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February 13, 2008 |
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ARROW ELECTRONICS: Earns US$114 Million in 2007 Fourth Quarter Arrow Electronics Inc. reported fourth quarter 2007 net income of US$114.0 million on sales of US$4.42 billion, compared with net income of US$128.1 million on sales of US$3.49 billion in the fourth quarter of 2006. Sales increased 26% year over year. On a pro-forma basis, sales increased nine% year over year as acquisitions also benefited sales growth. The company's results for the fourth quarters of 2007 and 2006 include a number of items that impact their comparability. On a non-GAAP basis, net income for the quarter ended Dec. 31, 2007, would have been US$120.6 million and net income for the quarter ended Dec. 31, 2006, would have been US$88.6 million. "We finished 2007 with outstanding performance in the fourth quarter. Sales, working capital to sales, and return on working capital were all at record levels, and exceptional cash flow generation of US$220 million in the fourth quarter brought 2007 operating cash flow to US$851 million," said William Mitchell, chairman, president and chief executive officer. "Our operating margin was again at an industry leading level and our balance sheet is at its strongest level in 10 years. We are doing this while continuing to invest in important initiatives that will take us to even greater levels of growth and profitability." Global enterprise computing solutions sales of US$1.61 billion increased 111% year over year. Growth was aided by the impact of the acquisitions of KeyLink Systems Group, Alternative Technology Inc. and the storage and security distribution business of InTechnology plc. On a pro-forma basis, sales increased 22% year over year on strong growth in proprietary servers, storage, software, and services. "Sales pro forma for acquisitions more than tripled the rate at which the overall market is expected to have grown and our operating margin strengthened significantly over last quarter, demonstrating the tremendous operating leverage in our business. Execution on our strategic objectives in 2007 has resulted in a much stronger organization with broader geographic reach into 22 countries, increased market share in the fast growing product segments of software and storage, and a more robust customer and supplier base. Arrow ECS is now the world's largest distributor of enterprise storage and security and virtualization software, and with increased scale, scope and capabilities, our strategy is resonating with our customers and suppliers," added Mr. Mitchell. Global components sales of US$2.81 billion increased 3% year over year. "We again executed well and posted sales at the high end of expectations. In North America, we saw our first increase in daily run rate since the third quarter of 2006 and book to bill (the amount of sales booked for delivery as compared with sales that have been billed) was above one in each of the regions in which we operate. As we continued along the path to building best-in-class global capabilities and leveraging our global scale, we moved closer to our financial targets for the global components business in the fourth quarter. Operating income grew at more than three times the rate of sales growth and we reduced the amount of working capital needed to support sales by 160 basis points year over year. Our strategic initiatives around the world continue to take hold and we look forward to additional progress in the upcoming year," Mr. Mitchell said. The company's results for the fourth quarter of 2007 and 2006 include the items outlined below that impact their comparability: * during the fourth quarter of 2007, the company recorded a restructuring and integration charge of US$10.0 million (US$6.6 million net of related taxes) primarily related to initiatives taken by the company to improve operating efficiencies. * during the fourth quarter of 2006, the company settled certain tax matters covering multiple years. As such, the company recorded a reduction in the provision for income taxes of US$44.7 million and related interest expense of US$6.2 million (US$3.8 million net of related taxes) related to periods prior to the fourth quarter of 2006. * during the fourth quarter of 2006, the company completed the valuation of identifiable intangibles associated with acquisitions completed in the fourth quarter of 2005. Accordingly, the company recorded the related amortization expense for the full year in the fourth quarter of 2006. The impact on net income was a decrease of US$1.2 million related to periods prior to the fourth quarter of 2006. * during the fourth quarter of 2006, the company recorded restructuring and integration charges and costs associated with pre-acquisition warranty and environmental claims of US$9.7 million (US$7.8 million net of related taxes). "Based upon the information known to us, we expect normal seasonality in both our components and ECS businesses. We believe that total first quarter sales will be between US$3.925 and US$4.225 billion, with global component sales between US$2.775 and US$2.975 billion and global enterprise computing solutions sales between US$1.15 and US$1.25 billion. Earnings per share, on a diluted basis, excluding any charges and including estimated amortization of intangible assets of US$.03 to US$.04, are expected to be in the range of US$.81 to US$.87, an increase of 9% to 18% from last year's first quarter," said Paul J. Reilly, senior vice president and chief financial officer. Full Year Results Arrow's net income for 2007 was US$407.8 million on sales of US$16.0 billion, compared with net income of US$388.3 million on sales of US$13.6 billion in 2006. Net income for 2007 includes a restructuring and integration charge of US$11.7 million (US$7.0 million net of related taxes) primarily related to initiatives taken by the company to improve operating efficiencies and the acquisition of KeyLink. Net income for 2007 also includes an income tax benefit of US$6.0 million, net, principally due to a reduction in deferred income taxes as a result of the reduction in the statutory tax rate in Germany. Excluding these items, net income would have been US$408.8 million for 2007. Net income for 2006 includes a restructuring and integration charge and costs associated with pre-acquisition warranty and environmental claims of US$16.1 million (US$11.7 million net of related taxes) and a loss on prepayment of debt of US$2.6 million (US$1.6 million net of related taxes). During 2006, the company settled certain tax matters covering multiple years. As such, the company recorded a reduction in the provision for income taxes of US$40.4 million and related interest expense of US$4.0 million (US$2.4 million net of related taxes) related to tax years prior to 2006. Excluding these items, net income would have been US$358.7 million for 2006. About Arrow Electronics Headquartered in Melville, New York, Arrow Electronics Inc. -- http://www.arrow.com/ -- provides products, services and solutions to industrial and commercial users of electronic components and computer products. Arrow serves as a supply channel partner for nearly 600 suppliers and more than 130,000 original equipment manufacturers, contract manufacturers and commercial customers through a global network of over 270 locations in 53 countries and territories. The company operates in France, Spain, Portugal, Denmark, Estonia, Finland, Ireland, Latvia, Lithuania, Norway, Sweden, Italy, Germany, Austria, Switzerland, Belgium, the Netherlands, United Kingdom, Argentina, Brazil, Mexico, Australia, China, Hong Kong, Korea, Philippines and Singapore. * * * Arrow Electronics senior subordinated stock continues to carry Moody's Investors Service's Ba1 rating. The company's senior preferred stock is rated at Ba2. |
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