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Arrow Electronics Inc. Reports Operating Results (10-Q)

July 28, 2010 | About:
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10qk

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Arrow Electronics Inc. (ARW) filed Quarterly Report for the period ended 2010-07-03.

Arrow Electronics Inc. has a market cap of $2.95 billion; its shares were traded at around $24.3 with a P/E ratio of 11.7 and P/S ratio of 0.2. ARW is in the portfolios of Robert Rodriguez of FPA Capital, First Pacific Advisors of First Pacific Advisors, LLC, Arnold Schneider of Schneider Capital Management, NWQ Managers of NWQ Investment Management Co, Paul Tudor Jones of The Tudor Group, David Dreman of Dreman Value Management, Jim Simons of Renaissance Technologies LLC, Bruce Kovner of Caxton Associates, Pioneer Investments, Chuck Royce of Royce& Associates, Steven Cohen of SAC Capital Advisors, Jeremy Grantham of GMO LLC, George Soros of Soros Fund Management LLC.

Highlight of Business Operations:

Consolidated sales for the second quarter and first six months of 2010 increased by $1.22 billion, or 36.0%, and $2.04 billion, or 30.0%, compared with the year-earlier periods. The increase was driven by an increase in the global components business segment sales of $987.4 million, or 43.5%, and $1.77 billion, or 38.3%, for the second quarter and first six months of 2010, respectively, and an increase in the global ECS business segment sales of $234.0 million, or 20.9%, and $269.0 million, or 12.3%, for the second quarter and first six months of 2010, respectively. On a pro forma basis, which includes Converge and Petsche as though these acquisitions occurred on January 1, 2009, consolidated sales for the second quarter and first six months of 2010 increased 33.3% and 27.6%, respectively. The translation of the company's international financial statements into U.S. dollars resulted in a reduction in consolidated sales of $54.1 million for the second quarter of 2010, compared with the year-earlier period, due to a stronger U.S. dollar. The translation of the company's international financial statements into U.S. dollars resulted in increased consolidated sales of $21.3 million for the first six months of 2010, compared with the year-earlier period, due to a weaker U.S. dollar. Excluding the impact of foreign currency, the company's consolidated sales increased by 38.2% and 29.5% for the second quarter and first six months of 2010, respectively.

The company recorded restructuring, integration, and other charges of $5.6 million ($4.1 million net of related taxes or $.03 per share on both a basic and diluted basis) and $13.1 million ($9.6 million net of related taxes or $.08 per share on both a basic and diluted basis) for the second quarter and first six months of 2010, respectively. Included in the restructuring, integration, and other charges for the second quarter and first six months of 2010 are restructuring charges of $5.8 million and $11.0 million, respectively, related to initiatives taken by the company to improve operating efficiencies. Also included in the restructuring, integration, and other charges for the second quarter and first six months of 2010 is a credit of $1.1 million and a charge of $1.1 million, respectively, related to restructuring and integration actions taken in prior periods and acquisition-related expenses of $.9 million and $1.0 million, respectively.

The company recorded restructuring, integration, and other charges of $19.3 million ($16.1 million net of related taxes or $.13 per share on both a basic and diluted basis) and $43.3 million ($32.2 million net of related taxes or $.27 per share on both a basic and diluted basis) for the second quarter and first six months of 2009, respectively. Included in the restructuring, integration, and other charges for the second quarter and first six months of 2009 are restructuring charges of $20.0 million and $43.4 million, respectively, related to initiatives taken by the company to improve operating efficiencies. Also, included in the restructuring, integration, and other charges for the second quarter and first six months of 2009 are credits of $.7 million and $.2 million, respectively, related to restructuring and integration actions taken in prior periods.

The company recorded operating income of $189.2 million and $334.5 million in the second quarter and first six months of 2010, respectively, as compared with operating income of $51.2 million and $112.4 million in the year-earlier periods. Included in operating income for the second quarter and first six months of 2010 were the previously discussed restructuring, integration, and other charges of $5.6 million and $13.1 million, respectively. Included in operating income for the second quarter and first six months of 2009 were the previously discussed restructuring and integration charges of $19.3 million and $43.3 million, respectively.

The company recorded net income attributable to shareholders of $116.2 million and $203.2 million in the second quarter and first six months of 2010, respectively, compared with net income attributable to shareholders of $21.1 million and $47.8 million in the year-earlier periods. Included in net income attributable to shareholders for the second quarter and first six months of 2010 were the previously discussed restructuring, integration, and other charges of $4.1 million and $9.6 million, respectively. Also included in net income attributable to shareholders for both the second quarter and first six months of 2010 was the previously discussed loss on prepayment of debt of $1.0 million. Included in net income attributable to shareholders for the second quarter and first six months of 2009 were the previously discussed restructuring, integration, and other charges of $16.1 million and $32.2 million, respectively. Excluding the above-mentioned items, the increase in net income attributable to shareholders for the second quarter and first six months of 2010 was primarily the result of the sales increases in both the global components business segment and the global ECS business segment, increased gross profit margins, reduced selling, general and administrative expenses as a percentage of sales due to the company's continuing efforts to streamline and simplify processes, and a lower effective income tax rate. These increases were offset, in part, by increased net interest and other financing expense for the second quarter of 2010 compared with the year-earlier period.

In May 2006, the company entered into a cross-currency swap, with a maturity date of July 2011, for approximately $100.0 million or €78.3 million (the "2006 cross-currency swap"). In October 2005, the company entered into a cross-currency swap, with a maturity date of October 2010, for approximately $200.0 million or €168.4 million (the "2005 cross-currency swap"). These cross-currency swaps are designated as net investment hedges and hedge a portion of the company's net investment in euro-denominated net assets, by effectively converting the interest expense on $300.0 million of long-term debt from U.S. dollars to euros. During the second quarter of 2010, the company paid $2.3 million, plus accrued interest, to terminate these cross-currency swaps. The 2006 cross-currency swap and the 2005 cross-currency swap had a negative fair value at December 31, 2009 of $12.5 million and $41.9 million, respectively.

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10qk
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