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, 1996
-------------
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
incorporation or organization) Identification 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: 51,022,842 shares outstanding at August 2, 1996.
<PAGE>
ARROW ELECTRONICS, INC. June 30, 1996 FORM 10Q Page 2
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements.
<TABLE>
ARROW ELECTRONICS, INC.
CONSOLIDATED STATEMENT OF INCOME
(IN THOUSANDS EXCEPT PER SHARE DATA)
(UNAUDITED)
<CAPTION>
Six Months Ended Three Months Ended
June 30, June 30, .
----------------------- ----------------------
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Sales $3,304,968 $2,898,566 $1,601,651 $1,458,213
---------- ---------- ---------- ----------
Costs and expenses:
Cost of products sold 2,757,816 2,389,398 1,336,315 1,195,375
Selling, general and
administrative expenses 307,215 287,011 151,135 146,373
Depreciation and amortization 18,354 15,552 9,301 7,781
---------- ---------- ---------- ---------
3,083,385 2,691,961 1,496,751 1,349,529
---------- ---------- ---------- ---------
Operating income 221,583 206,605 104,900 108,684
Equity in earnings (loss) of
affiliated company (28) 1,770 73 1,026
Interest expense 21,150 22,186 9,842 11,079
---------- ---------- ---------- ---------
Earnings before income
taxes and minority interest 200,405 186,189 95,131 98,631
Provision for income taxes 79,172 76,373 37,441 40,440
---------- ---------- ---------- ---------
Earnings before minority
interest 121,233 109,816 57,690 58,191
Minority interest 10,329 13,213 3,593 6,439
---------- ---------- ---------- ----------
Net income $ 110,904 $ 96,603 $ 54,097 $ 51,752
========== ========== ========== ==========
Net income per common share:
Primary $2.16 $2.05 $1.05 $1.09
========== ========== ========== ==========
Fully diluted $2.16 $1.93 $1.05 $1.03
========== ========== ========== ==========
<PAGE>
ARROW ELECTRONICS, INC. June 30, 1996 FORM 10Q Page 3
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Average number of common shares
and common share equivalents
outstanding:
Primary 51,463 47,065 51,672 47,294
========== ========== ========= ==========
Fully diluted 51,463 51,039 51,672 51,199
========== ========== ========= ==========
See accompanying notes.
</TABLE>
<PAGE>
ARROW ELECTRONICS, INC. June 30, 1996 FORM 10Q Page 4
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<TABLE>
ARROW ELECTRONICS, INC.
CONSOLIDATED BALANCE SHEET
(DOLLARS IN THOUSANDS)
<CAPTION>
June 30, December 31,
1996 1995
---------- ------------
(Unaudited)
ASSETS
<S> <C> <C>
Current assets:
Cash and short-term investments $ 62,606 $ 93,947
Accounts receivable, less allowance
for doubtful accounts ($39,404 in 1996
and $38,670 in 1995) 982,250 940,049
Inventories 1,045,043 1,039,111
Prepaid expenses and other assets 29,179 31,610
---------- ----------
Total current assets 2,119,078 2,104,717
Property, plant and equipment at cost:
Land 14,525 14,527
Buildings and improvements 66,888 63,857
Machinery and equipment 126,741 112,883
---------- ----------
208,154 191,267
Less accumulated depreciation and
amortization 85,034 73,932
---------- ----------
123,120 117,335
Investment in affiliated company 36,003 36,031
Cost in excess of net assets of
companies acquired, net of amortization
($52,274 in 1996 and $48,085 in 1995) 373,496 379,171
Other assets 62,234 63,762
---------- ----------
$2,713,931 $2,701,016
========== ==========
See accompanying notes.
</TABLE>
<PAGE>
ARROW ELECTRONICS, INC. June 30, 1996 FORM 10Q Page 5
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<TABLE>
ARROW ELECTRONICS, INC.
CONSOLIDATED BALANCE SHEET
(DOLLARS IN THOUSANDS)
<CAPTION>
June 30, December 31,
1996 1995
----------- ------------
(Unaudited)
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 517,598 $ 561,834
Accrued expenses 201,852 207,738
Short-term borrowings, including current
maturities of long-term debt 115,362 117,085
---------- -----------
Total current liabilities 834,812 886,657
Long-term debt 404,030 451,706
Deferred income taxes and other liabilities 93,219 68,992
Minority interest 73,318 97,780
Shareholders equity:
Common stock, par value $1:
Authorized - 120,000,000 shares in 1996 and
80,000,000 shares in 1995
Issued - 51,028,449 shares in 1996 and
50,647,826 shares in 1995 51,028 50,648
Capital in excess of par value 543,649 530,324
Retained earnings 713,537 602,633
Foreign currency translation adjustment 8,657 18,398
---------- ----------
1,316,871 1,202,003
Less: Unamortized employee stock awards
and other 8,319 6,122
---------- ----------
1,308,552 1,195,881
---------- ----------
$2,713,931 $2,701,016
========== ==========
See accompanying notes.
</TABLE>
<PAGE>
ARROW ELECTRONICS, INC. June 30, 1996 FORM 10Q Page 6
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<TABLE>
ARROW ELECTRONICS, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(IN THOUSANDS)
<CAPTION>
Six Months Ended
June 30,
-------------------------
1996 1995
---- ----
(Unaudited)
<S> <C> <C>
Cash flows from operating activities:
Net income $110,904 $ 96,603
Adjustments to reconcile net income to net
cash provided by (used for) operations:
Minority interest in earnings 10,329 13,213
Depreciation and amortization 19,434 16,512
Equity in undistributed (earnings) loss
of affiliated company 28 (1,770)
Deferred income taxes 5,611 7,891
Change in assets and liabilities,
net of effects of acquired businesses:
Accounts receivable (37,035) (140,641)
Inventories (10,002) (92,255)
Prepaid expenses and other assets 3,683 (3,122)
Accounts payable (43,408) 16,699
Accrued expenses (8,889) 35,800
Other 4,735 (847)
-------- -------
Net cash provided by (used for)
operating activities 55,390 (51,917)
-------- -------
Cash flows from investing activities:
Acquisition of property, plant and
equipment, net (17,288) (26,050)
Cash consideration paid for acquired businesses (12,425) (57,334)
Investment in affiliate - (28,598)
-------- -------
Net cash used for investing activities (29,713) (111,982)
-------- -------
Cash flows from financing activities:
Change in short-term borrowings (9,442) 36,812
-------- --------
Change in credit facilities (42,738) 99,397
Repayment of long-term debt (501) (15,784)
Proceeds from long-term debt 966 22,651
Proceeds from exercise of stock options 7,631 9,014
Distribution to minority partners (9,379) (27,178)
--------- -------
Net cash provided by (used for)
financing activities (53,463) 124,912
-------- -------
Effect of exchange rate changes on cash (3,555) 9,611
-------- -------
<PAGE>
ARROW ELECTRONICS, INC. June 30, 1996 FORM 10Q Page 7
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Net decrease in cash and short-term investments (31,341) (29,376)
Cash and short-term investments at beginning
of period 93,947 105,606
-------- --------
Cash and short-term investments at end of period $ 62,606 $ 76,230
======== ========
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Income taxes $ 68,997 $ 47,371
Interest 23,156 22,277
See accompanying notes.
</TABLE>
<PAGE>
ARROW ELECTRONICS, INC. June 30, 1996 FORM 10Q Page 8
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ARROW ELECTRONICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1996
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, 1995 and the notes thereto. The results of operations for
the interim periods are not necessarily indicative of results for the full
year.
Note B -- Authorized shares and net income per common share
- -----------------------------------------------------------
In May 1996, the shareholders approved an amendment to increase the number of
authorized shares from 80,000,000 to 120,000,000 shares of common stock.
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, 1996 and 1995, the average number of common stock
equivalents was 634,767 and 660,324, respectively. For the quarter ended
June 30, 1996 and 1995, the average number of common stock equivalents was
723,752 and 748,823, respectively. In October 1995, the company's 5-3/4%
convertible subordinated debentures (the debentures) were converted into common
stock. Net income per common share for 1995, on a fully diluted basis, assumes
that the debentures we 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 1996 increased
14 percent and 10 percent, respectively, compared with the year-earlier periods.
This sales growth was principally due to increased activity levels in each of
the company's distribution groups throughout the world.
<PAGE>
ARROW ELECTRONICS, INC. June 30, 1996 FORM 10Q Page 9
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Operating income
- ----------------
The company recorded operating income of $221.6 million and $104.9 million
in the first six months and second quarter of 1996, respectively, compared
with $206.6 million and $108.7 million, respectively, in the year-earlier
periods. The improvement in operating income in the first half of 1996,
compared with the year-earlier period, reflects the impact of increased sales
and the benefits of continuing economies of scale offset, in part, by a
decline in gross profit margins. The reduction in operating income in the
second quarter of 1996, compared with the year-earlier period, is primarily
due to the decrease in gross profits in Europe due to competitive pricing
pressures, offset, in part, by continued operating efficiencies.
Interest expense
- ----------------
Interest expense of $21.2 million and $9.8 million in the first six months and
second quarter of 1996, respectively, decreased from $22.2 million during the
first six months of 1995 and $11.1 million in the comparable quarter of 1995.
The decrease from the first six months and second quarter of 1995 reflects
the conversion of the debentures in October 1995, and lower borrowings
resulting from improved working capital usage offset, in part, by an increase
in interest rates.
Income taxes
- ------------
During the first six months and second quarter of 1996, the company recorded a
provision for taxes at an effective tax rate of 39.5 percent and 39.3 percent,
respectively, compared with 41 percent in the year-earlier periods. The
decrease in the provision is due to increased earnings in countries with lower
marginal tax rates.
Net income
- ----------
The company recorded net income of $110.9 million and $54.1 million in the
first six months and second quarter of 1996, respectively, compared with $96.6
million in the first six months of 1995 and $51.8 million in the second
quarter of 1995. The increase in net income for the first six months is due
to increased operating income as well as a decrease in interest expense, the
provision for the income taxes, and minority interests. The increase in net
income for second quarter is attributable to lower operating income offset by
decreases in interest expense, the provision for income taxes, and minority
interest.
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 78.1 percent and 75.6 percent at June 30, 1996
and 1995, respectively.
<PAGE>
ARROW ELECTRONICS, INC. June 30, 1996 FORM 10Q Page 10
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The net amount of cash provided by the company's operating activities during
the first six months of 1996 was $55.4 million, principally reflecting
increased earnings offset, in part, by an increase in working capital
requirements. The net amount of cash used for investing activities was $29.7
million, including $17.3 million for various capital expenditures. The net
amount of cash used for financing activities was $53.5 million, principally
reflecting the reduction in the company's borrowings.
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 investments and acquisitions. The net amount of cash provided by
financing activities was $124.9 million, principally reflecting the company's
borrowings to finance investments, acquisitions, distributions to partners,
and the net repayment 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 1997.
The company announced that its Board of Directors has authorized management to
implement a stock repurchase program under which Arrow may purchase, from time
to time, at least $100 million of the company's common stock. The purchases
will be made in the open market or in privately negotiated transactions, as
determined by management. The timing and amount of the purchases will depend,
among other matters, on market conditions and corporate requirements.
<PAGE>
ARROW ELECTRONICS, INC. June 30, 1996 FORM 10Q Page 11
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Item 4. Submission of Matters to a Vote of Security Holders.
---------------------------------------------------
(a) The company's Annual Meeting of Shareholders was held on May 14,
1996 (the Annual Meeting).
(b) The matters voted upon at the Annual Meeting and the results
of the voting were as follows:
(i) The following individuals were elected by the
shareholders to serve as directors:
Board Member In Favor Withheld
- --------------- ---------- -------
Daniel W. Duval 43,313,967 309,555
Carlo Giersch 43,213,673 409,849
Stephen P. Kaufman 43,222,616 400,906
Roger King 42,878,839 744,683
Robert E. Klatell 43,228,348 395,174
Karen Gordon Mills 43,289,380 334,142
Richard S. Rosenbloom 43,312,343 311,179
Robert S. Throop 43,228,658 394,864
John C. Waddell 43,329,188 294,334
(ii) The amendment to increase the number of authorized shares from
80,000,000 to 120,000,000 shares of common stock was voted upon
as follows: 42,222,613 shares in favor; 1,230,110 shares
against; and 170,799 shares abstaining.
(iii) The appointment of Ernst & Young LLP as auditors of the company
was voted upon as follows: The shareholders voted 43,559,839;
shares in favor; 30,490 shares against; and 33,193 shares
abstaining.
There were no broker non-votes regarding any of the above matters.
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.
<PAGE>
ARROW ELECTRONICS, INC. June 30, 1996 FORM 10Q Page 12
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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 7, 1996 By:/s/ Gerald Luterman
----------------------
Gerald Luterman
Senior Vice President and
Chief Financial Officer
Date: August 7, 1996 By:/s/ Paul J. Reilly
----------------------
Paul J. Reilly
Vice President and
Corporate Controller
<PAGE>
ARROW ELECTRONICS, INC. June 30, 1996 FORM 10Q Page 13
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<TABLE>
Exhibit 11
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
------------------ ------------------
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Primary
Average shares of common stock
outstanding 50,828 46,405 50,948 46,545
Net effect of dilutive stock
options - based on the
treasury method 635 660 724 749
-------- ------- ------- -------
Total 51,463 47,065 51,672 47,294
======== ======= ======= =======
Net income $110,904 $96,603 $54,096 $51,752
======== ======= ======= =======
Per share amount $ 2.16 $ 2.05 $ 1.05 $ 1.09
======== ======= ======= =======
Fully Diluted
Average shares of common stock
outstanding 50,828 46,405 50,948 46,545
Net effect of dilutive stock
options - based on the
treasury method 641 860 728 880
Assumed conversion of 5-3/4%
convertible subordinated
debentures - 3,774 - 3,774
-------- ------- ------- -------
Total 51,469 51,039 51,676 51,199
======== ======= ======= =======
Net income $110,904 $96,603 $54,096 $51,752
Add interest on 5-3/4%
convertible subordinated
debentures, net of income
tax effect - 2,156 - 1,078
-------- ------- ------- -------
Total $110,904 $98,759 $54,096 $52,830
======== ======= ======= =======
Per share amount $ 2.16(A) $ 1.93 $ 1.05(A) $ 1.03
======== ======= ======= =======
(A) This calculation is submitted in accordance with Regulation S-K, Item
601(b)(11), although not required by footnote 2 to paragraph 14 of APB
Opinion No. 15 because it results in dilution of less than 3%.
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND> THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION
EXTRACTED FROM THE JUNE 1996 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-31-1996
<PERIOD-START> JAN-1-1996
<PERIOD-END> JUN-30-1996
<PERIOD-TYPE> 6-MOS
<EXCHANGE-RATE> 1
<CASH> 62,606
<SECURITIES> 0
<RECEIVABLES> 982,250
<ALLOWANCES> 39,404
<INVENTORY> 1,045,043
<CURRENT-ASSETS> 2,119,078
<PP&E> 208,154
<DEPRECIATION> 85,034
<TOTAL-ASSETS> 2,713,931
<CURRENT-LIABILITIES> 834,812
<BONDS> 404,030
0
0
<COMMON> 51,028
<OTHER-SE> 1,257,524
<TOTAL-LIABILITY-AND-EQUITY> 2,713,931
<SALES> 3,304,968
<TOTAL-REVENUES> 3,304,968
<CGS> 2,757,816
<TOTAL-COSTS> 3,083,385
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 9,725
<INTEREST-EXPENSE> 21,150
<INCOME-PRETAX> 200,405
<INCOME-TAX> 79,172
<INCOME-CONTINUING> 110,904
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 110,904
<EPS-PRIMARY> 2.16
<EPS-DILUTED> 2.16
</TABLE>
