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, 1997
-------------
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: 48,985,482 shares outstanding at
August 1, 1997.
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements.
---------------------
ARROW ELECTRONICS, INC.
CONSOLIDATED STATEMENT OF INCOME
(IN THOUSANDS EXCEPT PER SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
Six Months Ended Three Months Ended
June 30, June 30,
---------------------- ----------------------
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Sales $3,704,075 $3,304,968 $1,848,742 $1,601,651
---------- ---------- ---------- ----------
Costs and expenses:
Cost of products sold 3,125,124 2,757,816 1,555,352 1,336,315
Selling, general and
administrative expenses 345,758 307,215 173,983 151,135
Depreciation and amortization 20,834 18,354 11,145 9,301
---------- ---------- ---------- ----------
3,491,716 3,083,385 1,740,480 1,496,751
---------- ---------- ---------- ----------
Operating income 212,359 221,583 108,262 104,900
Equity in earnings (loss) of
affiliated company 532 (28) 234 73
Interest expense 30,048 21,150 16,103 9,842
---------- ---------- ---------- ----------
Earnings before income 182,843 200,405 92,393 95,131
taxes and minority interest
Provision for income taxes 74,991 79,172 37,799 37,441
---------- ---------- ---------- ----------
Earnings before minority interest 107,852 121,233 54,594 57,960
Minority interest 5,779 10,329 2,815 3,593
---------- ---------- ---------- ----------
Net income $ 102,073 $ 110,904 $ 51,779 $ 54,097
========== ========== ========== ==========
Net income per common share $2.02 $2.16 $1.03 $1.05
===== ===== ===== =====
Average number of common shares
and common share equivalents
outstanding 50,468 51,463 50,404 51,672
====== ====== ====== ======
See accompanying notes.
</TABLE>
ARROW ELECTRONICS, INC.
CONSOLIDATED BALANCE SHEET
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
June 30, December 31,
1997 1996
----------- ------------
(Unaudited)
<S> <C> <C>
ASSETS
- ------
Current assets:
Cash and short-term investments $ 115,138 $ 136,400
Accounts receivable, less allowance
for doubtful accounts ($43,006 in 1997
and $39,753 in 1996) 1,130,313 902,878
Inventories 1,200,404 1,044,841
Prepaid expenses and other assets 34,786 36,004
---------- ----------
Total current assets 2,480,641 2,120,123
Property, plant and equipment at cost:
Land 8,695 8,712
Buildings and improvements 75,094 77,257
Machinery and equipment 141,268 127,633
---------- ----------
225,057 213,602
Less accumulated depreciation and
amortization (106,145) (98,377)
---------- ----------
118,912 115,225
Investment in affiliated company 34,732 34,200
Cost in excess of net assets of
companies acquired, net of amortization
($62,563 in 1997 and $57,802 in 1996) 585,535 388,787
Other assets 58,306 52,016
---------- ----------
$3,278,126 $2,710,351
========== ==========
See accompanying notes.
</TABLE>
ARROW ELECTRONICS, INC.
CONSOLIDATED BALANCE SHEET
(DOLLARS IN THOUSANDS)
<TABLE>
June 30, December 31,
1997 1996
----------- ------------
(Unaudited)
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
- ------------------------------------
Current liabilities:
Accounts payable $ 610,644 $ 594,474
Accrued expenses 208,305 180,129
Short-term borrowings, including current
maturities of long-term debt 101,046 71,504
---------- ----------
Total current liabilities 919,995 846,107
Long-term debt 857,930 344,562
Deferred income taxes and other liabilities 69,351 68,488
Minority interest 70,111 92,712
Shareholders' equity:
Common stock, par value $1:
Authorized - 120,000,000 shares
Issued - 51,474,820 shares in 1997 and
51,196,385 shares in 1996 51,475 51,196
Capital in excess of par value 559,354 549,913
Retained earnings 907,415 805,342
Foreign currency translation adjustment (26,113) 8,753
---------- ----------
1,492,131 1,415,204
Less: Treasury stock (2,194,091 shares in 1997
and 1,069,699 shares in 1996) 113,610 49,065
Unamortized employee stock awards 17,782 7,657
---------- ----------
1,360,739 1,358,482
---------- ----------
$3,278,126 $2,710,351
========== ==========
See accompanying notes.
</TABLE>
ARROW ELECTRONICS, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
Six Months Ended
June 30,
----------------------
1997 1996
---- ----
(Unaudited)
<S> <C> <C>
Cash flows from operating activities:
Net income $102,073 $110,904
Adjustments to reconcile net income to net
cash provided by (used for) operations:
Minority interest in earnings 5,779 10,329
Depreciation and amortization 22,861 19,434
Equity in undistributed (earnings) loss
of affiliated company (532) 28
Deferred income taxes 6,995 5,611
Change in assets and liabilities,
net of effects of acquired businesses:
Accounts receivable (152,191) (37,035)
Inventories (72,836) (10,002)
Prepaid expenses and other assets (446) 3,683
Accounts payable (36,857) (43,408)
Accrued expenses 4,210 (8,889)
Other 2,528 4,735
-------- --------
Net cash provided by (used for)
operating activities (118,416) 55,390
-------- --------
Cash flows from investing activities:
Acquisition of property, plant and
equipment, net (14,000) (17,288)
Cash consideration paid for acquired businesses (341,194) (12,425)
-------- --------
Net cash used for investing activities (355,194) (29,713)
-------- --------
Cash flows from financing activities:
Change in short-term borrowings 33,029 (9,442)
Change in credit facilities 114,948 (42,738)
Repayment of long-term debt (1,541) (501)
Proceeds from long-term debt 400,822 966
Proceeds from exercise of stock options 11,394 7,631
Distribution to minority partners (11,874) (9,379)
Purchases of common stock (83,276) -
-------- --------
Net cash provided by (used for)
financing activities 463,502 (53,463)
-------- --------
Effect of exchange rate changes on cash (11,154) (3,555)
-------- --------
Net decrease in cash and short-term investments (21,262) (31,341)
Cash and short-term investments at beginning
of period 136,400 93,947
-------- --------
Cash and short-term investments at end of period $115,138 $ 62,606
======== ========
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Income taxes $ 56,146 $ 68,997
Interest 17,421 23,156
See accompanying notes.
</TABLE>
ARROW ELECTRONICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1997
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, 1996 and
the notes thereto. The results of operations for the interim
periods are not necessarily indicative of results for the full year.
Note B -- Stock repurchase program
- ----------------------------------
In July 1997, the company's Board of Directors renewed the
stock repurchase program initiated last year and authorized
management to purchase, from time to time, up to an additional
$50 million of the company's common stock. Over the past year,
Arrow has acquired over 2.8 million shares of its common stock
at a cost of $150 million.
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
1997 increased 12 percent and 15 percent, respectively,
compared with the year-earlier periods. This sales growth was
principally due to increased activity levels in North America
and the Asia/Pacific region and the acquisition of the volume
electronic businesses (FES Group) of Premier Farnell plc,
offset, in part, by a stronger U.S. dollar. Excluding the FES
Group, sales for the six months and second quarter of 1997
increased approximately 6 percent and 8 percent, respectively,
compared with the year-earlier periods.
Operating income
- ----------------
The company recorded operating income of $212.4 million and
$108.3 million in the first six months and second quarter of
1997, respectively, compared with $221.6 million and $104.9
million, respectively, in the year-earlier periods. The
decrease in operating income in the first half of 1997
principally reflects the impact of lower gross profit margins
caused by competitive pricing pressures, offset, in part, by
increased sales and the acquisition of the FES Group. The
improvement in operating income in the second quarter of 1997,
compared with the year-earlier period, reflects the impact of
increased consolidated sales coupled with a reduction in lower-
margin microprocessor sales, offset, in part, by lower gross
profit margins due to competitive pricing pressures.
Interest expense
- ----------------
Interest expense of $30.0 million and $16.1 million in the
first six months and second quarter of 1997, respectively,
increased from $21.2 million during the first six months of
1996 and $9.8 million in the comparable quarter of 1996. The
increase from the first six months and second quarter of 1996
is a result of acquisitions, principally the FES Group, and the
repurchase of the company's common stock, offset, in part, by
lower interest rates.
Income taxes
- ------------
During the first six months and second quarter of 1997, the
company recorded a provision for taxes at an effective tax rate
of 41 percent and 40.9 percent, respectively, compared with
39.5 percent during the first six months of 1996 and 39.3
percent in the comparable quarter of 1996. The increase in the
provision is due to increased earnings in countries with higher
marginal tax rates.
Net income
- ----------
The company recorded net income of $102.1 million and $51.8
million in the first six months and second quarter of 1997,
respectively, compared with $110.9 million in the first six
months of 1996 and $54.1 million in the second quarter of 1996.
The decrease in net income for the first six months is due to
decreased operating income as well as an increase in interest
expense offset, in part, by a decrease in the provision for income
taxes and lower minority interest. The decrease in net income
for the second quarter is attributable to an increase in interest
expense, offset, in part, by higher operating income.
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 75.7
percent and 78.1 percent at June 30, 1997 and 1996,
respectively.
The net amount of cash used by the company's operating
activities during the first six months of 1997 was $118.4
million, principally reflecting increased working capital
requirements supporting higher sales. The net amount of cash
used for investing activities was $355.2 million including
approximately $341.2 million for investments and acquisitions.
The net amount of cash provided by financing activities was
$463.5 million, principally reflecting the $393 million of
proceeds from the issuance in January 1997 of the company's
senior notes and senior debentures and increases in the
company's credit facilities, offset, in part, by the purchase
of the company's common stock.
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 $12.4 million for various acquisitions. The net
amount of cash used for financing activities was $53.5 million,
principally reflecting the reduction in the company's
borrowings.
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 1998.
Item 4. Submission of Matters to a Vote of Security Holders.
---------------------------------------------------
(a) The company's Annual Meeting of Shareholders was held
on May 14, 1997 (the "Annual Meeting") and was adjourned until
May 16, 1997 with respect to the vote on item (ii) below.
(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 43,871,046 111,910
Carlo Giersch 43,852,878 130,078
Stephen P. Kaufman 43,852,951 130,005
Gaynor N. Kelley 43,865,116 117,840
Roger King 43,400,647 582,309
Robert E. Klatell 43,862,416 120,540
Karen Gordon Mills 43,868,474 114,482
Richard S. Rosenbloom 43,872,231 110,725
Robert S. Throop 43,852,692 130,264
John C. Waddell 43,853,011 129,945
(ii) The amendment to increase the number of authorized shares
from 6,000,000 to 10,500,000 shares of common stock to be
issued pursuant to options awarded under the Arrow
Stock Option Plan and to make certain other
modifications to the plan was voted upon as follows:
28,312,238 shares in favor; 9,698,943 shares
against; 2,025,124 shares abstaining; and 3,946,651
broker no votes.
(iii) The amendment to increase the number of authorized shares from
1,480,000 to 1,980,000 shares of common stock to be
awarded under the Arrow Restricted Stock Plan and to
make certain other modifications to the plan was
voted upon as follows: 30,202,284 shares in favor;
8,026,446 shares against; 220,506 shares abstaining;
and 5,533,720 broker no votes.
(iv) The adoption of the Arrow Non-Employee Directors
Stock Option Plan was voted upon as follows: 32,315,252
shares in favor; 5,905,598 shares against; 228,386 shares
abstaining; and 5,533,720 broker no votes.
(v) The adoption of the Arrow Non-Employee Directors
Deferral Plan was voted upon as follows: 33,178,975 shares in
favor; 5,042,554 shares against; 227,707 shares
abstaining; and 5,533,720 broker no votes.
(vi) The appointment of Ernst & Young LLP as auditors
of the company was voted upon as follows: 43,893,469 shares
in favor; 40,813 shares against; and 48,674 shares
abstaining.
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.
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, 1997 By:/s/ Gerald Luterman
-------------------
Gerald Luterman
Senior Vice President and
Chief Financial Officer
Date: August 7, 1997 By:/s/ Paul J. Reilly
------------------
Paul J. Reilly
Vice President and
Corporate Controller
Exhibit 11
ARROW ELECTRONICS, INC.
STATEMENT RE: COMPUTATION OF EARNINGS PER SHARE
(IN THOUSANDS EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
Six Months Ended Three Months Ended
June 30, June 30,
------------------ ------------------
1997 1996 1997 1996
-------- -------- ------- -------
<S> <C> <C> <C> <C>
Primary
- -------
Average shares of common stock
outstanding 49,636 50,828 49,644 50,948
Net effect of dilutive stock options -
based on the treasury method 832 635 760 724
-------- -------- ------- -------
Total 50,468 51,463 50,404 51,672
======== ======== ======= =======
Net income $102,073 $110,904 $51,779 $54,097
======== ======== ======= =======
Per share amount $ 2.02 $ 2.16 $ 1.03 $ 1.05
======== ======== ======= =======
Fully Diluted (A)
- -----------------
Average shares of common stock
outstanding 49,636 50,828 49,644 50,948
Net effect of dilutive stock options -
based on the treasury method 832 641 760 728
-------- -------- ------- -------
Total 50,468 51,469 50,404 51,676
======== ======== ======= =======
Net income $102,073 $110,904 $51,779 $54,097
======== ======== ======= =======
Per share amount $ 2.02 $ 2.16 $ 1.03 $ 1.05
======== ======== ======= =======
(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 1997 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-31-1997
<PERIOD-START> JAN-1-1997
<PERIOD-END> JUN-30-1997
<PERIOD-TYPE> 6-MOS
<EXCHANGE-RATE> 1
<CASH> 115,138
<SECURITIES> 0
<RECEIVABLES> 1,130,313
<ALLOWANCES> 43,006
<INVENTORY> 1,200,404
<CURRENT-ASSETS> 2,480,641
<PP&E> 225,057
<DEPRECIATION> 106,145
<TOTAL-ASSETS> 3,278,126
<CURRENT-LIABILITIES> 919,995
<BONDS> 857,930
0
0
<COMMON> 51,475
<OTHER-SE> 1,309,264
<TOTAL-LIABILITY-AND-EQUITY> 3,278,126
<SALES> 3,704,075
<TOTAL-REVENUES> 3,704,075
<CGS> 3,125,124
<TOTAL-COSTS> 3,491,716
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 6,408
<INTEREST-EXPENSE> 30,048
<INCOME-PRETAX> 182,843
<INCOME-TAX> 74,991
<INCOME-CONTINUING> 102,073
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 102,073
<EPS-PRIMARY> 2.02
<EPS-DILUTED> 2.02
</TABLE>
