we will continue to invest in strategic opportunities to build for the future," Mr. Mitchell said. The company's results for the third quarter of 2007 and 2006 include the items outlined below that impact their comparability: * During the third quarter of 2007, the company recorded restructuring and integration charges of $4.5 million ($2.7 million net of related taxes or $.02 per share on both a basic and diluted basis) primarily related to initiatives taken by the company in the period to improve operating efficiencies. During the third quarter of 2007, the company took a series of additional steps to make its organizational structure  This article has no lead section.To comply with Wikipedia's lead section guidelines, one should be written. more efficient. These actions are expected to reduce costs by approximately $30 million per annum Per annum Yearly. in North America North America, third largest continent (1990 est. pop. 365,000,000), c.9,400,000 sq mi (24,346,000 sq km), the northern of the two continents of the Western Hemisphere. , of which approximately $3 million was realized in the third quarter of 2007 and approximately $7 million is expected to be realized in the fourth quarter of 2007. The estimated restructuring charges restructuring charge The expense of reorganizing a company's operations. A restructuring charge is an infrequent expense that generally results from asset writedowns or facility closings. to be recorded over the next several quarters associated with these actions total approximately $8 million. * During the third quarter of 2007, the company recorded an income tax benefit of $6.0 million, net, ($.05 per share on both a basic and diluted basis) principally due to a reduction in deferred income taxes as a result of the reduction in the statutory tax rate in Germany. * During the third quarter of 2006, the company recorded restructuring and integration charges of $1.8 million ($1.1 million net of related taxes or $.01 per share on both a basic and diluted basis). "Based upon the information known to us today, we generally expect normal seasonality in both of our businesses. We believe that total fourth quarter sales will be between $4.15 and $4.45 billion, with global component sales between $2.65 and $2.85 billion and global enterprise computing solutions sales between $1.50 and $1.60 billion. Earnings per share, on a diluted basis, excluding any charges and including estimated amortization of intangible assets Intangible Asset An asset that is not physical in nature. Notes: Examples are things like copyrights, patents, intellectual property, and goodwill. These are the opposite of tangible assets. of $.02 to $.03, are expected to be in the range of $.90 to $.95, an increase of 25 percent to 32 percent from last year's fourth quarter," said Paul J. Reilly, senior vice president and chief financial officer. NINE-MONTH RESULTS Arrow's net income for the first nine months of 2007 was $293.8 million ($2.38 and $2.36 per share on a basic and diluted basis, respectively) on sales of $11.57 billion, compared with net income of $260.3 million ($2.14 and $2.12 per share on a basic and diluted basis, respectively) on sales of $10.08 billion in the first nine months of 2006. Net income for the first nine months of 2007 includes restructuring and integration charges of $1.8 million ($0.4 million net of related taxes), primarily related to initiatives taken by the company in the period to improve operating efficiencies and the acquisition of KeyLink, and an income tax benefit of $6.0 million, net, ($.05 per share on both a basic and diluted basis) principally due to a decrease in deferred income taxes as a result of a reduction in the statutory tax rate in Germany. Excluding these items, net income would have been $288.2 million ($2.34 and $2.31 per share on a basic and diluted basis, respectively) for the first nine months of 2007. Net income for the first nine months of 2006 includes restructuring and integration charges of $6.4 million ($3.9 million net of related taxes or $.03 per share on both a basic and diluted basis) and a loss on prepayment Prepayment 1. The payment of a debt obligation prior to its due date. 2. The excess payment over a scheduled debt repayment amount. Notes: 1. Examples include deferred expenses such as rent and early loan repayments. 2. 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 accreted value The current value of an original-issue discount bond, taking into account imputed interest that has accumulated. ) of its zero coupon convertible debentures Convertible Debenture Any type of debenture that can be converted into some other security. Notes: For example, a convertible bond can be converted into stock. due in 2021 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 $265.7 million ($2.19 and $2.16 per share on a basic and diluted basis, respectively) for the first nine months of 2006. 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 Melville is a hamlet and census-designated place in the town of Huntington in Suffolk County on Long Island, New York, in the United States. As of the 2000 census, 14,533 people resided there. , 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 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 The standard accounting rules, regulations, and procedures used by companies in maintaining their financial records. Generally accepted accounting principles (GAAP) provide companies and accountants with a consistent set of guidelines that cover both broad accounting ("GAAP GAAP See: Generally Accepted Accounting Principles GAAP See generally accepted accounting principles (GAAP). "), the company provides certain non-GAAP financial information relating to relating to relate prep → concernant relating to relate prep → bezüglich +gen, mit Bezug auf +acc 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, deferred tax adjustments, 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. [TABLE OMITTED] [TABLE OMITTED] Information Relating to Forward-Looking Statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. 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 global financial system and the company's planned implementation of its new enterprise resource planning See ERP. (application, business) Enterprise Resource Planning - (ERP) Any software system designed to support and automate the business processes of medium and large businesses. system, changes in product supply, pricing and customer demand, competition, other vagaries in the global components and global enterprise computing solutions 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. [TABLE OMITTED] This interim report is subject to independent audit at year-end. [TABLE OMITTED] This interim report is subject to independent audit at year-end. [TABLE OMITTED] This interim report is subject to independent audit at year-end. [TABLE OMITTED] This interim report is subject to independent audit at year-end. [TABLE OMITTED] [TABLE OMITTED] Effective April 1, 2007, the company's business segments were realigned as part of the company's continued efforts to strengthen its market leadership position, streamline the business, and further leverage cost synergies Cost Synergy In the context of mergers, cost synergy is the savings in operating costs expected after two companies, who compliment each other's strengths, join. Notes: The savings in operating costs usually come in the form of laying off employees. globally. The company's global components business was formed to bring a single, global organization to leverage the collective enterprise to speed services and solutions to customers and suppliers. The company's global ECS business was formed to bring a single organization with an expanded geographic reach, increased exposure in faster growing product segments, and a more robust customer and supplier base. As a result, the UK Microtronica, ATD ATD Anthropomorphic Test Dummy ATD Attention to Detail ATD Advanced Technology Demonstration AtD Achieving the Dream ATD Atmospheric Technology Division (US National Center for Atmospheric Research) ATD Assistant Technical Director (in Spain), and Arrow Computer Products (in France) businesses, previously included in the computer products business segment, were transitioned into the company's global components business segment. As a result of this realignment re·a·lign tr.v. re·a·ligned, re·a·lign·ing, re·a·ligns 1. To put back into proper order or alignment. 2. To make new groupings of or working arrangements between. , global components and global ECS are the business segments upon which management primarily evaluates the operations of the company and upon which it bases its operating decisions. Prior period segment data was adjusted to conform to Verb 1. conform to - satisfy a condition or restriction; "Does this paper meet the requirements for the degree?" fit, meet coordinate - be co-ordinated; "These activities coordinate well" the current period presentation. Effective January 1, 2007, stock option expense, which was previously included in corporate, is allocated to global components, global ECS, and corporate. Prior period segment data was adjusted to conform with the current period presentation. This interim report is subject to independent audit at year-end. |
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