ARROW ELECTRONICS, INC. — Interim / Quarterly Report 1995

Aug 11, 1995

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, 1995 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission file number 1-4482 ARROW ELECTRONICS, INC. (Exact name of Registrant as specified in its charter) New York 11-1806155 (State or other jurisdiction of (I.R.S. Employer Identifi- incorporation or organization) cation Number) 25 Hub Drive, Melville, New York 11747 (Address of principal executive (Zip Code) offices) Registrant's telephone number, including area code (516) 391-1300 Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. Common stock, $1 par value: 46,718,867 shares outstanding at August 4, 1995. PART I. FINANCIAL INFORMATION Item 1. Financial Statements.

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-5- ARROW ELECTRONICS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS JUNE 30, 1995 (UNAUDITED) Note A -- Basis of presentation The accompanying consolidated financial statements reflect all adjustments, consisting only of normal recurring accruals, which are, in the opinion of management, necessary for a fair presentation of the consolidated financial position and results of operations at and for the periods presented. Such financial statements do not include all the information or footnotes necessary for a complete presentation and, accordingly, should be read in conjunction with the company's audited consolidated financial statements for the year ended December 31, 1994 and the notes thereto. The results of operations for the interim periods are not necessarily indicative of results for the full year. In 1994, the company completed the acquisition of Gates/FA Distributing, Inc. ("Gates") and Anthem Electronics, Inc. ("Anthem") in transactions accounted for as poolings of interests. Accordingly, the 1994 consolidated statements of income and cash flows have been restated to include the operations of Gates and Anthem. Note B -- Net income per common share Net income per common share is based upon the weighted average number of shares of common stock and common stock equivalents outstanding. For the six months ended June 30, 1995 and 1994, the average number of common stock equivalents was 660,324 and 630,852, respectively. For the quarter ended June 30, 1995 and 1994, the average number of common stock equivalents was 748,823 and 555,694, respectively. Net income per common share on a fully diluted basis assumes that the 5-3/4% convertible subordinated debentures were converted to common stock at the beginning of the period and the related interest expense, net of taxes, was eliminated. Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations. Sales Consolidated sales for the six months and second quarter of 1995 increased 29.9% and 30.9% compared with year-earlier periods. This sales growth was principally due to increased activity levels in each of the company's distribution groups throughout the world and, to a lesser extent, acquisitions in Europe and the Pacific Rim. -6- Operating income The company recorded operating income of $206.6 million and $108.7 million in the first six months and second quarter of 1995, respectively, compared with $144.3 million and $71.5 million, respectively, in the year-earlier periods. The improvement in operating income reflects the impact of increased sales, acquisitions, and the benefits of economies of scale resulting from the integration of Anthem and Gates with Arrow. Interest expense Interest expense of $22.2 million and $11.1 million in the first six months and second quarter of 1995, respectively, increased from $19 million during the first six months of 1994 and $9.5 million in the comparable quarter of 1994. The increase from the first six months and second quarter of 1994 reflects the incremental interest associated with businesses acquired subsequent to the second quarter of 1994. Income taxes During the first six months and second quarter of 1995 the company recorded a provision for taxes at an effective tax rate of 41% compared with 40.4% and 40.3%, respectively, in the year-earlier periods. Net income The company recorded net income of $96.6 million and $51.8 million in the first six months and second quarter of 1995, respectively, compared with $66.3 million in the first six months of 1994 and $32.9 million in the second quarter of 1994. The increase in net income over the year-earlier periods is due to increased sales and lower operating expenses as a percentage of sales offset in part by an increase in interest expense as previously discussed. Liquidity and capital resources The company maintains a high level of current assets, primarily accounts receivable and inventories. Consolidated current assets as a percentage of total assets were approximately 75.6% and 78.5% at June 30, 1995 and 1994, respectively (excluding, in 1994, the effect of the investments in net assets of acquired businesses). The net amount of cash used for the company's operating activities during the first six months of 1995 was $51.9 million, principally reflecting increased working capital requirements supporting higher sales. The net amount of cash used for investing activities was $112 million, including $85.9 million for various acquisitions. The net amount of cash provided by financing activities was $124.9 million, principally reflecting the company's U.S. credit agreements and German bank borrowings, offset in part by distributions to partners and the net repayment of debt. -7- The net amount of cash provided by the company's operating activities during the first six months of 1994 was $50 million, principally reflecting increased earnings. The net amount of cash used for investing activities was $80 million, including approximately $80.6 million for various acquisitions. The net amount of cash provided by financing activities was $29.8 million, principally reflecting the company's U.S. credit agreements and German bank borrowings, offset in part by the net payment of debt. The company believes that its working capital, funds available under its credit agreements, and additional funds generated from operations will be sufficient to satisfy its cash requirements at least through 1996. Item 4. Submission of Matters to a Vote of Security Holders. (a) The company's Annual Meeting of Shareholders was held on May 9, 1995 (the "Annual Meeting"). (b) The matters voted upon at the Annual Meeting and the results of the voting were as follows: (i) The shareholders voted 42,312,015 shares in favor and 16,003 shares against the appointment of Ernst & Young as auditors of the company. (ii) The following individuals were elected by the shareholders to serve as Directors: Shares Board Member In Favor Against Daniel W. Duval 42,304,964 58,203 Carlo Giersch 42,179,006 184,161 Stephen P. Kaufman 42,177,803 185,364 Lawrence R. Kem 42,301,812 61,355 Roger King 42,282,745 80,422 Robert E. Klatell 42,178,686 184,481 Steven W. Menefee 42,179,449 183,718 Karen Gordon Mills 42,300,996 62,171 Anne Pol 42,295,543 67,624 Richard S. Rosenbloom 42,307,043 56,124 Robert S. Throop 42,178,284 184,883 John C. Waddell 42,305,566 57,601 Item 6. Exhibits and Reports on Form 8-K. (a) Exhibits. 11 - Statement Re: Computation of Earnings Per Share (b) Reports on Form 8-K. None -8- SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. ARROW ELECTRONICS, INC. Date: August 11, 1995 By:/s/ Robert E. Klatell Robert E. Klatell Senior Vice President and Chief Financial Officer Date: August 11, 1995 By:/s/ Paul J. Reilly Paul J. Reilly Controller -9-