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, 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: 49,757,407 shares outstanding at May 2,
1997.
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements.
--------------------
ARROW ELECTRONICS, INC.
CONSOLIDATED STATEMENT OF INCOME
(IN THOUSANDS EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
--------------------------
1997 1996
---- ----
(Unaudited)
<S> <C> <C>
Sales $1,855,333 $1,703,318
---------- ----------
Costs and expenses:
Cost of products sold 1,569,772 1,421,501
Selling, general and
administrative expenses 171,775 156,080
Depreciation and amortization 9,689 9,053
---------- ----------
1,751,236 1,586,634
---------- ----------
Operating income 104,097 116,684
Equity in earnings (loss) of
affiliated company 298 (101)
Interest expense 13,945 11,308
---------- ---------
Earnings before income
taxes and minority interest 90,450 105,275
Provision for income taxes 37,192 41,731
---------- ---------
Earnings before minority interest 53,258 63,544
Minority interest 2,964 6,736
---------- ---------
Net income $ 50,294 $ 56,808
========== =========
Net income per common share $1.00 $1.11
===== =====
Average number of common shares
and common share equivalents
outstanding 50,520 51,276
====== ======
</TABLE>
See accompanying notes.
ARROW ELECTRONICS, INC.
CONSOLIDATED BALANCE SHEET
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
March 31, December 31,
1997 1996
--------- ------------
(Unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash and short-term investments $ 128,773 $ 136,400
Accounts receivable, less allowance
for doubtful accounts ($41,078 in
1997 and $39,753 in 1996) 1,130,583 902,878
Inventories 1,110,952 1,044,841
Prepaid expenses and other assets 31,186 36,004
---------- ----------
Total current assets 2,401,494 2,120,123
Property, plant and equipment at cost:
Land 8,650 8,712
Buildings and improvements 75,886 77,257
Machinery and equipment 134,620 127,633
---------- ----------
219,156 213,602
Less accumulated depreciation and
amortization 102,015 98,377
---------- ----------
117,141 115,225
Investment in affiliated company 34,498 34,200
Cost in excess of net assets of
companies acquired, net of amortization
($59,286 in 1997 and $57,802 in 1996) 589,207 388,787
Other assets 58,940 52,016
---------- ----------
$3,201,280 $2,710,351
========== ==========
See accompanying notes.
ARROW ELECTRONICS, INC.
CONSOLIDATED BALANCE SHEET
(DOLLARS IN THOUSANDS)
March 31, December 31,
1997 1996
--------- -----------
(Unaudited)
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 635,996 $ 594,474
Accrued expenses 222,190 180,129
Short-term borrowings, including
current maturities of long-term debt 84,592 71,504
---------- ----------
Total current liabilities 942,778 846,107
Long-term debt 766,376 344,562
Deferred income taxes and other liabilities 71,949 68,488
Minority interest 73,602 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 559,327 549,913
Retained earnings 855,636 805,342
Foreign currency translation adjustment (15,868) 8,753
---------- ----------
1,450,570 1,415,204
Less: Treasury stock (1,760,985 and 1,069,699
shares in 1997 and 1996), at cost 88,136 49,065
Unamortized employee stock awards 15,859 7,657
---------- ----------
1,346,575 1,358,482
---------- ----------
$3,201,280 $2,710,351
========== ==========
</TABLE>
See accompanying notes.
ARROW ELECTRONICS, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
-----------------------
1997 1996
---- ----
(Unaudited)
<S> <C> <C>
Cash flows from operating activities:
Net income $ 50,294 $ 44,851
Adjustments to reconcile net income to net
cash provided by operations:
Minority interest in earnings 2,964 6,774
Depreciation and amortization 10,650 8,257
Equity in undistributed earnings
of affiliated company (298) (744)
Deferred income taxes 2,792 4,420
Change in assets and liabilities,
net of effects of acquired businesses:
Accounts receivable (168,251) (100,691)
Inventories 21,544 (30,552)
Prepaid expenses and other assets 4,234 (578)
Accounts payable (14,674) 64,514
Accrued expenses 39,810 31,984
Other (804) -
-------- --------
Net cash provided (used) by operating
activities (51,739) 28,235
--------- --------
Cash flows from investing activities:
Acquisition of property, plant and
equipment, net (4,755) ( 15,934)
Cash consideration paid for
acquired businesses (322,226) (77,221)
-------- --------
Net cash used for investing activities (326,981) (93,155)
-------- --------
Cash flows from financing activities:
Change in short-term borrowings 27,957 2,528
Change in credit facilities 15,486 54,892
Repayment of long-term debt (1,148) (16,507)
Proceeds from long-term debt 393,296 3,863
Proceeds from exercise of stock options 8,300 3,909
Distribution to minority partners (12,079) (7,931)
Purchases of common stock (51,009) -
-------- --------
Net cash provided by financing activities 380,803 40,754
-------- --------
Effect of exchange rate changes on cash (9,710) 9,342
-------- --------
Net decrease in cash and short-term investments (7,627) (14,824)
Cash and short-term investments at beginning
of period 136,400 105,606
-------- ---------
Cash and short-term investments at end of period $128,773 $ 90,782
======== =========
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Income taxes $ 13,860 $ 15,071
Interest 10,778 10,806
See accompanying notes.
</TABLE>
ARROW ELECTRONICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 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 February 1997, the company's Board of Directors renewed the stock
repurchase program initiated last year and has authorized management to
purchase, from time to time, up to $50 million of the company's common
stock. Purchases are being made in the open market or in privately
negotiated transactions, as determined by management. The timing and
amount of the purchases depend, among other matters, on market conditions
and corporate requirements.
Item 2. Management's Discussion and Analysis of Financial Condition and
---------------------------------------------------------------
Results of Operations.
---------------------
Sales
- -----
Consolidated sales for the first quarter of 1997 increased approximately
9 percent compared over the year-earlier period. This sales growth was
due to increased activity levels in North America and the Asia/Pacific
region and the acquisition of the FES Group, offset in part by a stronger
U.S. dollar. Excluding the FES Group, sales increased approximately 4
percent compared with the year-earlier period.
Operating income
- ----------------
The company recorded operating income of $104.1 million in the first
quarter of 1997, compared with $116.7 million in the first quarter of
1996. The decrease in operating income reflects the impact of lower
gross profit margins, offset in part by increased sales and continued
economies of scale. Gross profit margins decreased primarily as a result of
competitive pricing pressures in North America and Europe.
Interest expense
- ----------------
Interest expense of $13.9 million in the first quarter of 1997 increased
from $11.3 million during the comparable quarter of 1996 principally as a
result of the acquisition of the FES Group, offset in part by lower
borrowings as a result of improved working capital usage and lower
interest rates.
Income taxes
- ------------
During the first quarter of 1997, the company recorded a provision for
taxes at an effective tax rate of 41.1 percent, compared with 39.6 percent
in the earlier period. The increase in the effective rate from the year-
earlier period is due to increased earnings in countries with higher
marginal tax rates.
Net income
- ----------
The company recorded net income of $50.3 million in the first quarter of
1997, compared with $56.8 million in the first quarter of 1996. The
decrease in net income from the year-earlier period is principally due to
lower operating income and higher interest expense, offset in part by
decreases in 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 75 percent and 78 percent for the first
quarter of 1997 and 1996, respectively.
The net amount of cash used by the company's operating activities during
the first three months of 1997 was $51.7 million, the principle element of
which was the increase in accounts receivable resulting from the increase
in net sales over the fourth quarter of 1996. The net amount of cash used
for investing activities was $327 million, including approximately $300
million for the acquisition of the FES Group. The net amount of cash
provided by financing activities was $380.8 million, principally reflecting
the $393.3 million of proceeds from the issuance in January 1997 of
the company's senior notes and senior debentures, offset in part by purchases
of common stock and distributions to minority partners.
During the first three months of 1996, the net amount of cash provided by
the company's operating activities was $28.2 million. The net amount of
cash used for investing activities was $93.2 million, including $77.2
million for various acquisitions and investments, and the net amount of
cash provided by the company's financing activities was $40.8 million.
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.
Accounting Matters
- ------------------
In February 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 128 ("SFAS 128"), "Earnings per
Share", which establishes new methodologies for computing earnings per
share. The adoption by the company of SFAS 128 at year-end is not
expected to have a material impact on the earnings per share for any
previously reported periods.
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: May 13, 1997 By:/s/ Gerald Luterman
----------------------
Gerald Luterman
Senior Vice President and
Chief Financial Officer
Date: May 13, 1997 By:/s/ Paul J. Reilly
----------------------
Paul J. Reilly
Vice President and Controller
Exhibit 11
ARROW ELECTRONICS, INC.
STATEMENT RE: COMPUTATION OF EARNINGS PER SHARE
(IN THOUSANDS EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
------------------
1997 1996
------ ------
<S> <C> <C>
Primary
- -------
Average shares of common stock
outstanding 49,628 50,708
Net effect of dilutive stock options -
based on the treasury method 892 568
-------- --------
Total 50,520 51,276
======== ========
Net income $ 50,294 $ 56,808
======== ========
Per share amount $ 1.00 $ 1.11
======== ========
Fully Diluted (A)
- -----------------
Average shares of common stock
outstanding 49,628 50,708
Net effect of dilutive stock options -
based on the treasury method 894 710
-------- --------
Total 50,522 51,418
======== ========
Net income $ 50,294 $ 56,808
======== ========
Per share amount $ 1.00 $ 1.10
======== ========
</TABLE>
(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> <S> <C>
<ARTICLE> 5
<LEGEND> THIS SCHEDULE CONTAINS SUMMARY FINANCIAL
INFORMATION EXTRACTED FROM THE MARCH 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> MAR-31-1997
<PERIOD-TYPE> 3-MOS
<EXCHANGE-RATE> 1
<CASH> 128,773
<SECURITIES> 0
<RECEIVABLES> 1,130,583
<ALLOWANCES> 41,078
<INVENTORY> 1,110,952
<CURRENT-ASSETS> 2,401,494
<PP&E> 219,156
<DEPRECIATION> 102,015
<TOTAL-ASSETS> 3,201,280
<CURRENT-LIABILITIES> 942,778
<BONDS> 766,376
0
0
<COMMON> 51,475
<OTHER-SE> 1,295,100
<TOTAL-LIABILITY-AND-EQUITY> 3,201,280
<SALES> 1,855,333
<TOTAL-REVENUES> 1,855,333
<CGS> 1,569,772
<TOTAL-COSTS> 1,751,236
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 2,260
<INTEREST-EXPENSE> 13,945
<INCOME-PRETAX> 90,450
<INCOME-TAX> 37,192
<INCOME-CONTINUING> 50,294
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 50,294
<EPS-PRIMARY> 1.00
<EPS-DILUTED> 1.00
</TABLE>
