UNITED STATES
SECURITIES
AND EXCHANGE COMMISSION
WASHINGTON,
D.C. 20549
FORM
8-K
CURRENT
REPORT
PURSUANT
TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
Date of
Report (Date of earliest event reported): July
28, 2015
ARROW
ELECTRONICS, INC.
(Exact
Name of Registrant as Specified in Its Charter)
NEW YORK
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1-04482
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11-1806155
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(State or Other Jurisdiction of Incorporation)
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(Commission
File Number)
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(IRS Employer
Identification No.)
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9201 East Dry Creek Road, Centennial, CO 80112
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(Address of Principal Executive Offices)
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Registrant’s
telephone number, including area code: (303) 824-4000
Not
Applicable
(Former Name or Former Address, if Changed Since Last
Report)
Check the
appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any
of the following provisions:
⃞
Written
communications pursuant to Rule 425 under the Securities Act (17 CFR
230.425)
⃞
Soliciting
material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
⃞
Pre-commencement
communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR
240.14d-2(b))
⃞
Pre-commencement
communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR
240.13e-4(c))
ITEM 2.02 RESULTS OF OPERATIONS AND FINANCIAL CONDITION
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On July 28, 2015, the Registrant issued a press release announcing
its second quarter 2015 earnings. A copy of the press release is
attached hereto as an Exhibit (99.1).
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On July 28, 2015, the Registrant also issued a press release
containing a second quarter 2015 CFO commentary related to its
second quarter 2015 earnings. A copy of that press release is
attached hereto as an Exhibit (99.2).
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The information in this Current Report on Form 8-K and the
Exhibits attached hereto is being furnished and shall not be
deemed "filed" for purposes of Section 18 of the Securities
Exchange Act of 1934 (the "Exchange Act") or otherwise subject to
the liabilities of that section, nor shall it be deemed
incorporated by reference in any filing under the Securities Act
of 1933 or the Exchange Act, regardless of any general
incorporation language in such filing.
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ITEM 9.01 FINANCIAL STATEMENTS AND EXHIBITS
(c) EXHIBITS
99.1 Earnings press release dated July 28, 2015.
99.2 CFO commentary press release dated July 28,
2015.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Company has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Date: July 28, 2015
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ARROW ELECTRONICS, INC.
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By:
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/s/ Gregory Tarpinian
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Name:
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Gregory Tarpinian
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Title:
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Senior Vice President, General Counsel and Secretary
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EXHIBIT INDEX
Exhibit
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Description
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99.1
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Earnings press release issued by Arrow Electronics, Inc.,
dated July 28, 2015.
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99.2
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CFO commentary press release issued by Arrow Electronics,
Inc., dated July 28, 2015.
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Exhibit 99.1
Arrow
Electronics Reports Second-Quarter Non-GAAP Earnings Per Share of $1.54
--
Operating Margins Expand Over Prior Year --
-- Cash
Flow from Operations of $461 Million --
CENTENNIAL, Colo.--(BUSINESS WIRE)--July 28, 2015--Arrow Electronics,
Inc. (NYSE:ARW) today reported second-quarter 2015 net income of $123.9
million, or $1.28 per share on a diluted basis, compared with net income
of $127.9 million, or $1.27 per share on a diluted basis, in the second
quarter of 2014. Excluding certain items1 in the second
quarters of 2015 and 2014, net income would have been $148.9 million, or
$1.54 per share on a diluted basis, in the second quarter of 2015,
compared with net income of $144.3 million, or $1.43 per share on a
diluted basis, in the second quarter of 2014. Second-quarter sales of
$5.83 billion increased 3 percent from sales of $5.68 billion in the
prior year. Second-quarter sales, adjusted for the impact of
acquisitions and changes in foreign currencies, also increased 3 percent
year over year. In the second quarter of 2015, changes in foreign
currencies had negative impacts on growth of $350 million on sales and
$.10 or 7 percent on earnings per share on a diluted basis compared to
the second quarter of 2014.
“Second-quarter sales exceeded the midpoint of our expectations.
Excluding the impacts from changes in foreign currencies, EPS advanced
nearly 16 percent year over year, with both our global components and
enterprise computing solutions segments delivering sales growth and
expanded operating margins. Both businesses continued to experience
strong demand in Europe. Our focus on selling comprehensive solutions
resulted in record second-quarter operating income and operating margin
for our enterprise computing solutions business,” said Michael J. Long,
chairman, president, and chief executive officer.
Global components second-quarter sales of $3.7 billion grew 4 percent
year over year. Second-quarter sales, adjusted for acquisitions and
changes in foreign currencies, grew 3 percent year over year. Americas
components sales were flat year over year. Core components sales in the
Americas grew 3 percent year over year. Europe components sales were
flat year over year. Sales in the region, as adjusted, grew 11 percent
year over year. Asia-Pacific components sales grew 11 percent year over
year. Sales in the region, as adjusted, grew 4 percent year over year.
Global enterprise computing solutions second-quarter sales of $2.13
billion grew 2 percent year over year, adjusted for acquisitions and
changes in foreign currencies. Sales, as reported, grew 1 percent year
over year. Americas sales grew 9 percent year over year. Sales in the
region, as adjusted, declined 1 percent year over year. Core enterprise
computing solutions sales in the Americas region were flat year over
year. Europe sales grew 8 percent on an as-adjusted basis. Sales in the
region, as reported, declined 13 percent year over year. Both Americas
and Europe experienced strong software growth.
“With $461 million in cash flow from operations in the second quarter,
we again meaningfully exceeded our cash flow target,” said Paul J.
Reilly, executive vice president, finance and operations, and chief
financial officer. “The highly effective management of our balance sheet
and related strong cash flow provided us with the opportunity to both
deploy capital toward our strategic initiatives and return approximately
$78 million to shareholders through our stock repurchase program.”
SIX-MONTH RESULTS
Arrow’s net income for the first six months of 2015 was $230.0 million,
or $2.37 per share on a diluted basis, compared with net income of
$235.0 million, or $2.33 per share on a diluted basis in the first six
months of 2014. Excluding certain items1 in both the first
six months of 2015 and 2014, net income would have been $276.7 million,
or $2.86 per share on a diluted basis, in the first six months of 2015
compared with net income of $268.3 million, or $2.66 per share on a
diluted basis, in the first six months of 2014. In the first six months
of 2015, sales of $10.83 billion increased 1 percent from sales of
$10.76 billion in the first six months of 2014. Six-month sales,
adjusted for acquisitions and changes in foreign currencies, increased 3
percent year over year.
GUIDANCE
“As we look to the third quarter, we believe that total sales will be
between $5.55 billion and $5.95 billion, with global components sales
between $3.65 billion and $3.85 billion, and global enterprise computing
solutions sales between $1.9 billion and $2.1 billion. As a result of
this outlook, we expect earnings per share on a diluted basis, excluding
any charges, to be in the range of $1.40 to $1.52 per share. Our
guidance assumes an average tax rate in the range of 27 to 29 percent
and average diluted shares outstanding are expected to be 95.5 million.
We are expecting the average USD to Euro exchange rate for the third
quarter to be approximately $1.08 to €1. Based on this assumption, the
weaker Euro will have a negative impact of $280 million or 5 percent on
sales and $.08 or 6 percent on earnings per share on a diluted basis,
respectively, when compared with the third quarter of 2014, and a
negative impact of $40 million or 1 percent on sales and $.01 or 1
percent on earnings per share on a diluted basis, respectively, when
compared with the second quarter of 2015,” said Mr. Reilly.
“Included in our guidance for the third quarter 2015 are $435 million of
sales and $.11 of earnings per share on a diluted basis when compared
with the third quarter of 2014, and $25 million of sales and no
additional contribution to earnings per share on a diluted basis when
compared with the second quarter of 2015, related to our closed
acquisitions,” added Mr. Reilly.
Please refer to the CFO commentary, which can be found at www.arrow.com/investor,
as a supplement to the company’s earnings release.
Arrow Electronics (www.arrow.com) is a global provider of
products, services and solutions to industrial and commercial users of
electronic components and enterprise computing solutions. Arrow serves
as a supply channel partner for more than 100,000 original equipment
manufacturers, contract manufacturers and commercial customers through a
global network of more than 460 locations in 56 countries.
Information Relating to Forward-Looking Statements
This press release includes forward-looking statements that are subject
to numerous assumptions, risks, and uncertainties, which could cause
actual results or facts to differ materially from such statements for a
variety of reasons, including, but not limited to: industry conditions,
the company's implementation of its new enterprise resource planning
system, changes in product supply, pricing and customer demand,
competition, other vagaries in the global components and global
enterprise computing solutions markets, changes in relationships with
key suppliers, increased profit margin pressure, the effects of
additional actions taken to become more efficient or lower costs, risks
related to the integration of acquired businesses, changes in legal and
regulatory matters, and the company’s ability to generate additional
cash flow. Forward-looking statements are those statements which are not
statements of historical fact. These forward-looking statements can be
identified by forward-looking words such as "expects," "anticipates,"
"intends," "plans," "may," "will," "believes," "seeks," "estimates," and
similar expressions. Shareholders and other readers are cautioned not to
place undue reliance on these forward-looking statements, which speak
only as of the date on which they are made. The company undertakes no
obligation to update publicly or revise any of the forward-looking
statements.
For a further discussion of factors to consider in connection with these
forward-looking statements, investors should refer to Item 1A Risk
Factors of the company’s Annual Report on Form 10-K for the year ended
December 31, 2014.
Certain Non-GAAP Financial Information
In addition to disclosing financial results that are determined in
accordance with accounting principles generally accepted in the United
States (“GAAP”), the company also provides certain non-GAAP financial
information relating to sales, operating income, net income attributable
to shareholders, and net income per basic and diluted share. The company
provides sales on a non-GAAP basis adjusted for the impact of changes in
foreign currencies and the impact of acquisitions by adjusting the
company's prior periods to include the sales of businesses acquired as
if the acquisitions had occurred at the beginning of the earliest period
presented (referred to as "impact of acquisitions"). Operating income,
net income attributable to shareholders, and net income per basic and
diluted share are adjusted for certain charges, credits, gains, and
losses that the company believes impact the comparability of its results
of operations. These charges, credits, gains, and losses arise out of
the company’s efficiency enhancement initiatives, acquisitions
(including intangible assets amortization expense), loss on prepayment
of debt, and (gain)/loss on investments. A reconciliation of the
company’s non-GAAP financial information to GAAP is set forth in the
tables below.
The company believes that such non-GAAP financial information is useful
to investors to assist in assessing and understanding the company’s
operating performance and underlying trends in the company’s business
because management considers these items referred to above to be outside
the company’s core operating results. This non-GAAP financial
information is among the primary indicators management uses as a basis
for evaluating the company’s financial and operating performance. In
addition, the company’s Board of Directors may use this non-GAAP
financial information in evaluating management performance and setting
management compensation.
The presentation of this additional non-GAAP financial information is
not meant to be considered in isolation or as a substitute for, or
alternative to, sales, operating income, net income and net income per
basic and diluted share determined in accordance with GAAP. Analysis of
results and outlook on a non-GAAP basis should be used as a complement
to, and in conjunction with, data presented in accordance with GAAP.
1 A reconciliation of non-GAAP adjusted financial measures, including
sales, as adjusted, operating income, as adjusted, net income
attributable to shareholders, as adjusted, and net income per share, as
adjusted, to GAAP financial measures is presented in the reconciliation
tables included herein.
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ARROW ELECTRONICS, INC.
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CONSOLIDATED STATEMENTS OF OPERATIONS
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(In thousands except per share data)
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(Unaudited)
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Quarter Ended
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Six Months Ended
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June 27, 2015
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June 28, 2014
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June 27, 2015
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June 28, 2014
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Sales
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$
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5,829,989
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$
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5,676,539
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$
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10,832,374
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$
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10,758,579
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Costs and expenses:
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Cost of sales
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5,061,394
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4,929,018
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9,378,457
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9,307,230
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Selling, general, and administrative expenses
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504,754
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489,908
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959,284
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967,811
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Depreciation and amortization
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39,751
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39,712
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76,913
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76,283
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Restructuring, integration, and other charges
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17,147
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9,632
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33,343
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21,246
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5,623,046
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5,468,270
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10,447,997
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10,372,570
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Operating income
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206,943
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208,269
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384,377
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386,009
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Equity in earnings of affiliated companies
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1,903
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1,181
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3,216
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2,598
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Interest and other financing expense, net
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34,696
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28,920
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65,550
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58,557
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Other
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1,500
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-
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2,435
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-
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Income before income taxes
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172,650
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180,530
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319,608
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330,050
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Provision for income taxes
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47,967
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52,470
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88,834
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94,798
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Consolidated net income
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124,683
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128,060
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230,774
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235,252
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Noncontrolling interests
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751
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176
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784
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248
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Net income attributable to shareholders
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$
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123,932
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$
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127,884
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$
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229,990
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$
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235,004
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Net income per share:
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Basic
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$
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1.30
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$
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1.29
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$
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2.40
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$
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2.36
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Diluted
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$
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1.28
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$
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1.27
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$
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2.37
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$
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2.33
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Weighted average shares outstanding:
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Basic
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95,638
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99,449
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95,776
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99,695
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Diluted
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96,649
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100,562
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96,874
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100,980
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ARROW ELECTRONICS, INC.
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CONSOLIDATED BALANCE SHEETS
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(In thousands except par value)
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June 27, 2015
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December 31, 2014
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(Unaudited)
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ASSETS
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Current assets:
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Cash and cash equivalents
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$
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399,721
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$
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400,355
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Accounts receivable, net
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5,084,531
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6,043,850
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Inventories
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2,517,815
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2,335,257
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Other current assets
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301,066
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253,145
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Total current assets
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8,303,133
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9,032,607
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Property, plant, and equipment, at cost:
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Land
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23,590
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23,770
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Buildings and improvements
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159,470
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144,530
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Machinery and equipment
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1,202,214
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1,146,045
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1,385,274
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1,314,345
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Less: Accumulated depreciation and amortization
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(713,826
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)
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(678,046
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)
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Property, plant, and equipment, net
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671,448
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636,299
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Investments in affiliated companies
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72,774
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69,124
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Intangible assets, net
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438,670
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335,711
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Cost in excess of net assets of companies acquired
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2,327,572
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2,069,209
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Other assets
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298,217
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292,351
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Total assets
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$
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12,111,814
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$
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12,435,301
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LIABILITIES AND EQUITY
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Current liabilities:
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Accounts payable
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$
|
4,171,131
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$
|
5,027,103
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Accrued expenses
|
|
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|
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719,232
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|
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797,464
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Short-term borrowings, including current portion of long-term debt
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|
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|
|
86,806
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13,454
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|
|
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Total current liabilities
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|
|
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4,977,169
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5,838,021
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Long-term debt
|
|
|
|
|
2,544,388
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|
|
|
|
2,067,898
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Other liabilities
|
|
|
|
|
410,333
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|
|
|
|
370,471
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|
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|
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|
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Equity:
|
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Shareholders' equity:
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|
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|
|
|
|
|
|
|
Common stock, par value $1:
|
|
|
|
|
|
|
|
|
|
Authorized – 160,000 shares in both 2015 and 2014
|
|
|
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|
|
|
|
|
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Issued – 125,424 shares in both 2015 and 2014
|
|
|
|
|
125,424
|
|
|
|
|
125,424
|
|
Capital in excess of par value
|
|
|
|
|
1,083,885
|
|
|
|
|
1,086,082
|
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Treasury stock (31,008 and 29,529 shares in 2015 and 2014,
respectively), at cost
|
|
|
|
|
(1,281,456
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)
|
|
|
|
(1,169,673
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)
|
Retained earnings
|
|
|
|
|
4,406,744
|
|
|
|
|
4,176,754
|
|
Accumulated other comprehensive loss
|
|
|
|
|
(210,567
|
)
|
|
|
|
(64,617
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)
|
|
|
|
|
|
|
|
|
|
|
|
|
Total shareholders' equity
|
|
|
|
|
4,124,030
|
|
|
|
|
4,153,970
|
|
Noncontrolling interests
|
|
|
|
|
55,894
|
|
|
|
|
4,941
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total equity
|
|
|
|
|
4,179,924
|
|
|
|
|
4,158,911
|
|
Total liabilities and equity
|
|
|
|
$
|
12,111,814
|
|
|
|
$
|
12,435,301
|
|
|
|
|
|
|
|
|
|
|
|
|
ARROW ELECTRONICS, INC.
|
CONSOLIDATED STATEMENTS OF CASH FLOWS
|
(In thousands)
|
(Unaudited)
|
|
|
|
|
|
Quarter Ended
|
|
|
|
|
June 27,
|
|
|
June 28,
|
|
|
|
|
2015
|
|
|
2014
|
Cash flows from operating activities:
|
|
|
|
|
|
|
|
|
|
Consolidated net income
|
|
|
|
$
|
124,683
|
|
|
|
$
|
128,060
|
|
Adjustments to reconcile consolidated net income to net cash
provided by (used for) operations:
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
|
|
39,751
|
|
|
|
|
39,712
|
|
Amortization of stock-based compensation
|
|
|
|
|
12,086
|
|
|
|
|
10,371
|
|
Equity in earnings of affiliated companies
|
|
|
|
|
(1,903
|
)
|
|
|
|
(1,181
|
)
|
Deferred income taxes
|
|
|
|
|
14,115
|
|
|
|
|
5,338
|
|
Restructuring, integration, and other charges
|
|
|
|
|
12,894
|
|
|
|
|
7,526
|
|
Excess tax benefits from stock-based compensation arrangements
|
|
|
|
|
(185
|
)
|
|
|
|
(386
|
)
|
Other
|
|
|
|
|
2,844
|
|
|
|
|
(120
|
)
|
Change in assets and liabilities, net of effects of acquired
businesses:
|
|
|
|
|
|
|
|
|
|
Accounts receivable
|
|
|
|
|
143,882
|
|
|
|
|
(306,793
|
)
|
Inventories
|
|
|
|
|
(131,399
|
)
|
|
|
|
(202,670
|
)
|
Accounts payable
|
|
|
|
|
259,287
|
|
|
|
|
449,225
|
|
Accrued expenses
|
|
|
|
|
(3,104
|
)
|
|
|
|
19,289
|
|
Other assets and liabilities
|
|
|
|
|
(11,917
|
)
|
|
|
|
11,064
|
|
Net cash provided by (used for) operating activities
|
|
|
|
|
461,034
|
|
|
|
|
159,435
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities:
|
|
|
|
|
|
|
|
|
|
Cash consideration paid for acquired businesses
|
|
|
|
|
(337,585
|
)
|
|
|
|
-
|
|
Acquisition of property, plant, and equipment
|
|
|
|
|
(37,670
|
)
|
|
|
|
(29,160
|
)
|
Other
|
|
|
|
|
-
|
|
|
|
|
-
|
|
Net cash used for investing activities
|
|
|
|
|
(375,255
|
)
|
|
|
|
(29,160
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities:
|
|
|
|
|
|
|
|
|
|
Change in short-term and other borrowings
|
|
|
|
|
(5,051
|
)
|
|
|
|
(2,566
|
)
|
Proceeds from (repayment of) long-term bank borrowings, net
|
|
|
|
|
82,800
|
|
|
|
|
(35,000
|
)
|
Proceeds from exercise of stock options
|
|
|
|
|
1,898
|
|
|
|
|
2,179
|
|
Excess tax benefits from stock-based compensation arrangements
|
|
|
|
|
185
|
|
|
|
|
386
|
|
Repurchases of common stock
|
|
|
|
|
(77,863
|
)
|
|
|
|
(50,310
|
)
|
Other
|
|
|
|
|
-
|
|
|
|
|
-
|
|
Net cash provided by (used for) financing activities
|
|
|
|
|
1,969
|
|
|
|
|
(85,311
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of exchange rate changes on cash
|
|
|
|
|
6,680
|
|
|
|
|
5,689
|
|
Net increase in cash and cash equivalents
|
|
|
|
|
94,428
|
|
|
|
|
50,653
|
|
Cash and cash equivalents at beginning of period
|
|
|
|
|
305,293
|
|
|
|
|
258,283
|
|
Cash and cash equivalents at end of period
|
|
|
|
$
|
399,721
|
|
|
|
$
|
308,936
|
|
|
|
|
|
|
|
|
|
|
|
|
ARROW ELECTRONICS, INC.
|
CONSOLIDATED STATEMENTS OF CASH FLOWS
|
(In thousands)
|
(Unaudited)
|
|
|
|
|
|
Six Months Ended
|
|
|
|
|
June 27,
|
|
|
June 28,
|
|
|
|
|
2015
|
|
|
2014
|
Cash flows from operating activities:
|
|
|
|
|
|
|
|
|
|
Consolidated net income
|
|
|
|
$
|
230,774
|
|
|
|
$
|
235,252
|
|
Adjustments to reconcile consolidated net income to net cash
provided by operations:
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
|
|
76,913
|
|
|
|
|
76,283
|
|
Amortization of stock-based compensation
|
|
|
|
|
22,006
|
|
|
|
|
20,167
|
|
Equity in earnings of affiliated companies
|
|
|
|
|
(3,216
|
)
|
|
|
|
(2,598
|
)
|
Deferred income taxes
|
|
|
|
|
26,506
|
|
|
|
|
15,979
|
|
Restructuring, integration, and other charges
|
|
|
|
|
25,463
|
|
|
|
|
15,546
|
|
Excess tax benefits from stock-based compensation arrangements
|
|
|
|
|
(5,842
|
)
|
|
|
|
(6,248
|
)
|
Other
|
|
|
|
|
4,574
|
|
|
|
|
1,372
|
|
Change in assets and liabilities, net of effects of acquired
businesses:
|
|
|
|
|
|
|
|
|
|
Accounts receivable
|
|
|
|
|
1,079,153
|
|
|
|
|
597,926
|
|
Inventories
|
|
|
|
|
(82,825
|
)
|
|
|
|
(130,669
|
)
|
Accounts payable
|
|
|
|
|
(1,020,150
|
)
|
|
|
|
(410,063
|
)
|
Accrued expenses
|
|
|
|
|
(124,829
|
)
|
|
|
|
(107,937
|
)
|
Other assets and liabilities
|
|
|
|
|
(9,089
|
)
|
|
|
|
(21,538
|
)
|
Net cash provided by operating activities
|
|
|
|
|
219,438
|
|
|
|
|
283,472
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from investing activities:
|
|
|
|
|
|
|
|
|
|
Cash consideration paid for acquired businesses
|
|
|
|
|
(470,674
|
)
|
|
|
|
(60,224
|
)
|
Acquisition of property, plant, and equipment
|
|
|
|
|
(68,820
|
)
|
|
|
|
(62,003
|
)
|
Other
|
|
|
|
|
2,008
|
|
|
|
|
-
|
|
Net cash used for investing activities
|
|
|
|
|
(537,486
|
)
|
|
|
|
(122,227
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities:
|
|
|
|
|
|
|
|
|
|
Change in short-term and other borrowings
|
|
|
|
|
(3,817
|
)
|
|
|
|
(9,904
|
)
|
Proceeds from (repayment of) long-term bank borrowings, net
|
|
|
|
|
34,400
|
|
|
|
|
(120,000
|
)
|
Net proceeds from note offering
|
|
|
|
|
688,162
|
|
|
|
|
-
|
|
Redemption of notes
|
|
|
|
|
(254,313
|
)
|
|
|
|
-
|
|
Proceeds from exercise of stock options
|
|
|
|
|
14,474
|
|
|
|
|
18,321
|
|
Excess tax benefits from stock-based compensation arrangements
|
|
|
|
|
5,842
|
|
|
|
|
6,248
|
|
Repurchases of common stock
|
|
|
|
|
(156,424
|
)
|
|
|
|
(138,811
|
)
|
Other
|
|
|
|
|
(3,000
|
)
|
|
|
|
-
|
|
Net cash provided by (used for) financing activities
|
|
|
|
|
325,324
|
|
|
|
|
(244,146
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of exchange rate changes on cash
|
|
|
|
|
(7,910
|
)
|
|
|
|
1,235
|
|
Net decrease in cash and cash equivalents
|
|
|
|
|
(634
|
)
|
|
|
|
(81,666
|
)
|
Cash and cash equivalents at beginning of period
|
|
|
|
|
400,355
|
|
|
|
|
390,602
|
|
Cash and cash equivalents at end of period
|
|
|
|
$
|
399,721
|
|
|
|
$
|
308,936
|
|
|
|
|
|
|
|
|
|
|
|
|
ARROW ELECTRONICS, INC.
|
(In thousands except per share data)
|
(Unaudited)
|
|
NON-GAAP SALES RECONCILIATION
|
|
|
|
|
|
|
|
|
|
|
|
|
Quarter Ended
|
|
|
|
|
|
|
|
June 27,
|
|
|
June 28,
|
|
|
%
|
|
|
|
|
2015
|
|
|
2014
|
|
|
Change
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated sales, as reported
|
|
|
|
$
|
5,829,989
|
|
|
$
|
5,676,539
|
|
|
|
2.7
|
%
|
Impact of changes in foreign currencies
|
|
|
|
|
-
|
|
|
|
(348,234
|
)
|
|
|
|
Impact of acquisitions
|
|
|
|
|
47,722
|
|
|
|
390,897
|
|
|
|
|
Consolidated sales, as adjusted
|
|
|
|
$
|
5,877,711
|
|
|
$
|
5,719,202
|
|
|
|
2.8
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Global components sales, as reported
|
|
|
|
$
|
3,698,175
|
|
|
$
|
3,569,344
|
|
|
|
3.6
|
%
|
Impact of changes in foreign currencies
|
|
|
|
|
-
|
|
|
|
(190,880
|
)
|
|
|
|
Impact of acquisitions
|
|
|
|
|
47,722
|
|
|
|
242,595
|
|
|
|
|
Global components sales, as adjusted
|
|
|
|
$
|
3,745,897
|
|
|
$
|
3,621,059
|
|
|
|
3.4
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Europe components sales, as reported
|
|
|
|
$
|
986,735
|
|
|
$
|
984,927
|
|
|
|
0.2
|
%
|
Impact of changes in foreign currencies
|
|
|
|
|
-
|
|
|
|
(180,658
|
)
|
|
|
|
Impact of acquisitions
|
|
|
|
|
-
|
|
|
|
83,512
|
|
|
|
|
Europe components sales, as adjusted
|
|
|
|
$
|
986,735
|
|
|
$
|
887,781
|
|
|
|
11.1
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Asia components sales, as reported
|
|
|
|
$
|
1,237,865
|
|
|
$
|
1,111,953
|
|
|
|
11.3
|
%
|
Impact of changes in foreign currencies
|
|
|
|
|
-
|
|
|
|
(6,703
|
)
|
|
|
|
Impact of acquisitions
|
|
|
|
|
47,722
|
|
|
|
125,878
|
|
|
|
|
Asia components sales, as adjusted
|
|
|
|
$
|
1,285,587
|
|
|
$
|
1,231,128
|
|
|
|
4.4
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Global ECS sales, as reported
|
|
|
|
$
|
2,131,814
|
|
|
$
|
2,107,195
|
|
|
|
1.2
|
%
|
Impact of changes in foreign currencies
|
|
|
|
|
-
|
|
|
|
(157,354
|
)
|
|
|
|
Impact of acquisitions
|
|
|
|
|
-
|
|
|
|
148,302
|
|
|
|
|
Global ECS sales, as adjusted
|
|
|
|
$
|
2,131,814
|
|
|
$
|
2,098,143
|
|
|
|
1.6
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Europe ECS sales, as reported
|
|
|
|
$
|
678,278
|
|
|
$
|
777,033
|
|
|
|
(12.7
|
)%
|
Impact of changes in foreign currencies
|
|
|
|
|
-
|
|
|
|
(147,505
|
)
|
|
|
|
Impact of acquisitions
|
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
Europe ECS sales, as adjusted
|
|
|
|
$
|
678,278
|
|
|
$
|
629,528
|
|
|
|
7.7
|
%
|
|
|
|
|
|
|
|
|
Americas ECS sales, as reported
|
|
|
|
$
|
1,453,536
|
|
|
$
|
1,330,161
|
|
|
|
9.3
|
%
|
Impact of changes in foreign currencies
|
|
|
|
|
-
|
|
|
|
(9,849
|
)
|
|
|
|
Impact of acquisitions
|
|
|
|
|
-
|
|
|
|
148,302
|
|
|
|
|
Americas ECS sales, as adjusted
|
|
|
|
$
|
1,453,536
|
|
|
$
|
1,468,614
|
|
|
|
(1.0
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ARROW ELECTRONICS, INC.
|
(In thousands except per share data)
|
(Unaudited)
|
|
NON-GAAP SALES RECONCILIATION
|
|
|
|
|
|
|
|
|
|
|
|
|
Six Months Ended
|
|
|
|
|
|
|
|
June 27,
|
|
|
June 28,
|
|
|
%
|
|
|
|
|
2015
|
|
|
2014
|
|
|
Change
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated sales, as reported
|
|
|
|
$
|
10,832,374
|
|
|
$
|
10,758,579
|
|
|
|
0.7
|
%
|
Impact of changes in foreign currencies
|
|
|
|
|
-
|
|
|
|
(670,373
|
)
|
|
|
|
Impact of acquisitions
|
|
|
|
|
340,392
|
|
|
|
743,729
|
|
|
|
|
Consolidated sales, as adjusted
|
|
|
|
$
|
11,172,766
|
|
|
$
|
10,831,935
|
|
|
|
3.1
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Global components sales, as reported
|
|
|
|
$
|
7,044,938
|
|
|
$
|
6,990,525
|
|
|
|
0.8
|
%
|
Impact of changes in foreign currencies
|
|
|
|
|
-
|
|
|
|
(374,710
|
)
|
|
|
|
Impact of acquisitions
|
|
|
|
|
248,406
|
|
|
|
478,492
|
|
|
|
|
Global components sales, as adjusted
|
|
|
|
$
|
7,293,344
|
|
|
$
|
7,094,307
|
|
|
|
2.8
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Europe components sales, as reported
|
|
|
|
$
|
1,909,996
|
|
|
$
|
1,973,861
|
|
|
|
(3.2
|
)%
|
Impact of changes in foreign currencies
|
|
|
|
|
-
|
|
|
|
(352,999
|
)
|
|
|
|
Impact of acquisitions
|
|
|
|
|
57,361
|
|
|
|
164,637
|
|
|
|
|
Europe components sales, as adjusted
|
|
|
|
$
|
1,967,357
|
|
|
$
|
1,785,499
|
|
|
|
10.2
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Asia components sales, as reported
|
|
|
|
$
|
2,263,779
|
|
|
$
|
2,142,648
|
|
|
|
5.7
|
%
|
Impact of changes in foreign currencies
|
|
|
|
|
-
|
|
|
|
(15,591
|
)
|
|
|
|
Impact of acquisitions
|
|
|
|
|
187,699
|
|
|
|
251,099
|
|
|
|
|
Asia components sales, as adjusted
|
|
|
|
$
|
2,451,478
|
|
|
$
|
2,378,156
|
|
|
|
3.1
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Global ECS sales, as reported
|
|
|
|
$
|
3,787,436
|
|
|
$
|
3,768,054
|
|
|
|
0.5
|
%
|
Impact of changes in foreign currencies
|
|
|
|
|
-
|
|
|
|
(295,663
|
)
|
|
|
|
Impact of acquisitions
|
|
|
|
|
91,986
|
|
|
|
265,237
|
|
|
|
|
Global ECS sales, as adjusted
|
|
|
|
$
|
3,879,422
|
|
|
$
|
3,737,628
|
|
|
|
3.8
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Europe ECS sales, as reported
|
|
|
|
$
|
1,259,941
|
|
|
$
|
1,442,012
|
|
|
|
(12.6
|
)%
|
Impact of changes in foreign currencies
|
|
|
|
|
-
|
|
|
|
(272,229
|
)
|
|
|
|
Impact of acquisitions
|
|
|
|
|
-
|
|
|
|
-
|
|
|
|
|
Europe ECS sales, as adjusted
|
|
|
|
$
|
1,259,941
|
|
|
$
|
1,169,783
|
|
|
|
7.7
|
%
|
|
|
|
|
Americas ECS sales, as reported
|
|
|
|
$
|
2,527,495
|
|
|
$
|
2,326,042
|
|
|
|
8.7
|
%
|
Impact of changes in foreign currencies
|
|
|
|
|
-
|
|
|
|
(23,434
|
)
|
|
|
|
Impact of acquisitions
|
|
|
|
|
91,986
|
|
|
|
265,237
|
|
|
|
|
Americas ECS sales, as adjusted
|
|
|
|
$
|
2,619,481
|
|
|
$
|
2,567,845
|
|
|
|
2.0
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ARROW ELECTRONICS, INC.
|
(In thousands except per share data)
|
(Unaudited)
|
|
NON-GAAP EARNINGS RECONCILIATION
|
|
|
|
|
|
Quarter Ended
|
|
|
Six Months Ended
|
|
|
|
|
June 27, 2015
|
|
|
June 28, 2014
|
|
|
June 27, 2015
|
|
|
June 28, 2014
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income, as reported
|
|
|
|
$
|
206,943
|
|
|
$
|
208,269
|
|
|
$
|
384,377
|
|
|
|
$
|
386,009
|
Intangible assets amortization expense
|
|
|
|
|
13,917
|
|
|
|
10,870
|
|
|
|
25,024
|
|
|
|
|
21,817
|
Restructuring, integration, and other charges
|
|
|
|
|
17,147
|
|
|
|
9,632
|
|
|
|
33,343
|
|
|
|
|
21,246
|
Operating income, as adjusted
|
|
|
|
$
|
238,007
|
|
|
$
|
228,771
|
|
|
$
|
442,744
|
|
|
|
$
|
429,072
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income attributable to shareholders, as reported
|
|
|
|
$
|
123,932
|
|
|
$
|
127,884
|
|
|
$
|
229,990
|
|
|
|
$
|
235,004
|
Intangible assets amortization expense
|
|
|
|
|
11,169
|
|
|
|
8,867
|
|
|
|
20,198
|
|
|
|
|
17,774
|
Restructuring, integration, and other charges
|
|
|
|
|
12,895
|
|
|
|
7,526
|
|
|
|
25,463
|
|
|
|
|
15,546
|
Loss on prepayment of debt
|
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,808
|
|
|
|
|
-
|
(Gain)/loss on investments
|
|
|
|
|
921
|
|
|
|
-
|
|
|
|
(746
|
)
|
|
|
|
-
|
Net income attributable to shareholders, as adjusted
|
|
|
|
$
|
148,917
|
|
|
$
|
144,277
|
|
|
$
|
276,713
|
|
|
|
$
|
268,324
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income per basic share, as reported
|
|
|
|
$
|
1.30
|
|
|
$
|
1.29
|
|
|
$
|
2.40
|
|
|
|
$
|
2.36
|
Intangible assets amortization expense
|
|
|
|
|
.12
|
|
|
|
.09
|
|
|
|
.21
|
|
|
|
|
.18
|
Restructuring, integration, and other charges
|
|
|
|
|
.13
|
|
|
|
.08
|
|
|
|
.27
|
|
|
|
|
.16
|
Loss on prepayment of debt
|
|
|
|
|
-
|
|
|
|
-
|
|
|
|
.02
|
|
|
|
|
-
|
(Gain)/loss on investments
|
|
|
|
|
.01
|
|
|
|
-
|
|
|
|
(.01
|
)
|
|
|
|
-
|
Net income per basic share, as adjusted
|
|
|
|
$
|
1.56
|
|
|
$
|
1.45
|
|
|
$
|
2.89
|
|
|
|
$
|
2.69
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income per diluted share, as reported
|
|
|
|
$
|
1.28
|
|
|
$
|
1.27
|
|
|
$
|
2.37
|
|
|
|
$
|
2.33
|
Intangible assets amortization expense
|
|
|
|
|
.12
|
|
|
|
.09
|
|
|
|
.21
|
|
|
|
|
.18
|
Restructuring, integration, and other charges
|
|
|
|
|
.13
|
|
|
|
.07
|
|
|
|
.26
|
|
|
|
|
.15
|
Loss on prepayment of debt
|
|
|
|
|
-
|
|
|
|
-
|
|
|
|
.02
|
|
|
|
|
-
|
(Gain)/loss on investments
|
|
|
|
|
.01
|
|
|
|
-
|
|
|
|
(.01
|
)
|
|
|
|
-
|
Net income per diluted share, as adjusted
|
|
|
|
$
|
1.54
|
|
|
$
|
1.43
|
|
|
$
|
2.86
|
|
|
|
$
|
2.66
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The sum of the components for basic and diluted net income per
share, as adjusted, may not agree to totals, as presented, due to
rounding.
|
|
|
ARROW ELECTRONICS, INC.
|
(In thousands except per share data)
|
(Unaudited)
|
|
SEGMENT INFORMATION
|
|
|
|
|
|
Quarter Ended
|
|
|
Six Months Ended
|
|
|
|
|
June 27, 2015
|
|
|
June 28, 2014
|
|
|
June 27, 2015
|
|
|
June 28, 2014
|
Sales:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Global components
|
|
|
|
$
|
3,698,175
|
|
|
|
$
|
3,569,344
|
|
|
|
$
|
7,044,938
|
|
|
|
$
|
6,990,525
|
|
Global ECS
|
|
|
|
|
2,131,814
|
|
|
|
|
2,107,195
|
|
|
|
|
3,787,436
|
|
|
|
|
3,768,054
|
|
Consolidated
|
|
|
|
$
|
5,829,989
|
|
|
|
$
|
5,676,539
|
|
|
|
$
|
10,832,374
|
|
|
|
$
|
10,758,579
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income (loss):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Global components
|
|
|
|
$
|
169,817
|
|
|
|
$
|
159,642
|
|
|
|
$
|
334,712
|
|
|
|
$
|
320,788
|
|
Global ECS
|
|
|
|
|
98,394
|
|
|
|
|
95,990
|
|
|
|
|
165,911
|
|
|
|
|
160,148
|
|
Corporate (a)
|
|
|
|
|
(61,268
|
)
|
|
|
|
(47,363
|
)
|
|
|
|
(116,246
|
)
|
|
|
|
(94,927
|
)
|
Consolidated
|
|
|
|
$
|
206,943
|
|
|
|
$
|
208,269
|
|
|
|
$
|
384,377
|
|
|
|
$
|
386,009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a)
|
|
|
|
Includes restructuring, integration, and other charges of $17.1
million and $33.3 million for the second quarter and first six
months of 2015 and $9.6 million and $21.2 million for the second
quarter and first six months of 2014, respectively.
|
|
|
|
|
|
NON-GAAP SEGMENT RECONCILIATION
|
|
|
|
|
|
Quarter Ended
|
|
|
Six Months Ended
|
|
|
|
|
June 27, 2015
|
|
|
June 28, 2014
|
|
|
June 27, 2015
|
|
|
June 28, 2014
|
Global components operating income, as reported
|
|
|
|
$
|
169,817
|
|
|
$
|
159,642
|
|
|
$
|
334,712
|
|
|
$
|
320,788
|
Intangible assets amortization expense
|
|
|
|
|
7,146
|
|
|
|
5,458
|
|
|
|
12,928
|
|
|
|
11,006
|
Global components operating income, as adjusted
|
|
|
|
$
|
176,963
|
|
|
$
|
165,100
|
|
|
$
|
374,640
|
|
|
$
|
331,794
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Global ECS operating income, as reported
|
|
|
|
$
|
98,394
|
|
|
$
|
95,990
|
|
|
$
|
165,911
|
|
|
$
|
160,148
|
Intangible assets amortization expense
|
|
|
|
|
6,771
|
|
|
|
5,412
|
|
|
|
12,096
|
|
|
|
10,811
|
Global ECS operating income, as adjusted
|
|
|
|
$
|
105,165
|
|
|
$
|
101,402
|
|
|
$
|
178,007
|
|
|
$
|
170,959
|
CONTACT:
Arrow Electronics, Inc.
Steven O’Brien, 303-824-4544
Director,
Investor Relations
or
Paul J. Reilly, 631-847-1872
Executive
Vice President, Finance and Operations, and Chief Financial Officer
or
Media:
John
Hourigan, 303-824-4586
Vice President, Global Communications
Exhibit 99.2
In the second quarter we
delivered sales and EPS above the midpoints of our prior guidance
ranges. As reflected in our earnings release, there are a number of
items that impact the comparability of our results with those in the
trailing quarter and prior quarter of last year. Any discussion of our
results will exclude these items to give you a better sense of our
operating results. As always, the operating information we provide to
you should be used as a complement to GAAP numbers. For a complete
reconciliation between our GAAP and non-GAAP results, please refer to
our earnings release and the earnings reconciliation found at the end of
this document. The following reported and adjusted information included
in this CFO commentary is unaudited and should be read in conjunction
with the Form 10-Q for the quarterly period ended June 27, 2015 and the
company’s 2014 Annual Report on Form 10-K as filed with the Securities
and Exchange Commission. CFO Commentary 1
Second-quarter sales were
$5.83 billion advancing 3% year over year. Sales, adjusted for the
impact of acquisitions and changes in foreign currencies, also advanced
3% year over year. Operating income was $238 million, an 11% increase
year over year adjusted for currency. Operating margins advanced year
over year as well, increasing by 10 basis points to 4.1%. Trailing
12-month cash generated from operating activities was $609 million.
Returns increased year over year with return on invested capital of
10.8% up 30 basis points and return on working capital of 27.7% up 50
basis points. Global components sales were $3.70 billion. Sales
increased 3% year over year adjusted for the impact of acquisitions and
changes in foreign currencies. The overall market for our global
components business remains stable, with lead times and customer order
patterns operating in normal ranges. Second-quarter book-to-bill was
1.02. In the Americas, our sales were flat year over year. Sales in our
core Americas components business grew 3% year over year. In Europe,
sales increased 11% year over year adjusted for the impact of
acquisitions and changes in foreign currencies. In Asia , sales
increased 4% year over year adjusted for the impact of acquisitions and
changes in foreign currencies. Global components operating margin of
4.8% increased 20 basis points year over year. In enterprise computing
solutions, sales of $2.13 billion increased 2% year over year adjusted
for the impact of acquisitions and changes in foreign currencies. On a
six-month basis, sales increased 4% adjusted for the impact of
acquisitions and changes in foreign currencies. In the Americas, sales
decreased 1% year over year adjusted for the impact of acquisitions and
changes in foreign currencies. In Europe, sales increased 8% year over
year adjusted for the impact of acquisitions and changes in foreign
currencies. Global enterprise computing solutions achieved record
second-quarter operating income of $105 million and operating margin of
4.9%. In the second quarter, both global components and enterprise
computing solutions sales and operating margins advanced year over year 2
Consolidated Overview
Second Quarter2015 Sales $5,830 +3% +3% +17% Gross Profit Margin 13.2%
flat -10bps -50bps Operating Expenses/Sales 9.1% flat flat -50bps
Operating Income $238 +4% +1% +16% Operating Margin 4.1% +10bps -10bps
flat Net Income $149 +3% +2% +17% Diluted EPS $1.54 +7% +6% +17%
Second-quarter sales were $5.83 billion – Adjusted for the impact of
acquisitions and changes in foreign currencies, sales increased 3% year
over year – Sales, as reported, increased 3% year over year and 17%
sequentially Consolidated gross profit margin was 13.2% – Flat year over
year as slightly higher global components gross margin from sales growth
was offset by slightly lower enterprise computing solutions gross margin
due to higher mix from the Americas region – Decreased 50 basis points
sequentially due to a seasonally higher mix of enterprise computing
solutions business Operating expenses as a percentage of sales were 9.1%
– Flat year over year and decreased seasonally by 50 basis points
sequentially – Adjusted for the impact of acquisitions and changes in
foreign currencies, operating expenses increased 3% year over year – On
a reported basis, operating expenses increased 2% year over year
primarily due to acquisitions Operating income was $238 million –
Increased 4% year over year as reported – Increased 1% year over year
adjusted for the impact of acquisitions and changes in foreign
currencies Operating income as a percentage of sales was 4.1% 3
Operating income as a
percentage of sales increased 10 basis points year over year Effective
tax rate for the quarter was 27.1% Net income was $149 million Increased
3% year over year Adjusted for the impact of acquisitions and changes in
foreign currencies, net income increased by 2% year over year Earnings
per share were $1.56 and $1.54 on a basic and diluted basis,
respectively Diluted EPS increased 7% year over year Adjusted for the
impact of acquisitions and changes in foreign currencies, diluted EPS
increased by 6% year over year A reconciliation of non-GAAP adjusted
financial measures, including sales, as adjusted, operating income, as
adjusted, net income attributable to shareholders, as adjusted, and net
income per share, as adjusted, to GAAP financial measures is presented
in the reconciliation tables included herein. 4
Components Global $3,500
$3,000 $2,500 $2,000 Q2–'14 Q3–'14 Q4–'14 Q1–'15 Q2–'15
Sales, adjusted for the impact of acquisitions and changes in foreign
currencies, increased 3% year over year Sales, as reported, increased 4%
year over year and 11% sequentially Leading indicators, including lead
times and cancellation rates, are in-line with historical norms
Book-to-bill was 1.02, at a normal seasonal level for a second quarter
Gross profit dollars, adjusted for the impact of acquisitions and
changes in foreign currencies, increased 4% year over year and
sequentially Gross margins increased 10 basis points year over year and
decreased 40 basis points sequentially Year-over-year increase
principally driven by Americas and Asia Pacific Sequential decrease
principally driven by seasonally higher mix from Asia Pacific region
Operating margin of 4.8% increased 20 basis points year over year
principally driven by improvement in Europe and Asia Pacific Return on
working capital decreased 100 basis points year over year, as higher
operating income was offset by higher working capital due to
Acquisitions . Global components sales increased 3% year over year
adjusted for the impact of acquisitions and changes in foreign
currencies 5
Second-Quarter 2015 CFO
Commentary Components Americas $1,600 $1,500 $1,400 $1,300 $1,200 $1,100
$1,000 $900 $800 Q2–'14 Q3–'14 Q4–'14 Q1–'15 Q2–'15 Sales ($
in millions) Sales were flat year over year and increased 5%
sequentially Americas core sales increased 3% year over year Strong
growth in the alternative energy, lighting, and transportation verticals
year over year On a sequential basis, core sales were in-line with
seasonality Looking ahead to the third quarter, we expect sales in our
core Americas components business to be in-line with seasonality
Americas Components core sales increased 3% year over year. 6
Second-Quarter 2015 CFO
Commentary Components EuropeQ2–'14 Q3–'14 Q4–'14 Q1–'15 Q2–'15 Sales ($
in millions) Sales increased 11%Sales increased 11% year over year
adjusted for the impact of acquistions and changes in foreign currencies
Sales, as reported, were flat year over year and increased 7%
sequentially Strong growth in the transportation and lighting verticals
year over year On a sequential basis, core sales were near the high end
of seasonality Looking ahead to the third quarter, we expect sales in
our core European components business to be in-line with seasonality
year over year adjusted for the impact of acquisitions and changes in
foreign currencies. 7
Second-Quarter 2015 CFO
Commentary Components Asia Pacific Core Asia Pacific Components sales
increased 15% year over year. Sales were grew 11% year over year and 21%
sequentially – Sales increased 4% year over year and 10% sequentially
adjusted for the impact of acquisitions and changes in foreign
currencies – Core components sales grew 15% year over year – Strong
growth in the transportation and industrial power verticals year over
year – On a sequential basis, core sales were near the higher end of
traditional seasonality Looking ahead to the third quarter, we expect
sales in our core Asia-Pacific components business to be near the lower
end of seasonality due to slowing economic growth in the bigger
economies $1,112 $1,270 $1,152 $1,026 $1,238 $700 $800 $900 $1,000
$1,100 $1,200 $1,300 Q2–'14 Q3–'14 Q4–'14 Q1–'15 Q2–'15 8
Second-Quarter 2015 CFO
Commentary Enterprise Computing Solutions Global Six-month sales
increased 4% year over year adjusted for the impact of acquisitions and
changes in foreign currencies. Sales increased 2% year over year
adjusted for the impact of acquisitions and changes in foreign
currencies – Sales, as reported, increased 1% year over year and
seasonally increased by 29% sequentially – On a six-month basis, sales
increased 4% year over year adjusted for the impact of acquisitions and
changes in foreign currencies Gross margin was down 20 basis points year
over year due to a higher mix from Americas Operating margin of 4.9% –
Up 10 basis points year over year due to higher margins in the Americas
– Operating income increased 4% year over year Return on working capital
continues to excel, increasing year over year for the seventh
consecutive quarter 9
Second-Quarter 2015 CFO
Commentary Enterprise Computing Solutions Americas ECS Americas captured
double-digit growth in software led by security. Sales increased 9% year
over year and seasonally increased by 35% sequentially – Sales decreased
1% year over year adjusted for the impact of acquisitions and changes in
foreign currencies – Double-digit growth in software led by security and
virtualization – Growth in services – Industry-standard and proprietary
servers declined compared to strong hardware spending during the
year-ago quarter Looking ahead to the third quarter, we expect sales in
our core Americas value-added computing solutions business to be in-line
with seasonality $1,330 $1,263 $1,822 $1,074 $1,454 $500 $700 $900
$1,100 $1,300 $1,500 $1,700 $1,900 Q2–'14 Q3–'14 Q4–'14 Q1–'15 Q2–'15 10
Second-Quarter 2015 CFO
Commentary Enterprise Computing Solutions Europe ECS Europe captured
strong growth in proprietary servers, storage, software, services and
networking. Sales increased 8% year over year adjusted for the impact of
acquisitions and changes in foreign currencies – Sales, as reported,
decreased 13% year over year and increased 17% sequentially – Strong
growth in proprietary servers, storage, software, services, and
networking – Growth in industry-standard servers Looking ahead to the
third quarter, we expect sales in our core European value-added
computing solutions business to be in-line with seasonality $777 $619
$984 $582 $678 $400 $500 $600 $700 $800 $900 $1,000 $1,100 Q2–'14 Q3–'14
Q4–'14 Q1–' 11
Second-Quarter 2015 CFO
Commentary Cash Flow and Balance Sheet Highlights Cash Flow from
Operations Cash from operating activities in the second quarter was $461
million and $609 million on a trailing 12-month basis. We converted more
than than 120% of GAAP net income to cash over the last 12 months, well
in excess of our target. Working Capital Working capital to sales was
14.7% in the second quarter. Return on working capital was 27.7%. Return
on Invested Capital Return on invested capital was 10.8% in the second
quarter and increased over the prior period for the seventh consecutive
quarter. Share Buyback We repurchased $78 million of our stock in the
second quarter, bringing our total cash returned to shareholders over
the last 12 months to approximately $307 million. Debt and Liquidity
Net-debt-to-last-12-months EBITDA ratio of approximately 2.1x. Our total
liquidity is $3.0 billion when including our cash of $400 million. We
repurchased $78 million of our stock in the second quarter, bringing our
total cash returned to shareholders over the last 12 months to
approximately $307 million. 12
Second-Quarter 2015 CFO
Commentary Third-Quarter 2015 Guidance Consolidated Sales $5.55 billion
to $5.95 billion Global Components $3.65 billion to $3.85 billion Global
ECS $1.9 billion to $2.1 billion Diluted Earnings per Share* $1.40 to
$1.52 * Third-quarter guidance assumes average diluted shares
outstanding of 95.5 million. Global Components NAC EMEA ex FX AAP Q1 -8%
to 0% +8% to 16% -10% to -2% Q2 0% to +8% -5% to +3% +3% to +11% Q3 -4%
to +4% -4% to +4% +4% to +12% Q4 -3% to +5% -8% to 0% -4% to +4% Global
ECS NAC EMEA ex FX Q1 -36% to -28% -40% to -32% Q2 +22% to +30% +9% to
+17% Q3 -12% to -4% -24% to -16% Q4 +36% to +44% +72% to +80% * Revenue
seasonality based on historical sequential sales growth for our
components and ECS businesses, updated February 5, 2015 Arrow
Electronics Outlook Guidance We are expecting the average USD to Euro
exchange rate for the second quarter to be €1.08 to $1. Based on this
assumption, changes in foreign currencies will have a negative impact of
approximately $280 million or 5% on sales and a negative impact of $.08
or 6% on earnings per share compared with the third quarter of 2014, and
a negative impact of $40 million or 1% on sales and a negative impact of
$.01 or 1% on earnings per share compared with the second quarter of
2015. 13
Second-Quarter 2015 CFO
Commentary Risk Factors The discussion of the company’s business and
operations should be read together with the risk factors contained in
Item 1A of its 2014 Annual Report on Form 10-K, filed with the
Securities and Exchange Commission, which describe various risks and
uncertainties to which the company is or may become subject. If any of
the described events occur, the company’s business, results of
operations, financial condition, liquidity, or access to the capital
markets could be materially adversely affected. Information Relating to
Forward- Looking Statements This press release includes forward-looking
statements that are subject to numerous assumptions, risks, and
uncertainties, which could cause actual results or facts to differ
materially from such statements for a variety of reasons, including, but
not limited to: industry conditions, company’s implementation of its new
enterprise resource planning system, changes in product supply, pricing
and customer demand, competition, other vagaries in the global
components and global enterprise computing solutions markets, changes in
relationships with key suppliers, increased profit margin pressure,
effects of additional actions taken to become more efficient or lower
costs, risks related to the integration of acquired businesses, changes
in legal and regulatory matters, and the company’s ability to generate
additional cash flow. Forward-looking statements are those statements
which are not statements of historical fact. These forward-looking
statements can be identified by forward-looking words such as “expects,”
“anticipates,” “intends,” “plans,” “may,” “will,” “believes,” “seeks,”
“estimates,” and similar expressions. Shareholders and other readers are
cautioned not to place undue reliance on these forward-looking
statements, which speak only as of the date on which they are made. The
company undertakes no obligation to update publicly or revise any of the
forward-looking statements. For a further discussion of factors to
consider in connection with these forward-looking statements, investors
should refer to Item 1A Risk Factors of the company’s Annual Report on
Form 10-K for the year ended December 31, 2014 14
Second-Quarter 2015 CFO
Commentary Certain Non-GAAP Financial Information In addition to
disclosing financial results that are determined in accordance with
accounting principles generally accepted in the United States (“GAAP”),
the company also provides certain non-GAAP financial information
relating to sales, operating income, net income attributable to
shareholders, and net income per basic and diluted share. The company
provides sales on a non-GAAP basis adjusted for the impact of changes in
foreign currencies and the impact of acquisitions by adjusting the
company’s prior periods to include the sales of businesses acquired as
if the acquisitions had occurred at the beginning of the earliest period
presented (referred to as “impact of acquisitions”). Operating income,
net income attributable to shareholders, and net income per basic and
diluted share are adjusted for certain charges, credits, gains, and
losses that the company believes impact the comparability of its results
of operations. These charges, credits, gains, and losses arise out of
the company’s efficiency enhancement initiatives, acquisitions
(including intangible assets amortization expense), loss on prepayment
of debt, and (gain)/loss on investments. A reconciliation of the
company’s non-GAAP financial information to GAAP is set forth in the
tables below. The company believes that such non-GAAP financial
information is useful to investors to assist in assessing and
understanding the company’s operating performance and underlying trends
in the company’s business because management considers these items
referred to above to be outside the company’s core operating results.
This non- GAAP financial information is among the primary indicators
management uses as a basis for evaluating the company’s financial and
operating performance. In addition, the company’s Board of Directors may
use this non-GAAP financial information in evaluating management
performance and setting management compensation. The presentation of
this additional non-GAAP financial information is not meant to be
considered in isolation or as a substitute for, or alternative to,
operating income, net income attributable to shareholders and net income
per basic and diluted share determined in accordance with GAAP. Analysis
of results and outlook on a non-GAAP basis should be used as a
complement to, and in conjunction with, data presented in accordance
with GAAP. The company believes that such non-GAAP financial information
is useful to investors to assist in assessing and understanding the
company’s operating performance. 15
Second-Quarter 2015 CFO
Commentary Q2 2015 Q1 2015 Q2 2014 Operating income, as Reported
$206,943 $177,434 $208,269 Intangible assets amortization expense 13,917
11,107 10,870 Restructuring, integration, and other charges 17,147
16,196 9,632 Operating income, as Adjusted $238,007 $204,737 $228,771 Q2
2015 Q1 2015 Q2 2014 Net income attributable to shareholders, as
Reported $123,932 $106,058 $127,884 Intangible assets amortization
expense 11,169 9,029 8,867 Restructuring, integration, and other charges
12,895 12,569 7,526 Loss on prepayment of debt – 1,808 – (Gain)/loss on
investments 921 (1,667) – Net income attributable to shareholders, as
Adjusted $148,917 $127,797 $144,277 Q2 2015 Q1 2015 Q2 2014 Diluted EPS,
as Reported $1.28 $1.09 $1.27 Intangible assets amortization expense .12
.09 .09 Restructuring, integration, and other charges .13 .13 .07 Loss
on prepayment of debt – .02 – (Gain)/loss on investments .01 (.02) – Net
income attributable to shareholders, as Adjusted $1.54 $1.32 $1.43 The
sum of the components for diluted EPS, as Adjusted, may not agree to
totals, as presented, due to rounding 16
Second-Quarter 2015 CFO
Commentary Earnings Reconciliation References to restructuring and other
charges refer to the following incremental charges taken in the periods
indicated: Q2-15 Intangible Assets Amortization Expense During the
second quarter of 2015, the company recorded intangible assets
amortization expense of 13.9 million ($11.2 million net of related taxes
or $.12 per share on both a basic and diluted basis). Q2-15
Restructuring, Integration, and Other Charges During the second quarter
of 2015, the company recorded restructuring, integration, and other
charges of $17.1 million ($12.9 million net of related taxes or $.13 per
share on both a basic and diluted basis). Q2-15 Loss on investment
During the second quarter of 2015, the company recorded a loss on
investment of $1.5 million ($0.9 million net of related taxes or $.01
per share on both a basic and diluted basis). Q1-15 Intangible Assets
Amortization Expense During the first quarter of 2015, the company
recorded intangible assets amortization expense of 11.1 million ($9.0
million net of related taxes or $.09 per share on both a basic and
diluted basis). Q1-15 Restructuring, Integration, and Other Charges
During the first quarter of 2015, the company recorded restructuring,
integration, and other charges of $16.2 million ($12.6 million net of
related taxes or $.13 per share on both a basic and diluted basis).
Q1-15 Loss on prepayment of debt During the first quarter of 2015, the
company recorded a loss on prepayment of debt of $2.9 million ($1.8
million net of related taxes or $.02 per share on both a basic and
diluted basis), related to the redemption of $250.0 million principal
amount of its 3.375% notes due November 2015. Q1-15 Gain on sale of
investment During the first quarter of 2015, the company recorded a gain
on sale of investment of $2.0 million ($1.7 million net of related taxes
or $.02 per share on both a basic and diluted basis). Q2-14 Intangible
Assets Amortization Expense During the second quarter of 2014, the
company recorded intangible assets amortization expense of $10.9 million
($8.9 million net of related taxes or $.09 per share on both a basic and
diluted basis). Q2-14 Restructuring, Integration, and Other Charges
During the second quarter of 2014, the company recorded restructuring,
integration, and other charges of $9.6 million ($7.5 million net of
related taxes or $.08 and $.07 per share on a basic and diluted basis,
respectively). 17
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