UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 1-4482
ARROW ELECTRONICS, INC.
(Exact name of Registrant as specified in its charter)
New York 11-1806155
(State or other jurisdiction of (I.R.S. Employer Identifi-
incorporation or organization) cation Number)
25 Hub Drive, Melville, New York 11747
(Address of principal executive (Zip Code)
offices)
Registrant's telephone number,
including area code (516) 391-1300
Indicate by check mark whether the Registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter
period that the Registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days.
Yes X No
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
Common stock, $1 par value: 46,718,867 shares outstanding at August
4, 1995.
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements.
<TABLE>
ARROW ELECTRONICS, INC.
CONSOLIDATED STATEMENT OF OPERATIONS
(IN THOUSANDS EXCEPT PER SHARE DATA)
(UNAUDITED)
<CAPTION>
Six Months Ended Three Months Ended
June 30 June 30
1995 1994 1995 1994
<S> <C> <C> <C> <C>
Sales $2,898,566 $2,231,670 $1,458,213 $1,113,991
Costs and expenses:
Cost of products sold 2,389,398 1,832,724 1,195,375 912,629
Selling, general and
administrative expens 287,011 241,707 146,373 123,391
Depreciation and amortization 15,552 12,959 7,781 6,431
2,691,961 2,087,390 1,349,529 1,042,451
Operating income 206,605 144,280 108,684 71,540
Equity in earnings of
affiliated company 1,770 - 1,026 -
Interest expense 22,186 18,990 11,079 9,547
Earnings before income taxes
and minority interest 186,189 125,290 98,631 61,993
Provision for income taxes 76,373 50,666 40,440 24,991
Earnings before minority
interest 109,816 74,624 58,191 37,002
Minority interest 13,213 8,342 6,439 4,099
Net income $ 96,603 $ 66,282 $ 51,752 $ 32,903
Primary $2.05 $1.42 $1.09 $.71
Fully diluted $1.93 $1.36 $1.03 $.68
Average number of common shares
and common share equivalents
outstanding:
Primary 47,065 46,566 47,294 46,556
Fully diluted 51,039 50,342 51,199 50,332
See accompanying notes.
</TABLE>
-2-
<TABLE>
ARROW ELECTRONICS, INC.
CONSOLIDATED BALANCE SHEET
(DOLLARS IN THOUSANDS)
<CAPTION>
June 30, December 31,
1995 1994
(Unaudited)
ASSETS
<S> <C> <C>
Current assets:
Cash and short-term investments $ 76,230 $ 105,606
Accounts receivable, less allowance
for doubtful accounts ($34,328 in
1995 and $31,132 in 1994) 860,085 697,021
Inventories 846,614 725,436
Prepaid expenses and other assets 34,491 30,180
Total current assets 1,817,420 1,558,243
Property, plant and equipment at cost:
Land 11,962 11,970
Buildings and improvements 63,899 53,962
Machinery and equipment 101,560 84,740
177,421 150,672
Less: accumulated depreciation and
amortization 67,001 60,857
110,420 89,815
Investment in affiliated company 30,383 -
Cost in excess of net assets of companies
acquired, less accumulated amortization
($43,046 in 1995 and $36,057 in 1994) 389,268 334,297
Other assets 57,010 56,419
$2,404,501 $2,038,774
See accompanying notes.
</TABLE>
-3-
<TABLE>
ARROW ELECTRONICS, INC.
CONSOLIDATED BALANCE SHEET
(DOLLARS IN THOUSANDS)
<CAPTION>
June 30, December 31,
1995 1994
(Unaudited)
LIABILITIES AND SHAREHOLDERS' EQUITY
<S> <C> <C>
Current liabilities:
Accounts payable $ 441,911 $ 411,766
Accrued expenses 242,476 191,574
Short-term borrowings, including
current maturities of long-term debt 127,787 86,123
Total current liabilities 812,174 689,463
Long-term debt 337,354 224,398
Deferred income taxes and other liabilities 69,186 56,335
Subordinated debentures 125,000 125,000
Minority interest 94,970 105,693
Shareholders' equity:
Common stock, par value $1:
Authorized - 80,000,000 shares
Issued - 46,676,022 shares in 1995
and 46,167,913 shares in 1994 46,676 46,168
Capital in excess of par value 404,204 388,913
Retained earnings 496,692 400,089
Foreign currency translation adjustment 24,453 6,367
972,025 841,537
Less: Unamortized employee stock awards 6,208 3,652
and other
965,817 837,885
$2,404,501 $2,038,774
See accompanying notes.
</TABLE>
-4-
<TABLE>
ARROW ELECTRONICS, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 1995 AND 1994
(IN THOUSANDS)
(UNAUDITED)
<CAPTION>
Six Months Ended
June 30,
1995 1994
<S> <C> <C>
Cash flows from operating activities:
Net income $ 96,603 $ 66,282
Adjustments to reconcile net income to net
cash provided by (used for) operations:
Minority interest in earnings 13,213 8,342
Depreciation and amortization 16,512 14,098
Equity in undistributed earnings of
affiliated company (1,770) -
Deferred income taxes 7,891 3,637
Change in assets and liabilities,
net of effects of acquired businesses:
Accounts receivable (140,641) (57,171)
Inventories (92,255) (24,696)
Prepaid expenses and other assets (3,122) 1,158
Accounts payable 16,699 51,414
Accrued expenses 36,562 (6,072)
Other (1,609) (7,017)
Net cash provided by (used for)
operating activities (51,917) 49,975
Cash flows from investing activities:
Acquisitions of property, plant and
equipment, net (26,050) (8,227)
Cash consideration paid for acquired businesses (85,932) (80,623)
Repayment by affiliate - 7,730
Collection of notes receivable from officers - 1,140
Net cash (used for) investing activities (111,982) (79,980)
Cash flows from financing activities:
Change in short term borrowings 36,812 12,330
Proceeds from credit facilities 99,512 8,811
Repayment of long-term debt (15,784) (1,329)
Proceeds from long-term debt 22,651 14,351
Proceeds from exercise of stock options 9,014 3,537
Distribution to partners (27,178) (7,696)
Financing fees paid (115) (200)
Net cash provided by financing activities 124,912 29,804
Effect of exchange rate changes on cash 9,611 3,712
Net increase (decrease) in cash and
short-term investments (29,376) 3,511
Cash and short-term investments at beginning of
period 105,606 80,962
Cash and short-term investments from affiliate
at beginning of period - 1,112
Cash and short-term investments at end of period $ 76,230 $ 85,585
Supplemental disclosures of cash flow information
Cash paid during the period:
Income taxes $ 47,371 $ 24,654
Interest $ 22,277 $ 22,085
See accompanying notes.
</TABLE>
-5-
ARROW ELECTRONICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1995
(UNAUDITED)
Note A -- Basis of presentation
The accompanying consolidated financial statements reflect
all adjustments, consisting only of normal recurring accruals, which
are, in the opinion of management, necessary for a fair presentation of
the consolidated financial position and results of operations at and
for the periods presented. Such financial statements do not include
all the information or footnotes necessary for a complete presentation
and, accordingly, should be read in conjunction with the company's
audited consolidated financial statements for the year ended December
31, 1994 and the notes thereto. The results of operations for the
interim periods are not necessarily indicative of results for the full
year.
In 1994, the company completed the acquisition of Gates/FA
Distributing, Inc. ("Gates") and Anthem Electronics, Inc. ("Anthem") in
transactions accounted for as poolings of interests. Accordingly, the
1994 consolidated statements of income and cash flows have been
restated to include the operations of Gates and Anthem.
Note B -- Net income per common share
Net income per common share is based upon the weighted
average number of shares of common stock and common stock equivalents
outstanding. For the six months ended June 30, 1995 and 1994, the
average number of common stock equivalents was 660,324 and 630,852,
respectively. For the quarter ended June 30, 1995 and 1994, the
average number of common stock equivalents was 748,823 and 555,694,
respectively.
Net income per common share on a fully diluted basis assumes
that the 5-3/4% convertible subordinated debentures were converted to
common stock at the beginning of the period and the related interest
expense, net of taxes, was eliminated.
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations.
Sales
Consolidated sales for the six months and second quarter of
1995 increased 29.9% and 30.9% compared with year-earlier periods. This
sales growth was principally due to increased activity levels in each
of the company's distribution groups throughout the world and, to a
lesser extent, acquisitions in Europe and the Pacific Rim.
-6-
Operating income
The company recorded operating income of $206.6 million and
$108.7 million in the first six months and second quarter of 1995,
respectively, compared with $144.3 million and $71.5 million,
respectively, in the year-earlier periods. The improvement in
operating income reflects the impact of increased sales, acquisitions,
and the benefits of economies of scale resulting from the integration
of Anthem and Gates with Arrow.
Interest expense
Interest expense of $22.2 million and $11.1 million in the
first six months and second quarter of 1995, respectively, increased
from $19 million during the first six months of 1994 and $9.5 million
in the comparable quarter of 1994. The increase from the first six
months and second quarter of 1994 reflects the incremental interest
associated with businesses acquired subsequent to the second quarter of
1994.
Income taxes
During the first six months and second quarter of 1995 the
company recorded a provision for taxes at an effective tax rate of 41%
compared with 40.4% and 40.3%, respectively, in the year-earlier
periods.
Net income
The company recorded net income of $96.6 million and $51.8
million in the first six months and second quarter of 1995,
respectively, compared with $66.3 million in the first six months of
1994 and $32.9 million in the second quarter of 1994. The increase in
net income over the year-earlier periods is due to increased sales and
lower operating expenses as a percentage of sales offset in part by an
increase in interest expense as previously discussed.
Liquidity and capital resources
The company maintains a high level of current assets,
primarily accounts receivable and inventories. Consolidated current
assets as a percentage of total assets were approximately 75.6% and
78.5% at June 30, 1995 and 1994, respectively (excluding, in 1994, the
effect of the investments in net assets of acquired businesses).
The net amount of cash used for the company's operating
activities during the first six months of 1995 was $51.9 million,
principally reflecting increased working capital requirements
supporting higher sales. The net amount of cash used for investing
activities was $112 million, including $85.9 million for various
acquisitions. The net amount of cash provided by financing activities
was $124.9 million, principally reflecting the company's U.S. credit
agreements and German bank borrowings, offset in part by distributions
to partners and the net repayment of debt.
-7-
The net amount of cash provided by the company's operating
activities during the first six months of 1994 was $50 million,
principally reflecting increased earnings. The net amount of cash used
for investing activities was $80 million, including approximately $80.6
million for various acquisitions. The net amount of cash provided by
financing activities was $29.8 million, principally reflecting the
company's U.S. credit agreements and German bank borrowings, offset in
part by the net payment of debt.
The company believes that its working capital, funds available
under its credit agreements, and additional funds generated from
operations will be sufficient to satisfy its cash requirements at least
through 1996.
Item 4. Submission of Matters to a Vote of Security Holders.
(a) The company's Annual Meeting of Shareholders was held on May
9, 1995 (the "Annual Meeting").
(b) The matters voted upon at the Annual Meeting and the results
of the voting were as follows:
(i) The shareholders voted 42,312,015 shares in favor and
16,003 shares against the appointment of Ernst & Young
as auditors of the company.
(ii) The following individuals were elected by the
shareholders to serve as Directors:
Shares
Board Member
In Favor Against
Daniel W. Duval 42,304,964 58,203
Carlo Giersch 42,179,006 184,161
Stephen P. Kaufman 42,177,803 185,364
Lawrence R. Kem 42,301,812 61,355
Roger King 42,282,745 80,422
Robert E. Klatell 42,178,686 184,481
Steven W. Menefee 42,179,449 183,718
Karen Gordon Mills 42,300,996 62,171
Anne Pol 42,295,543 67,624
Richard S. Rosenbloom 42,307,043 56,124
Robert S. Throop 42,178,284 184,883
John C. Waddell 42,305,566 57,601
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits.
11 - Statement Re: Computation of Earnings Per Share
(b) Reports on Form 8-K.
None
-8-
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 thereunto duly authorized.
ARROW ELECTRONICS, INC.
Date: August 11, 1995 By:/s/ Robert E. Klatell
Robert E. Klatell
Senior Vice President
and Chief Financial Officer
Date: August 11, 1995 By:/s/ Paul J. Reilly
Paul J. Reilly
Controller
-9-
Exhibit 11
<TABLE>
ARROW ELECTRONICS, INC.
STATEMENT RE: COMPUTATION OF EARNINGS PER SHARE
(In thousands except per share data)
<CAPTION>
Six Months Ended Three Months Ended
June 30 June 30
1995 1994 1995 1994
Primary
<S> <C> <C> <C> <C>
Average shares of common stock
outstanding 46,405 45,936 46,545 46,001
Net effect of dilutive stock
options-based on the treasury
method 660 630 749 555
Total 47,065 46,566 47,294 46,556
Net income $96,603 $66,282 $51,752 $32,903
Per share amount $ 2.05 $ 1.42 $ 1.09 $ .71
Fully Diluted
Average shares of common stock
outstanding 46,405 45,936 46,545 46,001
Net effect of dilutive stock
options-based on the
treasury method 860 632 880 557
Assumed conversion of 5-3/4%
convertible subordinated
debentures 3,774 3,774 3,774 3,774
Total 51,039 50,342 51,199 50,332
Net income $96,603 $66,282 $51,752 $32,903
Add interest on 5-3/4%
convertible subordinated
debentures, net of income
tax effect 2,156 2,156 1,078 1,078
Total $98,759 $68,438 $52,830 $33,981
Per share amount $ 1.93 $ 1.36 $ 1.03 $ .68
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND> THIS SCHEDULE CONTAINS SUMMARY FINANCIAL
INFORMATION EXTRACTED FROM THE JUNE 1995 10-Q
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH FINANCIAL STATEMENTS
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-1-1995
<PERIOD-END> JUN-30-1995
<PERIOD-TYPE> 6-MOS
<EXCHANGE-RATE> 1
<CASH> 76,230
<SECURITIES> 0
<RECEIVABLES> 860,085
<ALLOWANCES> 34,328
<INVENTORY> 846,614
<CURRENT-ASSETS> 1,817,420
<PP&E> 177,421
<DEPRECIATION> 67,001
<TOTAL-ASSETS> 2,404,501
<CURRENT-LIABILITIES> 812,174
<BONDS> 462,354
0
0
<COMMON> 46,676
<OTHER-SE> 919,141
<TOTAL-LIABILITY-AND-EQUITY> 2,404,501
<SALES> 2,898,566
<TOTAL-REVENUES> 2,898,566
<CGS> 2,389,398
<TOTAL-COSTS> 2,691,961
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 5,468
<INTEREST-EXPENSE> 22,186
<INCOME-PRETAX> 186,189
<INCOME-TAX> 76,373
<INCOME-CONTINUING> 96,603
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 96,603
<EPS-PRIMARY> 2.05
<EPS-DILUTED> 1.93
</TABLE>
