ARROW ELECTRONICS, INC. — Interim / Quarterly Report 1995

May 12, 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 March 31, 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: 46,518,330 shares outstanding at May 2, 1995. PART I. FINANCIAL INFORMATION Item 1. Financial Statements.

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5 ARROW ELECTRONICS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS MARCH 31, 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 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 quarter ended March 31, 1995 and 1994, the average number of common stock equivalents was 602,229 and 706,993. 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 first quarter of 1995 increased approximately 29% compared with the year-earlier period. 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. Operating income The company recorded operating income of $97.9 million in the first quarter of 1995, compared with $72.7 million in the first quarter of 1994. The improvement in operating income reflects the impact of increased sales, acquisitions, and continued economies of scale and expense containment efforts reducing operating expenses as a percentage of sales, offset in part by lower gross profit margins. Gross profit margins decreased as a result of proportionately higher sales of low margin products, such as commercial computer products, and competitive pricing pressures. 6 Interest expense Interest expense of $11.1 million in the first quarter of 1995, increased from $9.4 million during the comparable quarter of 1994. The increase from the first quarter of 1994 reflects the incremental interest associated with businesses acquired subsequent to the first quarter of 1994. Income taxes During the first quarter of 1995, the company recorded a provision for taxes at an effective tax rate of 41.0%, compared with 40.6% in the earlier period. Net income The company recorded net income of $44.9 million in the first quarter of 1995, compared with $33.4 million in the first quarter of 1994. The increase in net income over the year-earlier period is principally due to increased sales and operating income 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% and 77% for the first quarter of 1995 and 1994, respectively. The net amount of cash provided by the company's operating activities during the first three months of 1995 was $28.2 million. The net amount of cash used for investing activities was $93.2 million, including $77.2 million for various acquisitions. The net amount of cash provided by financing activities was $40.8 million, principally reflecting the company's U.S. credit agreement and German bank borrowings, offset in part by the net repayment of debt. The net amount of cash provided by the company's operating activities during the first three months of 1994 was $48.2 million. The net amount of cash used for investing activities was $46.1 million, including $51.9 million for various acquisitions. 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. 7 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: May 11, 1995 By:/s/ Robert E. Klatell Robert E. Klatell Senior Vice President and Chief Financial Officer Date: May 11, 1995 By:/s/ Paul J. Reilly Paul J. Reilly Controller 9