Arrow: Fiscal 4Q11 Financial Results

Arrow Electronics, Inc. reported fourth-quarter 2011 net income of $174.1 million ($1.55 and $1.53 per share on a basic and diluted basis, respectively) on sales of $5.44 billion, compared with net income of $157.9 million ($1.37 and $1.34 per share on a basic and diluted basis, respectively) on sales of $5.24 billion in the fourth quarter of 2010.

Arrow’s net income for 2011 was $598.8 million ($5.25 and $5.17 per share on a basic and diluted basis, respectively) on sales of $21.39 billion, compared with net income of $479.6 million ($4.06 and $4.01 per share on a basic and diluted basis, respectively) on sales of $18.74 billion in 2010. Cash flow from operations for the year ended December 31, 2011 was $121 million.

The company’s results for 2011 and 2010 include a number of items that impact their comparability. Excluding those items, on a non-GAAP basis, net income for the quarter ended December 31, 2011, would have been $157.3 million ($1.40 and $1.38 per share on a basic and diluted basis, respectively) and net income for the quarter ended December 31, 2010, would have been $151.6 million ($1.31 and $1.29 per share on a basic and diluted basis, respectively). For 2011, net income would have been $601.4 million ($5.27 and $5.19 per share on a basic and diluted basis, respectively) and $493.5 million ($4.18 and $4.13 per share on a basic and diluted basis, respectively) for 2010.

"This has again been an exceptional year for Arrow Electronics as we set new financial records and successfully executed on our strategy to drive growth in our core global components and global ECS businesses as well as in high-margin lifecycle services," said Michael J. Long, chairman, president, and chief executive officer. "As we look forward to 2012, I’m confident that we will continue to make strong progress on our journey to be one of the world’s premier electronics companies and to guide innovation forward. The future holds great promise for us and we are well positioned to achieve even greater levels of success."

"We again reported industry-leading earnings per share, returns, and operating margins in the fourth quarter and full year 2011," said Paul J. Reilly, executive vice president, finance and operations and chief financial officer. "We continue to deliver to and exceed our overarching goals of growing sales faster than the market, growing earnings at a faster rate than sales, generating returns well in excess of our cost of capital, and being cash flow positive."

Global components fourth-quarter sales of $3.44 billion increased 3 percent year over year. "The global components team did an admirable job of growing the legacy businesses in a market that was expected to decline in 2011, and set records for annual sales and operating income. In 2011 we executed on our strategy to expand the portfolio and increase our addressable market," Mr. Long said.

Global enterprise computing solutions (ECS) fourth-quarter sales of $2.0 billion increased 5 percent year over year. "We had a remarkable year in ECS as the organization also set records for sales and operating income. Over the course of the year, we made significant progress on our strategy to differentiate Arrow ECS and solidified our industry-leading position," said Mr. Long.

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

• restructuring, integration, and other charges of $14.1 million ($11.2 million net of related taxes or $.10 per share on both a basic and diluted basis) in the fourth quarter of 2011 and $6.1 million ($5.5 million net of related taxes or $.05 per share on a both basic and diluted basis) in the fourth quarter of 2010;
• an adjustment to the gain on bargain purchase recorded in the first quarter of 2011 of $.7 million ($.4 million net of related taxes) in the fourth quarter of 2011;
• a loss on prepayment of debt of $.9 million ($.5 million net of related taxes) in the fourth quarter of 2011;
• a net reduction of the provision for income taxes of $28.9 million ($.26 and $.25 per share on a basic and diluted basis, respectively) in the fourth quarter of 2011 principally due to a reversal of a valuation allowance on certain international deferred tax assets; and
• a net reduction of the provision for income taxes of $9.4 million ($.08 per share on both a basic and diluted basis) and a reduction in interest expense of $3.8 million ($2.3 million net of related taxes or $.02 per share on both a basic and diluted basis) in the fourth quarter of 2010 primarily related to the settlement of certain income tax matters covering multiple years.

The company’s results for 2011 and 2010 include the items outlined below that impact their comparability:

• restructuring, integration, and other charges of $37.8 million ($28.1 million net of related taxes or $.25 and $.24 per share on a basic and diluted basis, respectively) in 2011 and $33.5 million ($24.6 million net of related taxes or $.21 per share on a both basic and diluted basis) in 2010;
• 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 in 2011;
• a gain on a bargain purchase of $1.1 million ($.7 million net of related taxes or $.01 per share on both a basic and diluted basis) in 2011;
• a loss on prepayment of debt of $.9 million ($.5 million net of related taxes) in 2011 and $1.6 million ($1.0 million net of related taxes or $.01 per share on both a basic and diluted basis) in 2010;
• a net reduction of the provision for income taxes of $28.9 million ($.25 per share on both a basic and diluted basis) in 2011 principally due to a reversal of a valuation allowance on certain international deferred tax assets; and
• a net reduction of the provision for income taxes of $9.4 million ($.08 per share on both a basic and diluted basis) and a reduction in interest expense of $3.8 million ($2.3 million net of related taxes or $.02 per share on both a basic and diluted basis) in 2010 primarily related to the settlement of certain income tax matters covering multiple years.

Guidance
"Looking ahead to the first quarter, we believe that total sales will be between $4.67 and $5.07 billion, with global component sales between $3.35 and $3.55 billion and global enterprise computing solutions sales between $1.32 and $1.52 billion. Earnings per share, on a diluted basis, excluding any charges, are expected to be in the range of $1.01 to $1.13 per share. Our guidance assumes that the average Euro to USD exchange rate for the first quarter is 1.31 to 1," said Mr. Reilly.