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Arrow Sets Financial Marks

MELVILLE, N.Y. — Arrow Electronics, Inc. (NYSE:ARW) today reported third quarter 2011 net income of $132.2 million ($1.17 and $1.15 per share on a basic and diluted basis, respectively) on sales of $5.19 billion, compared with net income of $118.5 million ($1.01 and $1.00 per share on a basic and diluted basis, respectively) on sales of $4.66 billion in the third quarter of 2010.

The company's results for the third quarters of 2011 and 2010 include a number of items outlined below that impact their comparability. A complete reconciliation of these items is provided under the heading “Certain Non-GAAP Financial Information.”

Excluding those items, on a non-GAAP basis, net income for the quarter ended October 1, 2011 would have been $138.3 million ($1.22 and $1.20 per share on a basic and diluted basis, respectively) and net income for the quarter ended October 2, 2010 would have been $128.0 million ($1.09 and $1.08 per share on a basic and diluted basis, respectively).

“Revenue of $5.2 billion increased 11% year over year and was in line with our expectations. Earnings per share of $1.20 represent the highest third-quarter level in company history and the sixth consecutive quarter of record earnings. Based on our guidance for the fourth quarter, we are on track to achieve earnings per share in excess of $5 per share, an increase of more than 20% from 2010's record level,” said Michael J. Long, chairman, president, and chief executive officer. “I am extremely proud of the entire Arrow team for delivering such strong results in a challenging macroeconomic environment. In the face of these uncertain economic times, we remain focused on outgrowing the market in our core global components and global ECS businesses; expanding into faster growing, high-margin products and services; growing profits faster than sales; and increasing returns on capital.”

“Gross margins continued to improve in the third quarter, increasing 60 basis points year over year. This represents the seventh consecutive quarter of year-over-year gross margin increases, and reflects the hard work of our teams across the world to drive enhanced profitability and our strategy to acquire companies in markets that have higher margins,” said Paul J. Reilly, executive vice president, finance and operations and chief financial officer. “Cash flow generation was another bright spot this quarter, as we generated almost $120 million in cash from operations, and $436 million over the last twelve months. We again generated a return on invested capital well in excess of our weighted average cost of capital, which is a key driver in creating lasting shareholder value.”

“During the quarter, we completed our previously announced $100 million stock buyback authorization bringing the total amount returned to shareholders over the past four years to $550 million,” added Mr. Reilly. “Our board has approved an additional $150 million repurchase authorization as we continue to believe this is an effective method of returning capital to shareholders.”

Global components sales of $3.65 billion increased 6 percent year over year. “Sales growth in the Americas and Europe was partially offset by weakness in the Asia Pacific region, reflecting difficult market conditions,” Mr. Long said.

Global enterprise computing solutions (“ECS”) sales of $1.54 billion increased 26 percent year over year. “Our ECS business again posted record quarterly revenue, with extremely strong year-over-year growth in all of our product lines led by services, software, proprietary servers, industry standard servers, and storage,” said Mr. Long. “We are focused on several growth opportunities, including the addition of new suppliers, the penetration of new market segments, and the expansion of our services portfolio.”

The company's results for the third quarters of 2011 and 2010 include the items outlined below that impact their comparability:

  • restructuring, integration, and other charges of $8.8 million ($6.0 million net of related taxes or $.05 per share on both a basic and diluted basis) in 2011 and $14.3 million ($9.5 million net of related taxes or $.08 per share on a both basic and diluted basis) in 2010.

NINE-MONTH RESULTS
Arrow's net income for the first nine months of 2011 was $424.7 million ($3.70 and $3.64 per share on a basic and diluted basis, respectively) on sales of $15.95 billion, compared with net income of $321.7 million ($2.71 and $2.68 per share on a basic and diluted basis, respectively) on sales of $13.51billion in the first nine months of 2010.

Net income for the first nine months of 2011 includes restructuring, integration, and other charges of $23.7 million ($16.8 million net of related taxes or $.15 and $.14 per share on a basic and diluted basis, respectively), a charge of $5.9 million ($3.6 million net of related taxes or $.03 per share on both a basic and diluted basis) in connection with the settlement of a legal matter, and a gain on a bargain purchase of $1.8 million ($1.1 million net of related taxes or $.01 per share on both a basic and diluted basis) related to the acquisition of Nu Horizons Electronics Corp. Excluding these items, net income would have been $444.1 million ($3.87 and $3.81 per share on a basic and diluted basis, respectively) for the first nine months of 2011.

Net income for the first nine months of 2010 includes restructuring, integration, and other charges of $27.4 million ($19.1 million net of related taxes or $.16 per share on both a basic and diluted basis) and a loss on prepayment of debt of $1.6 million ($1.0 million net of taxes or $.01 per share on both a basic and diluted basis). Excluding these items, net income would have been $341.9 million ($2.88 and $2.84 per share on a basic and diluted basis, respectively) for the first nine months of 2010.

GUIDANCE
“Looking ahead to the fourth quarter, we believe that total sales will be between $5.29 and $5.69 billion, with global component sales between $3.29 and $3.49 billion and global enterprise computing solutions sales between $2.0 and $2.2 billion. Earnings per share, on a diluted basis, excluding any charges, are expected to be in the range of $1.25 to $1.37 per share. Our guidance assumes that the average Euro to USD exchange rate for the third quarter is 1.38 to 1,” said Mr. Reilly.

“In the fourth quarter, we would expect global ECS sales to be in line with the low end of normal seasonality. Sales in our core global components business are expected to be below normal seasonality, reflecting weaker global macroeconomic conditions. The outlook reflects selective targeted operating expense reductions across both businesses,” Mr. Reilly added. “Based on our current guidance for the fourth quarter, we expect 2011 earnings per share to be in the range of $5.06 to $5.18, representing another record year for our company and year over year growth of 24% at the midpoint. We expect to again be cash flow positive in the fourth quarter and for 2011.”

Please refer to the CFO commentary as a supplement to the company's earnings release, which can be found at http://www.arrow.com/investor.

{complink 453|Arrow Electronics Inc.}

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