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 March 31, 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: 46,518,330 shares outstanding at May 2, 1995.
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements.
<TABLE>
ARROW ELECTRONICS, INC.
CONSOLIDATED STATEMENT OF INCOME
(IN THOUSANDS EXCEPT PER SHARE DATA)
(UNAUDITED)
<CAPTION>
Three Months Ended
March 31,
1995 1994
<S> <C> <C>
Sales $1,440,353 $1,117,679
Costs and expenses:
Cost of products sold 1,194,023 920,095
Selling, general and administrative expenses 140,638 118,316
Depreciation and amortization 7,771 6,528
1,342,432 1,044,939
Operating income 97,921 72,740
Equity in earnings of affiliated company 744 -
Interest expense 11,107 9,443
Earnings before income taxes and minority interest 87,558 63,297
Provision for income taxes 35,933 25,675
Earnings before minority interest 51,625 37,622
Minority interest 6,774 4,243
Net income $ 44,851 $ 33,379
Net income per common share:
Primary $.96 $.72
Fully diluted $.91 $.68
Average number of common shares and
common share equivalents outstanding:
Primary 46,865 46,563
Fully diluted 50,706 50,337
See accompanying notes
</TABLE>
2
<TABLE>
ARROW ELECTRONICS, INC.
CONSOLIDATED BALANCE SHEET
(DOLLARS IN THOUSANDS)
<CAPTION>
March 31, December 31,
1995 1994
(Unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash and short-term investments $ 90,782 $ 105,606
Accounts receivable, less allowance
for doubtful accounts ($34,240 in
1995 and $31,132 in 1994) 813,441 697,021
Inventories 781,033 725,436
Prepaid expenses and other assets 31,063 30,180
Total current assets 1,716,319 1,558,243
Property, plant and equipment at cost:
Land 12,008 11,970
Buildings and improvements 59,265 53,962
Machinery and equipment 97,883 84,740
169,156 150,672
Less accumulated depreciation and
amortization 64,794 60,857
104,362 89,815
Investment in affiliated company 29,342 -
Cost in excess of net assets of companies
acquired, less accumulated amortization
($40,690 in 1995 and $36,057 in 1994) 380,910 334,297
Other assets 58,082 56,419
$2,289,015 $2,038,774
See accompanying notes.
</TABLE>
3
<TABLE>
ARROW ELECTRONICS, INC.
CONSOLIDATED BALANCE SHEET
(DOLLARS IN THOUSANDS)
<CAPTION>
March 31, December 31,
1995 1994
(Unaudited)
LIABILITIES AND SHAREHOLDERS' EQUITY
<S> <C> <C>
Current liabilities:
Accounts payable $ 487,736 $ 411,766
Accrued expenses 234,516 191,574
Short-term borrowings, including
current maturities of long-term debt 84,234 86,123
Total current liabilities 806,486 689,463
Long-term debt 279,020 224,398
Deferred income taxes and other liabilities 63,319 56,335
Subordinated debentures 125,000 125,000
Minority interest 108,609 105,693
Shareholders' equity:
Common stock, par value $1:
Authorized - 80,000,000 shares
Issued - 46,471,098 shares in 1995
and 46,167,913 shares in 1994 46,471 46,168
Capital in excess of par value 397,609 388,913
Retained earnings 444,940 400,089
Foreign currency translation adjustment 24,367 6,367
913,387 841,537
Less: Unamortized employee stock awards
and other 6,806 3,652
906,581 837,885
$2,289,015 $2,038,774
See accompanying notes.
4
</TABLE>
<TABLE>
ARROW ELECTRONICS, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
<CAPTION>
Three Months Ended
March 31,
1995 1994
<S> <C> <C>
Cash flows from operating activities:
Net income $ 44,851 $ 33,379
Adjustments to reconcile net income to net
cash provided by (used for) operations:
Minority interest in earnings 6,774 4,243
Depreciation and amortization 8,257 7,093
Equity in undistributed earnings of
affiliated company (744) -
Deferred income taxes 4,420 2,123
Change in assets and liabilities,
net of effects of acquired businesses:
Accounts receivable (100,691) (42,863)
Inventories (30,552) (2,558)
Prepaid expenses and other assets (578) 2,859
Accounts payable 64,514 34,579
Accrued expenses 32,072 11,976
Other (88) (2,663)
Net cash provided by operating activities 28,235 48,168
Cash flows from investing activities:
Acquisitions of property, plant and
equipment, net (15,934) (2,624)
Cash consideration paid for acquired businesses (77,221) (51,904)
Repayment by affiliate - 7,730
Collection of notes receivable from officers - 656
Net cash (used for) investing activities (93,155) (46,142)
Cash flows from financing activities:
Change in short term borrowings 2,528 (13,138)
Proceeds from credit facilities 34,586 2,959
Repayment of long-term debt (16,507) (995)
Proceeds from long-term debt 24,234 14,545
Proceeds from exercise of stock options 3,909 2,392
Distribution to partners (7,931) (2,870)
Financing fees paid (65) (200)
Net cash provided by financing activities 40,754 2,693
Effect of exchange rate changes on cash 9,342 1,075
Net increase (decrease) in cash and
short-term investments (14,824) 5,794
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 $ 90,782 $ 87,868
Supplemental disclosures of cash flow information
Cash paid during the period:
Income taxes $ 3,525 $ 5,196
Interest $ 10,806 $ 8,141
See accompanying notes
</TABLE>
5
ARROW ELECTRONICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 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
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
quarter ended March 31, 1995 and 1994, the average number of common stock
equivalents was 602,229 and 706,993. 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 first quarter of 1995 increased
approximately 29% compared with the year-earlier period. 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.
Operating income
The company recorded operating income of $97.9 million
in the first quarter of 1995, compared with $72.7 million in the first
quarter of 1994. The improvement in operating income reflects the impact of
increased sales, acquisitions, and continued economies of scale and expense
containment efforts reducing operating expenses as a percentage of sales,
offset in part by lower gross profit margins. Gross profit margins
decreased as a result of proportionately higher sales of low margin
products, such as commercial computer products, and competitive pricing
pressures.
6
Interest expense
Interest expense of $11.1 million in the first quarter of 1995,
increased from $9.4 million during the comparable quarter of 1994. The
increase from the first quarter of 1994 reflects the incremental interest
associated with businesses acquired subsequent to the first quarter of 1994.
Income taxes
During the first quarter of 1995, the company recorded a provision
for taxes at an effective tax rate of 41.0%, compared with 40.6% in the
earlier period.
Net income
The company recorded net income of $44.9 million in the first
quarter of 1995, compared with $33.4 million in the first quarter of 1994.
The increase in net income over the year-earlier period is principally due
to increased sales and operating income 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% and 77% for the first
quarter of 1995 and 1994, respectively.
The net amount of cash provided by the company's operating
activities during the first three months of 1995 was $28.2 million. The net
amount of cash used for investing activities was $93.2 million, including
$77.2 million for various acquisitions. The net amount of cash provided by
financing activities was $40.8 million, principally reflecting the company's
U.S. credit agreement and German bank borrowings, offset in part by the net
repayment of debt.
The net amount of cash provided by the company's operating activities
during the first three months of 1994 was $48.2 million. The net amount of
cash used for investing activities was $46.1 million, including $51.9
million for various acquisitions.
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.
7
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: May 11, 1995 By:/s/ Robert E. Klatell
Robert E. Klatell
Senior Vice President
and Chief Financial Officer
Date: May 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>
Three Months Ended
March 31,
1995 1994
<S> <C> <C>
Primary
Average shares of common stock
outstanding 46,263 45,856
Net effect of dilutive stock
options-based on the treasury
method 602 707
Total 46,865 46,563
Net income $44,851 $33,379
Per share amount $ .96 $ .72
Fully Diluted
Average shares of common stock
outstanding 46,263 45,856
Net effect of dilutive stock
options-based on the treasury
method 669 707
Assumed conversion of 5-3/4%
convertible subordinated debentures 3,774 3,774
Total 50,706 50,337
Net income $44,851 $33,379
Add interest on 5-3/4% convertible
subordinated debentures, net of
income tax effect 1,078 1,078
Total $45,929 $34,457
Per share amount $ .91 $ .68
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND> THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION
EXTRACTED FROM THE FIRST QUARTER 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> MAR-31-1995
<PERIOD-TYPE> 3-MOS
<EXCHANGE-RATE> 1
<CASH> 90,782
<SECURITIES> 0
<RECEIVABLES> 813,441
<ALLOWANCES> 34,240
<INVENTORY> 781,033
<CURRENT-ASSETS> 1,716,319
<PP&E> 169,156
<DEPRECIATION> 64,794
<TOTAL-ASSETS> 2,289,015
<CURRENT-LIABILITIES> 806,486
<BONDS> 404,020
0
0
<COMMON> 46,471
<OTHER-SE> 860,110
<TOTAL-LIABILITY-AND-EQUITY> 2,289,015
<SALES> 1,440,353
<TOTAL-REVENUES> 1,440,353
<CGS> 1,194,023
<TOTAL-COSTS> 1,342,432
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 6,735
<INTEREST-EXPENSE> 11,107
<INCOME-PRETAX> 87,558
<INCOME-TAX> 35,933
<INCOME-CONTINUING> 44,851
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 44,851
<EPS-PRIMARY> 0.96
<EPS-DILUTED> 0.91
</TABLE>
