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Arrow Electronics, Inc. reported second-quarter 2013 net income of$89.9 million, or$.86 per share on a diluted basis, compared with net income of$114.4 million, or$1.02 per share on a diluted basis in the second quarter of 2012. Excluding certain items in both the second quarters of 2013 and 2012 as described in the non-GAAP earnings reconciliation table found herein, net income would have been$116.9 million, or$1.12 per share on a diluted basis, in the second quarter of 2013 compared with net income of$124.1 million, or$1.11 per share on a diluted basis, in the second quarter of 2012. The results for the second quarter of 2013 and 2012 include intangible amortization expense of approximately$9 million ($7 million net of tax, or$.07 per share on a diluted basis). Second-quarter sales of$5.31 billion increased 3 percent from sales of$5.15 billion in the prior year.
“We executed very well in the second quarter, with revenue at the top end of our guidance and non-GAAP earnings per share well ahead of our expectations. In our components segment, we saw each of our regions post sales above the high end of normal sequential seasonality. Our enterprise computing solutions business performed especially well, with our 14th consecutive quarter of year-over-year organic growth and operating margins at the highest level in five years,” said Michael J. Long, chairman, president, and chief executive officer. “Our differentiated value-added strategy continues to drive strong financial performance.”
Global components second-quarter sales of $3.40 billion decreased 2 percent year over year. Sales, as adjusted in the non-GAAP sales reconciliation table below, increased 1 percent year over year. In the Americas, sales declined 4 percent year over year due to ongoing market weakness amid economic uncertainty. European sales were down 9 percent year over year primarily due to the prospective change in the accounting for revenue related to a fulfillment contract. European sales, as adjusted in the non-GAAP earnings table below, increased 4 percent year over year. Sales in the Asia-Pacific region increased 10 percent year over year, driven by strong growth in China and the ASEAN region.
Global ECS second-quarter sales of $1.91 billion increased 12 percent year over year. Sales, as adjusted in the non-GAAP sales reconciliation table below, increased 7 percent year over year. In the Americas, sales growth was 10 percent year over year. In Europe, sales growth, including the Altimate acquisition, was 18 percent with broad-based strength across the region.
“Cash flow is again a great story as we generated $334 million in cash flow from operations in the second quarter of 2013 and $519 million on a trailing 12 month basis, meaningfully exceeding our targets,” said Paul J. Reilly, executive vice president, finance and operations, and chief financial officer. “In the first half of 2013 we returned nearly $300 million to shareholders through our stock repurchase program, bringing the total amount returned to shareholders to $900 million since the beginning of 2010.”
SIX-MONTH RESULTS
Arrow’s net income for the first six months of 2013 was $167.8 million, or $1.58 per share on a diluted basis, compared with net income of $228.0 million, or $2.02 per share on a diluted basis in the first six months of 2012. Excluding certain items in both the first six months of 2013 and 2012 as described in the non-GAAP earnings reconciliation table found herein, net income would have been $212.9 million, or $2.01 per share on a diluted basis, in the first six months of 2013 compared with net income of $243.9 million, or $2.16 per share on a diluted basis, in the first six months of 2012. The results for the first six months of 2013 and 2012 include intangible amortization expense of approximately $18 million and $19 million, respectively ($14 million and $15 million net of tax, respectively, or $.13 per share on a diluted basis for both 2013 and 2012). In the first six months of 2013, sales of $10.16 billion increased 1 percent from sales of $10.04 billion in the first six months of 2012.
GUIDANCE
Looking ahead to the third quarter of 2013, there remains economic uncertainty across the globe. In light of these economic conditions, the company remains somewhat cautious in the outlook for business activity in the third quarter. The company expects sales to be at the low to midpoint of normal sequential seasonal activity.
“As we look to the third quarter, we believe that total sales will be between $4.9 billion and $5.3 billion, with global components sales between $3.35 billion and $3.55 billion and global enterprise computing solutions sales between $1.55 billion and $1.75 billion. We expect earnings per share, on a diluted basis, excluding amortization of intangible assets of approximately $.07 per share, and any charges to be in the range of $1.14 to $1.26. Our guidance assumes an average tax rate in the range of 27 to 29 percent, average diluted shares outstanding are expected to be 101.7 million, and the average USD to Euro exchange rate for the third quarter is 1.31 to 1,” said Mr. Reilly.
