-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, VMr1WXnAkxBYmFHi62s8jTZRDWv5tUIpcX9paprjo3Df7z2SFQhFi48rdjmGZtBA 5/sjmuH70jl0ekBS0nhnkQ== /in/edgar/work/0000007536-00-000012/0000007536-00-000012.txt : 20001114 0000007536-00-000012.hdr.sgml : 20001114 ACCESSION NUMBER: 0000007536-00-000012 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20000930 FILED AS OF DATE: 20001113 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ARROW ELECTRONICS INC CENTRAL INDEX KEY: 0000007536 STANDARD INDUSTRIAL CLASSIFICATION: [5065 ] IRS NUMBER: 111806155 STATE OF INCORPORATION: NY FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-04482 FILM NUMBER: 758629 BUSINESS ADDRESS: STREET 1: 25 HUB DR CITY: MELVILLE STATE: NY ZIP: 11747 BUSINESS PHONE: 5163911300 10-Q 1 0001.txt FORM 10-Q FOR SEPTEMBER 2000 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 September 30, 2000 ------------------ 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 incorporation or organization) Identification 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: 98,199,931 shares outstanding at October 27, 2000. PART I. FINANCIAL INFORMATION Item 1. Financial Statements. -------------------- ARROW ELECTRONICS, INC. CONSOLIDATED STATEMENT OF INCOME (In thousands except per share data) (Unaudited) Nine Months Ended Three Months Ended September 30, September 30, ---------------------- ---------------------- 2000 1999 2000 1999 ---- ---- ---- ---- Sales $9,268,162 $6,827,457 $3,337,068 $2,375,797 ---------- ---------- ---------- ---------- Costs and expenses: Cost of products sold 7,823,157 5,881,809 2,805,362 2,052,570 Selling, general and administrative expenses 844,643 637,421 296,038 212,197 Depreciation and amortization 63,009 53,448 22,325 17,404 Integration charge - 24,560 - - ---------- ---------- ---------- ---------- 8,730,809 6,597,238 3,123,725 2,282,171 ---------- ---------- ---------- ---------- Operating income 537,353 230,219 213,343 93,626 Equity in losses of affiliated companies (2,635) (173) (725) (211) Interest expense 107,207 78,146 41,088 26,836 ---------- ---------- ---------- ---------- Earnings before income taxes and minority interest 427,511 151,900 171,530 66,579 Provision for income taxes 175,249 67,447 68,612 28,828 ---------- ---------- ---------- ---------- Earnings before minority interest 252,262 84,453 102,918 37,751 Minority interest 3,290 4,337 975 998 ---------- ---------- ---------- ---------- Net income $ 248,972 $ 80,116 $ 101,943 $ 36,753 ========== ========== ========== ========== Net income per share: Basic $2.58 $.84 $1.05 $.39 ===== ==== ===== ==== Diluted $2.53 $.83 $1.02 $.38 ===== ==== ===== ==== Average number of shares outstanding: Basic 96,392 95,097 97,403 95,176 ====== ====== ======= ====== Diluted 98,408 96,001 100,022 96,317 ====== ====== ======= ====== See accompanying notes. ARROW ELECTRONICS, INC. CONSOLIDATED BALANCE SHEET (Dollars in thousands) September 30, December 31, 2000 1999 ------------- ------------ (Unaudited) ASSETS - ------ Current assets: Cash and short-term investments $ 43,565 $ 44,885 Accounts receivable, less allowance for doubtful accounts ($47,881 in 2000 and $32,338 in 1999) 2,282,899 1,638,654 Inventories 1,926,305 1,444,929 Prepaid expenses and other assets 42,696 29,469 ---------- ---------- Total current assets 4,295,465 3,157,937 Property, plant and equipment at cost: Land 17,798 17,638 Buildings and improvements 119,659 114,158 Machinery and equipment 295,783 257,841 ---------- ---------- 433,240 389,637 Less accumulated depreciation and amortization (192,334) (165,987) ---------- ---------- 240,906 223,650 Investments in affiliated companies 37,775 52,233 Cost in excess of net assets of companies acquired, net of amortization ($132,570 in 2000 and $113,762 in 1999) 999,694 960,770 Other assets 133,565 88,665 ---------- ---------- $5,707,405 $4,483,255 ========== ========== See accompanying notes. ARROW ELECTRONICS, INC. CONSOLIDATED BALANCE SHEET (Dollars in thousands) September 30, December 31, 2000 1999 ------------- ------------ (Unaudited) LIABILITIES AND SHAREHOLDERS' EQUITY - ------------------------------------ Current liabilities: Accounts payable $1,140,499 $ 805,468 Accrued expenses 408,150 263,216 Short-term borrowings, including current maturities of long-term debt and capital lease obligations 1,464,996 255,977 ---------- ---------- Total current liabilities 3,013,645 1,324,661 Long-term debt and capital lease obligations 859,436 1,533,421 Deferred income taxes 30,932 39,474 Other liabilities 22,775 23,754 Minority interest 14,863 11,416 Shareholders' equity: Common stock, par value $1: Authorized - 120,000,000 shares Issued - 103,741,595 shares in 2000 and 102,949,640 shares in 1999 103,742 102,950 Capital in excess of par value 527,704 501,379 Retained earnings 1,487,951 1,238,979 Foreign currency translation adjustment (195,712) (95,295) ---------- ---------- 1,923,685 1,748,013 Less: Treasury stock (5,552,692 shares in 2000 and 7,004,349 shares in 1999), at cost 148,498 187,269 Unamortized employee stock awards 9,433 10,215 ---------- ---------- 1,765,754 1,550,529 ---------- ---------- $5,707,405 $4,483,255 ========== ========== See accompanying notes. ARROW ELECTRONICS, INC. CONSOLIDATED STATEMENT OF CASH FLOWS (In thousands) Nine Months Ended September 30, ------------------------- 2000 1999 ---- ---- (Unaudited) Cash flows from operating activities: Net income $ 248,972 $ 80,116 Adjustments to reconcile net income to net cash provided by (used for) operations: Minority interest in earnings 3,222 4,337 Depreciation and amortization 69,187 59,115 Equity in losses of affiliated companies 2,635 173 Integration charge - 24,560 Deferred income taxes (3,945) (19,917) Change in assets and liabilities, net of effects of acquired businesses: Accounts receivable (627,032) (189,200) Inventories (471,108) 23,222 Prepaid expenses and other assets (12,509) (5,228) Accounts payable 318,135 72,363 Accrued expenses 126,852 15,479 Other (27,359) 1,531 --------- --------- Net cash provided by (used for) operating activities (372,950) 66,551 --------- --------- Cash flows from investing activities: Acquisition of property, plant and equipment, net (51,004) (62,655) Cash consideration paid for acquired businesses (92,704) (430,390) Investments (33,906) (30,557) --------- --------- Net cash used for investing activities (177,614) (523,602) --------- --------- Cash flows from financing activities: Change in short-term borrowings 539,655 3,490 Change in credit facilities (125,490) 429,478 Change in long-term debt 106,344 (38,621) Proceeds from exercise of stock options 34,407 382 Purchases of common stock (321) (100) Distribution to minority partners - (37,852) --------- --------- Net cash provided by financing activities 554,595 356,777 --------- --------- Effect of exchange rate changes on cash (5,351) (9,393) --------- --------- Net decrease in cash and short-term investments (1,320) (109,667) Cash and short-term investments at beginning of period 44,885 158,924 --------- --------- Cash and short-term investments at end of period $ 43,565 $ 49,257 ========= ========= Supplemental disclosures of cash flow information: Cash paid during the period for: Income taxes $ 77,464 $ 21,820 Interest 104,579 79,439 See accompanying notes. ARROW ELECTRONICS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS September 30, 2000 (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, 1999 and the notes thereto. The results of operations for the interim periods are not necessarily indicative of results for the full year. Note B -- Impact of Recently Issued Accounting Standards - -------------------------------------------------------- In June 1998, the Financial Accounting Standards Board issued Statement No. 133, "Accounting for Derivative Instruments and Hedging Activities." This Statement is required to be adopted effective January 1, 2001. The Statement will require the company to recognize all derivatives on the balance sheet at fair value. Gains and losses resulting from changes in the value of the derivatives would be accounted for depending on the intended use of the derivative and whether it qualifies for hedge accounting. Due to the company's limited use of derivative financial instruments, adoption of Statement No. 133 is not expected to have a significant effect on the company's consolidated results of operations, financial position, or cash flows. Note C -- Debt - -------------- During the quarter ended September 30, 2000, the global multi-currency facility was reclassified from long-term debt to short-term debt, due to the maturity date of September 30, 2001. The commercial paper and bid facilities were also reclassified to short-term, as such amounts are supported by the global multi-currency facility. Note D -- Integration of Acquisitions - ------------------------------------- In 1999, the company recorded a special charge of $24.6 million related to the acquisition and integration of the electronics distribution group of Bell Industries, Inc. ("EDG") and Richey Electronics, Inc. ("Richey"). The company also recorded an additional $38.2 million, as adjusted, as cost in excess of net assets of companies acquired. Of the total amounts recorded, $41.7 million represented costs associated with closing facilities and severance payments, $13 million represented costs associated with outside resources related to the conversion of systems, professional fees principally related to legal and accounting services, and certain other costs of the integration of these businesses into Arrow, and $8.1 million represented the write-down of property, plant and equipment and inventories to estimated fair value. Of the expected $54.7 million to be spent in cash in connection with the acquisition and integration of EDG and Richey, $29.4 million has been spent to date. The remaining $25.3 million principally relates to vacated facilities leased with various expiration dates through 2010. Excluding the integration charge, net income and net income per share on a basic and diluted basis were $96.6 million, $1.02, and $1.01, respectively, for the nine months ended September 30, 1999. Note E -- Earnings Per Share - ---------------------------- The following table sets forth the calculation of basic and diluted earnings per share (in thousands except per share data): For the Nine For the Three Months Ended Months Ended September 30, September 30, ------------------- -------------------- 2000 1999 2000 1999 ---- ---- ---- ---- Net income $248,972 $80,116 $101,943 $36,753 ======== ======= ======== ======= Weighed average common shares outstanding for basic earnings per share 96,392 95,097 97,403 95,176 Net effect of dilutive stock options and restricted stock awards 2,016 904 2,619 1,141 ------ ------ ------- ------ Weighted average common shares outstanding for diluted earnings per share 98,408 96,001 100,022 96,317 ====== ====== ======= ====== Basic earnings per share $2.58 $.84 $1.05 $.39 ===== ==== ===== ==== Diluted earnings per share $2.53 $.83 $1.02 $.38 ===== ==== ===== ==== Note F -- Comprehensive Income - ------------------------------ Comprehensive income is defined as the aggregate change in shareholders' equity excluding changes in ownership interests. For the company, the components of comprehensive income are as follows (in thousands): For the Nine For the Three Months Ended Months Ended September 30, September 30, ------------------- ------------------- 2000 1999 2000 1999 ---- ---- ---- ---- Net income $248,972 $80,116 $101,943 $36,753 Foreign currency translation adjustments(a) (100,417) (38,951) (72,583) 9,576 -------- ------- -------- ------- Comprehensive income (b) $148,555 $41,165 $ 29,360 $46,329 ======== ======= ======== ======= (a) The foreign currency translation adjustments have not been tax effected as investments in foreign affiliates are deemed to be permanent. (b) Excluding the integration charge of $24.6 million ($16.5 million after taxes), comprehensive income was $57.6 million for the nine months ended September 30, 1999. Note G -- Segment and Geographic Information - -------------------------------------------- The company is engaged in the distribution of electronic components to original equipment manufacturers and computer products to value-added resellers (VARs). The company has redefined its reportable segments to present two distinct worldwide businesses that have different economic cycles, structures, and competitors. Computer products include North American Computer Products Operations together with UK Microtronica, Nordic Microtronica, ATD (in Iberia), and Arrow Computer Products (in France). The prior year has been restated for comparative purposes. Revenue and operating income, by segment, are as follows (in thousands): For the Nine For the Three Months Ended Months Ended September 30, September 30, ----------------------- ----------------------- 2000 1999 2000 1999 ---- ---- ---- ---- Revenue: Electronic Components $7,027,775 $4,419,434 $2,601,334 $1,570,741 Computer Products 2,240,387 2,408,023 735,734 805,056 ---------- ---------- ---------- ---------- Consolidated $9,268,162 $6,827,457 $3,337,068 $2,375,797 ========== ========== ========== ========== Operating income: Electronic Components $ 622,934 $ 252,848 $ 251,749 $ 95,944 Computer Products 26,948 45,974 7,635 14,647 Corporate (112,529) (68,603) (46,041) (16,965) ---------- ---------- ---------- ---------- Consolidated $ 537,353 $ 230,219 $ 213,343 $ 93,626 ========== ========== ========== ========== Total assets, by segment, are as follows (in thousands): September 30, December 31, 2000 1999 ------------- ------------ Total assets: Electronic Components $4,665,267 $3,317,253 Computer Products 841,358 991,785 Corporate 200,780 174,217 ---------- ---------- Consolidated $5,707,405 $4,483,255 ========== ========== As a result of the company's philosophy of maximizing operating efficiencies through the centralization of certain functions, selected fixed assets and related depreciation, as well as borrowings and goodwill amortization are not directly attributable to the individual operating segments. Revenues, by geographic area, are as follows (in thousands): For the Nine For the Three Months Ended Months Ended September 30, September 30, ---------------------- ---------------------- 2000 1999 2000 1999 ---- ---- ---- ---- Americas $5,665,263 $4,560,417 $2,026,455 $1,588,049 Europe 2,588,802 1,733,839 918,003 574,769 Asia/Pacific 1,014,097 533,201 392,610 212,979 ---------- ---------- ---------- ---------- Consolidated $9,268,162 $6,827,457 $3,337,068 $2,375,797 ========== ========== ========== ========== Total assets, by geographic area, are as follows (in thousands): September 30, December 31, 2000 1999 ------------- ------------ Americas $3,067,198 $2,642,601 Europe 1,987,856 1,460,439 Asia/Pacific 652,351 380,215 ---------- ---------- Consolidated $5,707,405 $4,483,255 ========== ========== Note H -- Subsequent Events - --------------------------- A special Meeting of Shareholders of the company was held on October 12, 2000 to vote on a proposed amendment to the Certificate of Incorporation to increase the number of authorized shares of common stock from 120,000,000 shares to 160,000,000 shares. The company's Certificate of Incorporation was duly amended on October 24, 2000. On October 16, 2000, the company completed its previously announced acquisition of Wyle Components and Wyle Systems (collectively "Wyle"), which reported combined 1999 sales in North America of about $2 billion, for approximately $945 million (including the assumption of debt). On October 30, 2000, the company completed its previously announced acquisition of the Merisel Open Computing Alliance ("MOCA"), which reported 1999 revenues of about $950 million, for approximately $173 million (including the repayment of off-balance sheet financing). In October the company sold $1.075 billion of notes to finance the acquisitions of Wyle and MOCA, as well as for general corporate purposes. The notes were sold in a Rule 144A offering in four tranches: $200 million of Floating Rate Notes due 2001; $425 million of 8.20% Senior Notes due 2003; $250 million of 8.70% Senior Notes due 2005; and $200 million of 9.15% Senior Notes due 2010. Item 2. Management's Discussion and Analysis of Financial Condition and --------------------------------------------------------------- Results of Operations. --------------------- Sales - ----- Consolidated sales for the first nine months and third quarter of 2000 increased 36 percent and 41 percent, respectively, compared with the year-earlier periods. The sales growth was driven by a 59 percent and 66 percent increase in sales of core components (net of foreign exchange rate differences) for the first nine months and third quarter of 2000, respectively, from the comparable year-earlier periods. Sales of computer products decreased by 7 percent and 9 percent for the first nine months and third quarter of 2000, respectively, when compared to the year-earlier periods, principally as a result of market conditions for mid-range products and lower sales of low margin microprocessors (a product segment not considered a part of the company's core business). Operating Income - ---------------- The company recorded operating income of $537.4 million and $213.3 million in the first nine months and third quarter of 2000, respectively, compared with $230.2 million and $93.6 million, respectively, in the year-earlier periods. Excluding the integration charge relating to EDG and Richey (see Note D), operating income was $254.8 million for the nine months ended September 30, 1999. The increase in operating income is due to increased sales and improving gross profit margins in the core components businesses around the world, as well as a change in mix resulting in greater weighting of the core components business. In addition, operating expenses as a percentage of sales decreased to 9.8 percent and 9.5 percent for the nine months and third quarter ended September 30, 2000, respectively, from 10.1 percent and 9.7 percent, respectively, in the year-earlier periods. Interest Expense - ---------------- Interest expense of $107.2 million and $41.1 million in the first nine months and third quarter of 2000, respectively, increased from $78.1 million and $26.8 million, respectively, in the year-earlier periods. The increase is the result of additional debt incurred to fund acquisitions, internet-related joint ventures, and capital expenditures, and investments in working capital to support accelerated sales growth. Income Taxes - ------------ The company recorded a provision for taxes at an effective rate of 41 percent and 40 percent for the first nine months and third quarter of 2000, respectively, compared with 44.4 percent and 43.3 percent in the comparable year-earlier periods. Excluding the impact of the aforementioned integration charge, the effective rate was 42.8 percent for the nine months ended September 30, 1999. The company's effective tax rate is principally impacted by, among other factors, the statutory tax rates in the countries in which it operates, the related level of earnings generated by these operations, and the nondeductibility of goodwill amortization. Net Income - ---------- The company recorded net income of $249 million and $101.9 million in the first nine months and third quarter of 2000, respectively, compared with $80.1 million and $36.8 million, respectively, in the year-earlier periods. Excluding the integration charge of $24.6 million ($16.5 million after taxes), net income was $96.6 million for the first nine months of 1999. The increase in net income is due to increased sales and improving gross profit margins, offset, in part, by higher levels of interest. 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 percent at September 30, 2000 compared with 70 percent at September 30, 1999. The net amount of cash used for the company's operating activities during the first nine months of 2000 was $373 million, principally reflecting investments in working capital, offset, in part, by earnings for the nine months. The net amount of cash used for investing activities was $177.6 million, including $51 million for various capital expenditures, $92.7 million primarily for the acquisitions of Rapac Electronics Ltd., Tekelec Europe, Jakob Hatteland AS, and Dicopel S.A. de C.V., and $33.9 million for internet-related joint ventures. The net amount of cash provided by financing was $554.6 million, primarily reflecting borrowings under the company's commercial paper program, credit facilities, and various short-term bank borrowings. The net amount of cash provided by the company's operating activities during the first nine months of 1999 was $66.6 million, principally reflecting earnings, offset, in part, by investments in working capital. The net amount of cash used for investing activities was $523.6 million, including $62.7 million for various capital expenditures and $460.9 million principally for the acquisitions of Richey, EDG, the remaining 10% of Spoerle Electronic, the remaining interest in Support Net, Inc., and the additional interest in Scientific and Business Minicomputers, Inc., as well as certain internet- related investments. The net amount of cash provided by financing activities was $356.8 million, reflecting borrowings under the company's credit facilities, offset, in part, by the repayment of Richey's 7.0% convertible subordinated notes and debentures and distributions to partners. Year 2000 Update - ---------------- The company has experienced no significant failures or disruptions of its internal systems either on or after January 1, 2000. Additionally, to date, there have been no material Year 2000 related failures or disruptions with respect to principal third-party business partners. The company continues to monitor its systems and the capabilities of its customers and suppliers to ensure that any previously unidentified Year 2000 issues that may arise are addressed promptly. In the unlikely event that any issues should occur, the company anticipates that they will be resolved through implementation of its comprehensive contingency planning efforts. Information Relating to Forward-Looking Statements - -------------------------------------------------- This report includes forward-looking statements that are subject to certain risks and uncertainties which could cause actual results or facts to differ materially from such statements for a variety of reasons, including, but not limited to: industry conditions, changes in product supply, pricing, and customer demand, competition, other vagaries in the electronic components and commercial computer products markets, and changes in relationships with key suppliers. Shareholders and other readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date on which they are made. The company undertakes no obligation to update publicly or revise any of the forward-looking statements. Item 3. Quantitative and Qualitative Disclosures About Market Risk. ---------------------------------------------------------- The company is exposed to market risk from changes in foreign currency exchange rates and interest rates. The company, as a large international organization, faces exposure to adverse movements in foreign currency exchange rates. These exposures may change over time as business practices evolve and could have a material impact on the company's financial results in the future. The company's primary exposure relates to transactions in which the currency collected from customers is different from the currency utilized to purchase the product sold in Europe, the Asia/Pacific region, and Latin America. At the present time, the company hedges only those currency exposures for which natural hedges do not exist. Anticipated foreign currency cash flows and earnings and investments in businesses in Europe, the Asia/Pacific region, and Latin America are not hedged as in many instances there are natural offsetting positions. The translation of the financial statements of the non-North American operations is impacted by fluctuations in foreign currency exchange rates. Had the various average foreign currency exchange rates remained the same during the first nine months of 2000 as compared with December 31, 1999, 2000 sales and operating income would have been $284 million and $27 million higher, respectively, than the reported results. The company's interest expense, in part, is sensitive to the general level of interest rates in the Americas, Europe, and the Asia/Pacific region. The company manages its exposure to interest rate risk through the proportion of fixed rate and variable rate debt in its total debt portfolio. At September 30, 2000, the company had approximately 37 percent of its debt as fixed rate borrowings and 63 percent of its debt subject to variable rates. Interest expense would fluctuate by approximately $7 million if average interest rates had changed by one percentage point during the first nine months of 2000. This amount was determined by considering the impact of a hypothetical interest rate on the company's borrowing cost. This analysis does not consider the effect of the level of overall economic activity that could exist in such an environment. Further, in the event of a change of such magnitude, management could likely take actions to further mitigate any potential negative exposure to the change. However, due to the uncertainty of the specific actions that would be taken and their possible effects, the sensitivity analysis assumes no changes in the company's financial structure. PART II. OTHER INFORMATION Item 4. Submission of Matters to a Vote of Security Holders. --------------------------------------------------- A Special Meeting of Shareholders of the company was held on October 12, 2000 to vote on a proposed amendment to the Certificate of Incorporation to increase the number of authorized shares of common stock from 120,000,000 shares to 160,000,000 shares. The resolution amending the Certificate of Incorporation was adopted by a vote of 85,380,575 shares in favor and 560,220 shares against with 91,238 shares abstaining and no broker non-votes. Item 6. Exhibits and Reports on Form 8-K. -------------------------------- (a) Exhibits (22) Proxy Statement (27) Financial Data Schedule (b) Reports on Form 8-K. During the quarter ended September 30, 2000 the following Current Reports on Form 8-K were filed: Date of Report Item Reported ----------------- -------------------------- September 1, 2000 Announcement of agreement to acquire Wyle Components and Wyle Systems. September 18, 2000 Announcement of agreement to acquire Merisel Open Computing Alliance, Inc. 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: November 13, 2000 By:/s/ Sam R. Leno ------------------------- Sam R. Leno Senior Vice President and Chief Financial Officer Date: November 13, 2000 By:/s/ Paul J. Reilly ---------------------- Paul J. Reilly Vice President-Finance EX-27 2 0002.txt
5 This schedule contains summary financial information extracted from the 2000 10-Q and is qualified in its entirety by reference to such financial statements. 1000 9-MOS DEC-31-2000 JAN-1-2000 SEP-30-2000 43,565 0 2,330,780 47,881 1,926,305 4,295,465 433,240 192,334 5,707,405 3,013,645 859,436 0 0 103,742 1,662,012 5,707,405 9,268,162 9,268,162 7,823,157 8,730,809 0 32,595 107,207 427,511 175,249 248,972 0 0 0 248,972 2.58 2.53
EX-22 3 0003.txt 1 SCHEDULE 14A INFORMATION PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES EXCHANGE ACT OF 1934 Filed by the Registrant [X] Filed by a Party other than the Registrant [ ] Check the appropriate box: [ ] Preliminary Proxy Statement [ ] Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) [X] Definitive Proxy Statement [ ] Definitive Additional Materials [ ] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-2. [ ] Confidential for the Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
ARROW ELECTRONICS, INC. - ------------------------------------------------------------------------------- (Name of Registrant as Specified In Its Charter) - ------------------------------------------------------------------------------- (Name of Person(s) Filing Proxy Statement, if other than the Registrant) Payment of Filing Fee (Check the appropriate box): [X] No fee required. [ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-12. (1) Title of each class of securities to which transaction applies: ------------------------------------------------------------------------ (2) Aggregate number of securities to which transaction applies: ------------------------------------------------------------------------ (3) Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee is calculated and state how it was determined): ------------------------------------------------------------------------ (4) Proposed maximum aggregate value of transaction: ------------------------------------------------------------------------ (5) Total fee paid: ------------------------------------------------------------------------ [ ] Fee paid previously with preliminary materials. [ ] Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing. (1) Amount Previously Paid: ------------------------------------------------------------------------ (2) Form, Schedule or Registration Statement No.: ------------------------------------------------------------------------ (3) Filing Party: ------------------------------------------------------------------------ (4) Date Filed: ------------------------------------------------------------------------ 2 ARROW ELECTRONICS, INC. 25 HUB DRIVE MELVILLE, NEW YORK 11747 [ARROW LOGO] STEPHEN P. KAUFMAN CHAIRMAN OF THE BOARD September 8, 2000 Dear Shareholder: You are cordially invited to attend a Special Meeting of Shareholders of Arrow Electronics, Inc., which will be held on Thursday, October 12, 2000 at 11:00 A.M., at the company's offices at 25 Hub Drive, Melville, New York. The formal Notice of Special Meeting and Proxy Statement, fully describing the matters to be acted upon at the meeting, appear on the following pages. The only matter scheduled to be considered at the meeting is a proposal to amend the company's Certificate of Incorporation to increase the number of authorized shares of common stock. The Board of Directors recommends the approval of the proposal being presented at the Special Meeting of Shareholders as being in the best interest of Arrow. We urge you to read the Proxy Statement and give the proposal your careful attention before completing the enclosed proxy card. Your vote is important regardless of the number of shares you own. Please be sure you are represented at the meeting, whether or not you plan to attend, by signing, dating and mailing the proxy card promptly. A postage-paid return envelope is enclosed for your convenience. You may also vote your shares by touch-tone telephone from the U.S. and Canada by using the toll-free telephone number on your proxy card. Sincerely yours, /s/ Stephen P. Kaufman Stephen P. Kaufman Chairman of the Board 3 ARROW ELECTRONICS, INC. 25 HUB DRIVE MELVILLE, NEW YORK 11747 ------------------------ NOTICE OF SPECIAL MEETING OF SHAREHOLDERS TO BE HELD OCTOBER 12, 2000 ------------------------ September 8, 2000 To the Shareholders of Arrow Electronics, Inc.: A Special Meeting of Shareholders of Arrow Electronics, Inc., a New York corporation ("Arrow"), is being called by the Board of Directors of the company and will be held at the company's offices at 25 Hub Drive, Melville, New York, on October 12, 2000 at 11:00 A.M., prevailing local time, for the following purposes: 1. To consider and act upon a proposal to amend the Certificate of Incorporation of Arrow to increase the number of authorized shares of common stock from 120,000,000 shares to 160,000,000 shares. 2. To transact such other business as may properly come before the meeting or any adjournments thereof. Only shareholders of record at the close of business on August 31, 2000 are entitled to notice of and to vote at the meeting or any adjournments thereof. By Order of the Board of Directors, Robert E. Klatell Secretary IMPORTANT Please complete, sign, and date the enclosed proxy and return it promptly in the enclosed return envelope which has been provided for your convenience or vote your shares by touch-tone telephone, whether or not you plan to attend the meeting. Your prompt response will assure a quorum and reduce solicitation expense. 4 ARROW ELECTRONICS, INC. 25 HUB DRIVE MELVILLE, NEW YORK 11747 ------------------------ SPECIAL MEETING OF SHAREHOLDERS TO BE HELD OCTOBER 12, 2000 ------------------------ PROXY STATEMENT ------------------------ This Proxy Statement, mailed to shareholders on September 8, 2000, is furnished in connection with the solicitation by the Board of Directors of Arrow Electronics, Inc., a New York corporation ("Arrow"), of proxies to be voted at the Special Meeting of Shareholders to be held in Melville, New York, on October 12, 2000, and any adjournments thereof, for the purposes set forth in the accompanying notice. Each proxy will be voted with respect to all shares represented by it in accordance with the directions specified thereon and otherwise in accordance with the judgment of the persons designated as proxies. Any proxy on which no directions are specified will be voted in favor of the actions described by the proxy. Any proxy may be revoked at any time prior to exercise by written notice to the Secretary of Arrow by the person giving the proxy. The cost of soliciting proxies will be borne by Arrow. Solicitation of proxies is being made by Arrow through the mail, in person, and by telephone. In addition to regular employees of Arrow who may engage in such solicitation, but who will not be specifically compensated for such services, Arrow has retained D.F. King & Co., Inc. to assist in soliciting proxies at an anticipated cost of $8,500 plus expenses. Arrow will also request brokers and other nominees to forward soliciting materials to the beneficial owners of the stock held of record by such persons and will reimburse such persons for their expenses in forwarding such materials. Only shareholders of record of Arrow's common stock at the close of business on August 31, 2000 are entitled to notice of and to vote at the meeting or any adjournments thereof. On August 31, 2000, Arrow had outstanding 98,137,820 shares of common stock. 5 PROPOSED AMENDMENT TO ARROW'S CERTIFICATE OF INCORPORATION TO INCREASE THE AUTHORIZED SHARES OF COMMON STOCK TO 160,000,000 On August 21, 2000, Arrow's Board of Directors adopted resolutions amending, subject to shareholder approval at the special meeting, Article THIRD of the Certificate of Incorporation to increase the authorized number of shares of common stock. A copy of the amendment is attached to this proxy statement as Annex A. Of the 120,000,000 currently authorized shares of common stock, as of August 31, 2000, 98,137,820 shares of common stock were outstanding and 16,166,880 shares of common stock were required to be reserved for issuance relating to outstanding options and restricted stock awards, and options available for grant. The proposed amendment to the Certificate of Incorporation would increase the number of authorized shares of common stock to 160,000,000. The affirmative vote of the holders of a majority of the outstanding shares of the common stock of Arrow is sufficient for the adoption of the proposal to approve the amendment to the Certificate of Incorporation increasing the number of authorized shares of common stock. Consequently, any shares not voted (whether by abstention or broker non-votes) have the same effect as votes against the proposed amendment to the Certificate of Incorporation. THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS VOTE FOR THIS PROPOSAL. REASONS FOR THE PROPOSED AMENDMENT OF THE CERTIFICATE OF INCORPORATION The reasons for the proposed increase in the number of authorized shares of common stock are to make such additional shares available for future issuances for acquisitions of property or stock of other corporations, for cash, as share dividends and stock splits, as restricted stock awards, upon the exercise of stock options, and for other purposes, as occasion may arise. The Board of Directors believes it is desirable that Arrow have such additional shares available for situations in which their issuance may be suitable without the delay which would result from holding a meeting of shareholders to authorize the issuance of additional shares. On August 7, 2000, a consortium consisting of Arrow, Schroder Ventures, and Avnet, Inc. entered into a share purchase agreement to purchase the VEBA Electronics Group from the Germany-based energy company, E.ON AG, for approximately $2.35 billion in cash, including the assumption of debt. Under the terms of the share purchase agreement, Arrow will acquire Wyle Systems, Wyle Components, and ATLAS Services North America (collectively referred to as the "Wyle Businesses") for approximately $840 million, including the assumption of debt, subject to closing adjustments. The Wyle Businesses, based in Irvine, California, have approximately 1,900 employees and had sales of approximately $2 billion in 1999. 2 6 Wyle Components, which specializes in semiconductor distribution, will complement Arrow's existing core components distribution businesses in North America. Arrow believes that Wyle Systems, which specializes in the distribution of computer products, will complement Arrow's computer distribution businesses in North America and strengthen Arrow's distribution business in the western and southwestern United States. Arrow also believes that the integration of the Wyle Businesses with Arrow will produce sizeable synergies and the transaction will be accretive to earnings in the first year following the combination. Arrow intends to offer for sale, in one or more transactions, a portion of the additionally authorized common stock and, potentially, other securities convertible into common stock to refinance part of the indebtedness incurred to purchase the Wyle Businesses. Arrow has not determined the terms of the offer of such common stock or other securities. If the proposed amendment is adopted, the additional shares of common stock may be issued by the Board of Directors without further action by the shareholders, except as may be required by law or pursuant to Arrow's listing agreement with the New York Stock Exchange. The additional authorized shares of common stock would have the same rights and privileges as the shares of common stock presently authorized and/or outstanding. The issuance of additional shares of common stock other than on a pro-rata basis to all holders of such stock would reduce the proportionate interest of such shareholders. The authorized but unissued shares of common stock also could be used by incumbent management to make more difficult, and thereby discourage, an attempt to acquire control of Arrow. For example, the shares could be privately placed with purchasers who might support the Board of Directors in opposing a hostile takeover bid. The issuance of the new shares also could be used to dilute the stock ownership and voting power of a third party seeking to remove directors, replace incumbent directors, accomplish certain business combinations, or alter, amend, or repeal provisions of the Certificate of Incorporation. To the extent that it impedes any such attempts, the issuance of shares of common stock following the amendment may serve to perpetuate existing management. 3 7 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The following table sets forth certain information with respect to:(a) the only shareholders known to management to own beneficially more than 5% of the outstanding common stock of Arrow as of August 31, 2000; (b) each of Arrow's directors; (c) each of the executive officers of Arrow; and (d) all of Arrow's directors and executive officers as a group.
SHARES OF COMMON PERCENTAGE OF STOCK OWNED OUTSTANDING BENEFICIALLY AS OF COMMON NAME AUGUST 31, 2000 STOCK(1) - ---- ------------------ ------------- Sanford C. Bernstein & Co., Inc. 13,886,400(2) 14.1% 767 Fifth Avenue New York, New York 10153 Wellington Management Company, LLP 8,268,200(3) 8.4% 75 State Street Boston, Massachusetts 02109 Vanguard Windsor Funds -- Vanguard Windsor Fund 8,147,200(4) 8.3% Post Office Box 2600 Valley Forge, Pennsylvania 19482 The Prudential Insurance Company of America 4,913,746(5) 5% 751 Broad Street Newark, New Jersey 07102 Daniel W. Duval 33,319(6) --% Director Carlo Giersch 294,400(7) .3% Director, Chairman of Spoerle Electronic John N. Hanson 29,826(6) --% Director Stephen P. Kaufman 3,886,130(8) 4% Chairman of the Board Roger King 31,119(6) --% Director Robert E. Klatell 2,557,610(9) 2.6% Director, Executive Vice President, General Counsel and Secretary Karen Gordon Mills 33,838(6) --% Director Barry W. Perry 24,044(10) --% Director Richard S. Rosenbloom 32,300(11) --% Director Francis M. Scricco 662,305(12) .7% Director, President and Chief Executive Officer
4 8
SHARES OF COMMON PERCENTAGE OF STOCK OWNED OUTSTANDING BENEFICIALLY AS OF COMMON NAME AUGUST 31, 2000 STOCK(1) - ---- ------------------ ------------- John C. Waddell 2,239,655(13) 2.3% Vice Chairman of the Board All executive officers and directors (30 persons) 6,980,384(14) 7.1%
- --------------- (1) Calculation is based upon 98,137,820 shares of common stock outstanding as of August 31, 2000. (2) Based upon a Schedule 13G dated February 8, 2000 filed with the Securities and Exchange Commission and reflects sole dispositive power with respect to 13,886,400 shares, sole voting power with respect to 7,351,270 shares, and shared voting power with respect to 1,591,049 shares beneficially owned by Sanford C. Bernstein & Co., Inc., a registered investment adviser. (3) Based upon a Schedule 13G dated February 9, 2000 filed with the Securities and Exchange Commission and reflects shared dispositive power with respect to 8,268,200 shares and shared voting power with respect to 3,000 shares beneficially owned by Wellington Management Company, LLP, a registered investment adviser. (4) Based upon a Schedule 13G dated February 8, 2000 filed with the Securities and Exchange Commission and reflects sole voting power and shared dispositive power with respect to the shares beneficially owned by Vanguard Windsor Funds -- Vanguard Windsor Fund, a registered investment company. (5) Based upon a Schedule 13G dated January 31, 2000 filed with the Securities and Exchange Commission and reflects shared voting power and shared dispositive power with respect to 4,351,996 shares and sole voting power and sole dispositive power with respect to 561,750 shares beneficially owned by The Prudential Insurance Company of America, an insurance company and registered investment adviser. (6) Includes shares owned individually, options to purchase shares granted under Arrow's Non-Employee Directors Stock Option Plan, and common stock units deferred under Arrow's Non-Employee Directors Deferral Plan. (7) Includes shares owned individually, options to purchase shares granted under Arrow's Stock Option Plan, and shares awarded under Arrow's Restricted Stock Plan. (8) Includes options to purchase shares granted under Arrow's Stock Option Plan, shares awarded under Arrow's Restricted Stock Plan, and shares held by Arrow's Stock Ownership Plan. (9) Includes shares owned individually, options to purchase shares granted under Arrow's Stock Option Plan, shares awarded under Arrow's Restricted Stock Plan, and shares held by Arrow's Stock Ownership Plan. (10) Includes options to purchase shares granted under Arrow's Non-Employee Directors Stock Option Plan and common stock units deferred under Arrow's Non-Employee Directors Deferral Plan. 5 9 (11) Includes shares owned individually and options to purchase shares granted under Arrow's Non-Employee Directors Stock Option Plan. (12) Includes options to purchase shares granted under Arrow's Stock Option Plan, shares awarded under Arrow's Restricted Stock Plan, and shares allocated under Arrow's Stock Ownership Plan. (13) Includes shares owned individually, options to purchase shares granted under Arrow's Non-Employee Directors Stock Option Plan, and shares held by Arrow's Stock Ownership Plan. (14) Includes 2,227,630 shares held by the Arrow Electronics Stock Ownership Plan, of which Mr. Stephen P. Kaufman, Mr. Robert E. Klatell, and Mr. John C. Waddell are the trustees, including shares allocated to the accounts of Messrs. Kaufman, Klatell, and Waddell (pursuant to certain regulations promulgated by the Securities and Exchange Commission, Messrs. Kaufman, Klatell, and Waddell may be deemed to have beneficial ownership of these shares by virtue of their shared power as trustees to vote such shares); options to purchase 3,535,887 shares granted under Arrow's Stock Option Plan or under stock option plans of companies acquired by Arrow and assumed by Arrow as part of the acquisition (of which 2,480,297 options are currently exercisable), including options to purchase 1,561,250 shares, 527,000 shares, 213,000 shares, 17,500 shares, 152,500 shares and 105,000 shares granted to Mr. Kaufman, Mr. Francis M. Scricco, Mr. Klatell, Mr. Carlo Giersch, Mrs. Betty Jane Scheihing, and Ms. Jan Salsgiver, respectively (of which 1,362,500 options, 121,000 options, 179,250 options, no options, 109,375 options, and 82,500 options, respectively, are currently exercisable); 732,222 shares awarded under Arrow's Restricted Stock Plan (of which 380,672 shares have vested and are not forfeitable), including 97,250 shares, 135,000 shares, 95,450 shares, 23,900 shares, 37,250 shares, and 26,000 shares awarded to Mr. Kaufman, Mr. Scricco, Mr. Klatell, Mr. Giersch, Mrs. Scheihing, and Ms. Salsgiver, respectively (of which 91,250 shares, 58,000 shares, 76,600 shares, 13,800 shares, 15,750 shares, and 9,750 shares, respectively, have vested and are not forfeitable); options to purchase 170,000 shares granted under Arrow's Non-Employee Directors Stock Option Plan (of which 75,250 shares are currently exercisable); and 11,346 common stock units deferred under Arrow's Non-Employee Directors Deferral Plan. OTHER MATTERS Management does not expect any matters to come before the meeting other than those to which reference is made in this Proxy Statement. However, if any other matters should properly come before the meeting, it is intended that proxies in the accompanying form will be voted thereon in accordance with the judgment of the person or persons voting such proxies. By Order of the Board of Directors, Robert E. Klatell Secretary 6 10 ANNEX A CERTIFICATE OF AMENDMENT OF THE RESTATED CERTIFICATE OF INCORPORATION OF ARROW ELECTRONICS, INC. UNDER SECTION 805 OF THE BUSINESS CORPORATION LAW * * * * * I, THE UNDERSIGNED, Robert E. Klatell, being the Secretary of Arrow Electronics, Inc. hereby certify: 1. The name of the corporation is Arrow Electronics, Inc. 2. The certificate of incorporation of said corporation was filed in the office of the Department of State on the 20th day of November, 1946. 3. (a) The certificate of incorporation is amended to increase the number of authorized shares of stock from 122,000,000 shares at $1 par value to 162,000,000 shares at $1 par value. To effect this increase, the certificate of incorporation is amended to increase the number of authorized shares of common stock from 120,000,000 to 160,000,000. The 2,000,000 authorized shares of preferred stock will remain the same. (b) To effect the foregoing, the first paragraph of Article Third relating to the number of authorized shares of stock is amended to read as follows: "THIRD: The total number of shares of all classes of stock which the Corporation shall have authority to issue is one hundred sixty-two million (162,000,000) shares, consisting of: (a) Two million (2,000,000) shares of Preferred Stock having a par value of $1 per share (hereinafter referred to as "Preferred Stock"); and (b) One Hundred Sixty Million (160,000,000) shares of Common Stock having a par value of $1 per share (hereinafter referred to as "Common Stock")." 4. The amendment hereinabove set forth was authorized by unanimous written consent of the Board of Directors dated August 21, 2000, followed by the vote of the holders of a majority of all the outstanding shares entitled to vote thereon. IN WITNESS WHEREOF, I have signed this certificate on the day of October 2000 and I affirm the statements contained herein as true under penalties of perjury. By: ------------------------------------ Name: Robert E. Klatell Title: Secretary A-1 11 PROXY ARROW ELECTRONICS, INC. This Proxy is Solicited by the Board of Directors. PROXY for the Special Meeting of Shareholders, October 12, 2000 The undersigned hereby appoints Stephen P. Kaufman, Robert E. Klatell, and Francis M. Scricco, and any one or more of them, with full power of substitution, as proxy or proxies of the undersigned to vote all shares of stock of ARROW ELECTRONICS, INC. which the undersigned would be entitled to vote if personally present at the Special Meeting of Shareholders to be held on October 12, 2000, at 11:00 A.M., prevailing local time, at the company's offices at 25 Hub Drive, Melville, New York, or any adjournments thereof, as set forth on the reverse hereof. Please Return This Proxy Promptly in the Enclosed Envelope (CONTINUED AND TO BE SIGNED ON REVERSE SIDE.) - -------------------------------------------------------------------------------- FOLD AND DETACH HERE 12 Please mark your votes as indicated in this example. [ x ] 1. Authority to vote FOR the adoption of a proposed amendment to the Certificate of Incorporation of Arrow Electronics, Inc., to increase the number of authorized shares of common stock from 120,000,000 to 160,000,000. FOR AGAINST ABSTAIN [ ] [ ] [ ]
2. In accordance with their discretion upon such other matters as may properly come before the meeting or any adjournments thereof. THIS PROXY IS BEING SOLICITED BY THE MANAGEMENT AND WILL BE VOTED AS SPECIFIED. IF NOT OTHERWISE SPECIFIED, IT WILL BE VOTED FOR THE PROPOSAL DESCRIBED IN ITEMS 1 ABOVE AND OTHERWISE IN ACCORDANCE WITH THEIR DISCRETION. DATE ______________/_____/2000 ____________________________________ Signature ____________________________________ Signature, if Jointly Held IF ACTING AS ATTORNEY, EXECUTOR, TRUSTEE OR IN OTHER REPRESENTATIVE CAPACITY, PLEASE SIGN NAME AND TITLE. - -------------------------------------------------------------------------------- FOLD AND DETACH HERE [PHONE GRAPHIC] VOTE BY TELEPHONE [PHONE GRAPHIC] QUICK***EASY***IMMEDIATE Your telephone vote authorizes the named proxies to vote your shares in the same manner as if you marked, signed and returned your proxy card. - - - You will be asked to enter a Control Number which is located in the box in the lower right hand corner of this form. PROPOSAL 1: To vote as the Board of Directors recommends FOR, Press 1; AGAINST, Press 9; ABSTAIN, Press 0. WHEN ASKED, PLEASE CONFIRM YOUR VOTE BY PRESSING 1. PLEASE DO NOT RETURN THE ABOVE PROXY CARD IF VOTED BY PHONE. CALL **TOLL FREE** ON A TOUCH-TONE TELEPHONE 1-800-840-1208 - ANYTIME There is NO CHARGE to you for this call. -----END PRIVACY-ENHANCED MESSAGE-----