Annual Report — [x] Reg. S-K Item 405 — Form 10-K
Filing Table of Contents
Document/Exhibit Description Pages Size
1: 10-K405 Annual Report -- [x] Reg. S-K Item 405 41± 191K
2: EX-2 Master Agreement Among Premier Farnell and Arrow 78± 254K
3: EX-4 Ex 4(B)(I) - Indenture, Dated January 15, 1997 63± 277K
4: EX-4 Officers' Certificate, as Defined by the Indenture 15± 68K
in
5: EX-10 Ex 10(B)(Vii) Form of Employment Agreement, Dated 12± 56K
as of April 15, 1996 Between the Company
and Gerald Luterman.
6: EX-10 Ex 10(C)(Iii) Second Amendment to the 8.29% Senior 7± 34K
Notes
7: EX-10 Ex 10(C)(Iii) Third Amendment to the 8.29% Senior 4± 18K
Notes
8: EX-11 Statement re: Computation of Earnings Per Share 2± 9K
9: EX-21 List of Subsidiaries 2± 11K
10: EX-23 Consent of Ernst & Young LLP 1 8K
11: EX-27 Financial Data Schedule 1 9K
Form 10-K
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(Mark One)
X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 (FEE REQUIRED)
For the fiscal year ended December 31, 1996
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
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 offices) (Zip Code)
Registrant's telephone number, including area code: (516) 391-1300
Securities registered pursuant to Section 12(b) of the Act:
Name of Each Exchange on
Title of Each Class Which Registered
---------------------- -----------------------
Common Stock, $1 par value New York Stock Exchange
Preferred Share Purchase Rights New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
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 by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K is not contained herein,
and will not be contained to the best of registrant's knowledge,
in definitive proxy or information statements incorporated by
reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ X ]
The aggregate market value of voting stock held by
nonaffiliates of the registrant as of March 7, 1997 was
$2,809,716,467.
Indicate the number of shares outstanding of each of the
registrant's classes of common stock, as of the latest
practicable date.
Common Stock, $1 par value: 49,543,839 shares outstanding at
March 7, 1997.
The following documents are incorporated herein by reference:
1. Proxy Statement filed in connection with Annual Meeting of
Shareholders to be held May 14, 1997 (incorporated in Part III).
PART I
Item 1. Business.
--------
Arrow Electronics, Inc. (the "company") is the world's largest
distributor of electronic components and computer products to
industrial and commercial customers. As the global electronics
distribution industry's leader in state-of-the-art operating
systems, employee productivity, value-added programs, and total
quality assurance, the company is the distributor of choice for
over 600 suppliers.
The company's global distribution network spans the world's three
dominant electronics markets - North America, Europe, and the
Asia/Pacific region. The company is the largest electronics
distributor in each of these vital industrialized regions,
serving a diversified base of original equipment manufacturers
(OEMs) and commercial customers worldwide. OEMs include
manufacturers of computer and office products, industrial
equipment (including machine tools, factory automation, and
robotic equipment), telecommunications products, aircraft and
aerospace equipment, and scientific and medical devices.
Commercial customers are mainly value-added resellers (VARs) of
computer systems. The company maintains 172 sales facilities and
19 distribution centers in 32 countries.
In North America, the company is organized into five product-
specific sales and marketing groups: The Arrow/Schweber
Electronics Group is the largest dedicated semiconductor
distributor in the world. Anthem Electronics is a leading
distributor of semiconductors and computer products. Zeus
Electronics is the only specialist distributor serving the
military and high-reliability markets. Capstone Electronics
focuses exclusively on the distribution of passive,
electromechanical, and interconnect products. Gates/Arrow
distributes commercial computer products and systems.
Through its wholly-owned subsidiary, Arrow Electronics
Distribution Group-Europe B.V., Arrow is the largest pan-European
electronics distributor. The company's European strategy
stresses two key elements: strong, locally-managed distributors
to satisfy widely varying customer preferences and business
practices; and an electronic backbone uniting Arrow's European
partners with one another and with Arrow worldwide to leverage
inventory investment and better meet the needs of customers in
all of Europe's leading industrial electronics markets. In most
of these markets, Arrow companies hold the number one position:
Arrow Electronics (UK) in Britain; Spoerle Electronic in Central
Europe; Silverstar in Italy; and Amitron and ATD Electronica in
Spain and Portugal. Arrow Electronique and Arrow Computer
Products (formerly called The Megachip Group) form the largest
electronics distribution group in France, and Arrow's Nordic
companies, Field, TH:s Elektronik, and Exatec, are among the
largest distributors in the markets of Finland, Norway, Sweden,
and Denmark.
Arrow is the largest American electronics distributor in the
Asia/Pacific region. Arrow's Components Agent Limited (C.A.L.),
the Lite-On Group, and the Melbourne-based Veltek and Zatek
companies in Australia are the region's leading multi-national
distributors. C.A.L., headquartered in Hong Kong, maintains
additional facilities in key cities in Singapore, Malaysia, the
People's Republic of China, and South Korea. Lite-On,
headquartered in Taipei, serves customers in Taiwan, South Korea,
Singapore, and Malaysia. Arrow Ally serves customers in Taipei
and Arrow Components (NZ) services customers in New Zealand.
Within these dynamic markets, Arrow is benefiting from two
important growth factors: the decision by many of Arrow's
traditional North American customers to locate production
facilities in the region; and the surging demand for electronic
products resulting from rising living standards and massive
investments in infrastructure.
On January 31, 1997, the company acquired the volume electronic
component distribution businesses of Premier Farnell plc (the
"Farnell Electronic Services Group") with operations in 15
countries.
The company distributes a broad range of electronic components,
computer products, and related equipment manufactured by others.
About 66 percent of the company's consolidated sales are
comprised of semiconductor products; industrial and commercial
computer products, including microcomputer boards and systems,
design systems, desktop computer systems, terminals, printers,
disk drives, controllers, and communication control equipment
account for about 26 percent; and the remaining sales are of
passive, electromechanical, and interconnect products,
principally capacitors, resistors, potentiometers, power
supplies, relays, switches, and connectors.
Most manufacturers of electronic components and computer products
rely on independent authorized distributors, such as the company,
to augment their product marketing operations. As a stocking,
marketing, and financial intermediary, the distributor relieves
manufacturers of a portion of the costs and personnel associated
with stocking and selling their products (including otherwise
sizable investments in finished goods inventories and accounts
receivable), while providing geographically dispersed selling,
order processing, and delivery capabilities. At the same time,
the distributor offers a broad range of customers the convenience
of diverse inventories and rapid or scheduled deliveries as well
as other value-added services such as kitting and memory
programming capabilities. The growth of the electronics
distribution industry has been fostered by the many manufacturers
who recognize their authorized distributors as essential
extensions of their marketing organizations.
The company and its affiliates serve approximately 160,000
industrial and commercial customers. Industrial customers range
from major original equipment manufacturers to small engineering
firms, while commercial customers include value-added resellers,
small systems integrators, and large end-users.
Most of the company's customers require delivery of the products
they have ordered on schedules that are generally not available
on direct purchases from manufacturers, and frequently their
orders are of insufficient size to be placed directly with
manufacturers. No single customer accounted for more than 2
percent of the company's 1996 or 1995 sales.
The electronic components and other products offered by the
company are sold by field sales representatives, who regularly
call on customers in assigned market areas, and by telephone from
the company's selling locations, from which inside sales
personnel with access to pricing and stocking data provided by
computer display terminals accept and process orders. Each of
the company's North American selling locations, warehouses, and
primary distribution centers is electronically linked to the
business' central computer, which provides fully integrated, on-
line, real-time data with respect to nationwide inventory levels
and facilitates control of purchasing, shipping, and billing.
The company's foreign operations utilize Arrow's Worldwide Stock
Check System, which affords access to the company's on-line, real-
time inventory system.
There are approximately 600 manufacturers whose products are sold
by the company. Intel Corporation accounted for approximately 18
percent of the business' purchases because of the market demand
for microprocessors. No other supplier accounted for more than 8
percent of 1996 purchases. The company does not regard any one
supplier of products to be essential to its operations and
believes that many of the products presently sold by the company
are available from other sources at competitive prices. Most of
the company's purchases are pursuant to authorized distributor
agreements which are typically cancelable by either party at any
time or on short notice.
Approximately 70 percent of the company's inventory consists of
semiconductors. It is the policy of most manufacturers to
protect authorized distributors, such as the company, against the
potential write-down of such inventories due to technological
change or manufacturers' price reductions. Under the terms of the
related distributor agreements, and assuming the distributor
complies with certain conditions, such suppliers are required to
credit the distributor for inventory losses incurred through
reductions in manufacturers' list prices of the items. In
addition, under the terms of many such agreements, the
distributor has the right to return to the manufacturer for
credit a defined portion of those inventory items purchased
within a designated period of time.
A manufacturer who elects to terminate a distributor agreement is
generally required to purchase from the distributor the total
amount of its products carried in inventory. While these
industry practices do not wholly protect the company from
inventory losses, management believes that they currently provide
substantial protection from such losses.
The company's business is extremely competitive, particularly
with respect to prices, franchises, and, in certain instances,
product availability. The company competes with several other
large multi-national, national, and numerous regional and local
distributors. As the world's largest electronics distributor,
the company's financial resources and sales are greater than
those of its competitors.
The company and its affiliates employ approximately 7,900 people
worldwide.
Executive Officers
The following table sets forth the names and ages of, and the
positions and offices with the company held by, each of the
executive officers of the company.
Name Age Position or Office Held
---- --- ------------------------
Stephen P. Kaufman 55 Chairman and Chief Executive Officer
Robert E. Klatell 51 Executive Vice President, General
Counsel, and Secretary
Carlo Giersch 59 Chief Executive Officer of Spoerle
Electronic
Gerald Luterman 53 Senior Vice President,
Chief Financial Officer, and
Treasurer
Steven W. Menefee 52 Senior Vice President
Michael J. Long 38 Vice President; President, Gates/Arrow
Distributing
John J. Powers, III 42 Vice President; President, Anthem
Electronics
Wesley S. Sagawa 49 Vice President; President, Capstone
Electronics
Jan M. Salsgiver 40 Vice President; President,
Arrow/Schweber Electronics Group
Betty Jane Scheihing 48 Senior Vice President of Operations
Robert S. Throop 59 Vice President; Chairman, Anthem
Electronics
Vincent Vellucci 47 President; Zeus Electronics
Set forth below is a brief account of the business experience
during the past five years of each executive officer of the
company.
Stephen P. Kaufman has been Chairman since May 1994 and President
and Chief Executive Officer of the company for more than five
years prior thereto.
Robert E. Klatell has been Executive Vice President since July
1995 and has served as Senior Vice President, General Counsel,
and Secretary of the company for more than five years. He also
served as Chief Financial Officer from January 1992 to April 1996
and Treasurer from 1990 to April 1996.
Carlo Giersch has been Chief Executive Officer of Spoerle
Electronic for more than five years.
Gerald Luterman joined the company in April 1996 as Senior Vice
President, Chief Financial Officer, and Treasurer. Prior thereto
he was Executive Vice President and Chief Financial Officer of
American Express Travel Related Services Consumer Card Group for
more than five years.
Steven W. Menefee has been a Senior Vice President of the company
since July 1995 and Senior Vice President of Corporate Marketing
since November 1995. Prior thereto he was a Vice President of
the company, and President of the company's Arrow/Schweber
Electronics Group since November 1990.
Michael J. Long has been a Vice President of the company and
President of Gates/Arrow since November 1995. Prior thereto he
held a variety of positions at Capstone Electronics since 1991,
the most recent of which was acting President from March 1994 to
November 1995.
John J. Powers, III has been a Vice President of the company
since November 1994, following the acquisition of Anthem
Electronics. He has been President of Anthem Electronics since
June 1992; prior thereto he was Senior Vice President.
Wesley S. Sagawa has been a Vice President of the company and
President of Capstone Electronics for more than five years. He
was managing director of Arrow U.K. from March 1994 to November
1995.
Jan M. Salsgiver has been a Vice President of the company since
September 1993 and President of the Arrow/Schweber Electronics
Group since November 1995. Prior thereto she had been President
of Zeus Electronics. Prior to July 1993, she held a variety of
senior marketing positions in the company, the most recent of
which was Vice President of Semiconductor Marketing of the
Arrow/Schweber Electronics Group.
Betty Jane Scheihing became Senior Vice President in May 1996 and
has served as Vice President of Operations of the company for
more than five years prior thereto.
Robert S. Throop had been Chairman and Chief Executive Officer of
Anthem Electronics for more than five years; he retired in
December 1996. He became a Vice President of the company in
March 1995.
Vincent Vellucci became President of Zeus Electronics in December
1996 and was acting President since November 1995. Prior thereto
he held a variety of sales and marketing positions in the
company, the most recent of which was Regional Vice President of
Arrow/Schweber's Northeast Region.
Item 2. Properties.
----------
The company's executive office, located in Melville, New York, is
owned by the company. The company occupies additional locations
under leases due to expire on various dates to 2016. Five
additional facilities are owned by the company, and another
facility has been sold and leased back in connection with the
financing thereof.
Item 3. Legal Proceedings.
-----------------
Through a wholly-owned subsidiary, Schuylkill Metals Corporation,
the company was previously engaged in the refining and selling of
lead. In September 1988, the company sold its refining business.
In mid-1986 the refining business ceased operations at its
battery breaking facility in Plant City, Florida, which facility
had been placed on the list of hazardous waste sites targeted for
cleanup under the Federal Super Fund program. The Plant City
site was not sold to the purchaser of the refining business, and
the company remains subject to various environmental cleanup
obligations at the site under federal and state law. The company
and the EPA became parties to a consent decree which was entered
by a federal court in Florida and became effective on April 22,
1992. The consent decree requires the company to fund, design,
and implement remediation addressing environmental impacts to
site soils and sediment, underlying ground water, and wetland
areas. Substantial progress has been made in each of these
areas. Remediation of the wetlands areas on the site, including
the creation of certain new wetlands areas under agreement with
the EPA and the Florida Department of Environmental Conservation,
was substantially completed in 1994. A waste water treatment
plant has been built on site by the company's contractors, and
processing of ground and pond water for discharge to the Plant
City Treatment Works commenced in July 1994. Soil stabilization
has been substantially completed. Water treatment will continue,
at least through 1997. The extent of such remediation activities
(including the estimated cost thereof and the time necessary to
complete them), however, is subject to change based upon
conditions actually encountered during remediation. Moreover, the
EPA reserves the right to seek additional action if it
subsequently finds further contamination or other conditions
rendering the work insufficiently protective of human health or
the environment. The company believes that the amount expected
to be expended in any year to fund such activities will not have
a material adverse impact on the company's liquidity, capital
resources or results of operations.
Item 4. Submission of Matters to a Vote of Security Holders.
---------------------------------------------------
None.
PART II
Item 5. Market for the Registrant's Common Equity and
---------------------------------------------
Related Stockholder Matters.
---------------------------
Market Information
The company's common stock is listed on the New York Stock
Exchange (trading symbol: "ARW"). The high and low sales
prices during each quarter of 1996 and 1995 were as follows:
Year High Low
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1996:
Fourth Quarter $55-3/8 $43
Third Quarter 47-1/8 37-1/2
Second Quarter 53-5/8 42-1/4
First Quarter 50 35-1/4
1995:
Fourth Quarter $55-1/4 $39-1/4
Third Quarter 59-3/4 48-1/2
Second Quarter 50-7/8 40
First Quarter 44-5/8 35-1/8
Holders
On March 1, 1997, there were approximately 4,500 shareholders
of record of the company's common stock.
Dividend History and Restrictions
The company has not paid cash dividends on its common stock
during the past five years. While the board of directors
considers the payment of dividends on the common stock from
time to time, the declaration of future dividends will be
dependent upon the company's earnings, financial condition, and
other relevant factors.
The terms of the company's global multi-currency credit
facility and its 8.29% senior notes (see Note 4 of the Notes to
Consolidated Financial Statements) limit, among other things,
the payment of cash dividends and the incurrence of additional
borrowings and require that working capital, net worth, and
certain other financial ratios be maintained at designated
levels.
Item 6. Selected Financial Data
-----------------------
The following table sets forth certain selected consolidated financial
data and should be read in conjunction with the company's consolidated
financial statements and related notes appearing elsewhere in this annual
report.
[Enlarge/Download Table]
SELECTED FINANCIAL DATA (a)
(In thousands except per share data)
For the year: 1996 1995 1994(b) 1993(c)(d) 1992
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Sales $6,534,577 $5,919,420 $4,649,234 $3,560,856 $2,423,033
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Operating income 400,627 423,209 255,974 226,089 163,699
Equity in earnings (loss)
of affiliated companies (97) 2,493 - 1,673 6,550
Interest expense 37,959 46,361 36,168 26,573 31,607
Earnings before
extraordinary charges 202,709 202,544 111,889 106,559 84,885
Extraordinary charges,
net of income taxes - - - - 5,424
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Net income $ 202,709 $ 202,544 $ 111,889 $ 106,559 $ 79,461
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Per common share (fully diluted)
Earnings before extra-
ordinary charges (e) $ 3.95 $ 4.03 $ 2.31 $ 2.22 $ 1.96
Extraordinary charges - - - - (.12)
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Net income (e) $ 3.95 $ 4.03 $ 2.31 $ 2.22 $ 1.84
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At year-end:
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Accounts receivable and
inventories $1,947,719 $1,979,160 $1,422,457 $1,094,175 $ 781,267
Total assets 2,710,351 2,701,016 2,038,774 1,569,152 1,080,163
Total long-term debt and
subordinated debentures 344,562 451,706 349,398 314,859 241,804
Shareholders' equity 1,358,482 1,195,881 837,885 701,799 566,100
--------------------------------------------------------------------------------------------
Book value per common share $ 27.10 $ 23.61 $ 18.15 $ 15.34 12.64
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<FN>
(a) In 1994, Arrow acquired Gates and Anthem in transactions accounted for
as poolings of interests. Accordingly, all financial information for years
prior thereto have been restated to include the operations of Gates and
Anthem.
Also, 1994 includes special charges of $45.3 million associated with
the acquisition and integration of Gates and Anthem. Excluding these charges,
operating income, net income, and net income per share were $301.3
million, $140.7 million, and $2.88, respectively.
(b) Includes results of Silverstar, which were accounted for under the
equity method prior to January 1994 when Arrow increased its holdings to a
majority interest.
(c) Includes results of Spoerle, which were accounted for under the equity
method prior to January 1993 when Arrow increased its holdings to a
majority interest.
(d) Net income is after a restructuring charge of $7.8 million associated with
the disposition of a business unit by Anthem. Excluding this charge,
operating income, net income, and net income per share were $233.9
million, $111.1 million, and $2.31, respectively.
(e) After preferred stock dividends of $.9 million in 1993 and $3.9 million
in 1992.
Item 7. Management's Discussion and Analysis of Financial
-------------------------------------------------
Condition and Results of Operations.
-----------------------------------
For an understanding of the significant factors that influenced
the company's performance during the past three years, the
following discussion should be read in conjunction with the
consolidated financial statements and other information appearing
elsewhere in this report.
During 1994, the company acquired Gates/FA Distributing, Inc.
("Gates") and Anthem Electronics, Inc. ("Anthem") in transactions
accounted for as poolings of interests. The 1994 consolidated
financial statements do not reflect the cost savings and synergies
achieved during 1995 or the sales attrition which may have
resulted from the merger of Gates and Anthem with the company.
Beginning in 1994, the consolidated financial statements include
the results of Silverstar Ltd., S.p.A. ("Silverstar"), which had
been accounted for under the equity method prior to January 1994
when the company increased its holdings to a majority interest.
See Note 2 of the Notes to Consolidated Financial Statements for
information with respect to the acquisitions.
Sales
Consolidated sales of $6.5 billion in 1996 were 10 percent higher
than 1995 sales of $5.9 billion. This sales growth was
principally due to increased sales of commercial computer products
and microprocessors. The sales of semiconductor products were
characterized by an oversupply of product, competitive pricing
pressures, and reductions in memory prices.
In 1995, consolidated sales increased to $5.9 billion, a 27
percent increase over 1994 sales of $4.6 billion. This sales
growth reflected strong activity levels in each of the company's
businesses as well as the impact of key strategic alliances and
acquisitions forged around the world during 1994.
Consolidated sales of $4.6 billion in 1994 were 31 percent higher
than 1993 sales of $3.6 billion. This increase principally
reflected increased activity levels in each of the company's
distribution groups throughout the world, the consolidation of
Silverstar and, to a lesser extent, acquisitions in Europe and the
Asia/Pacific region.
Operating Income
The company's consolidated operating income decreased to $400.6
million in 1996, compared with operating income of $423.2 million
in 1995. The reduction in operating income reflects a further
decline in gross margins due to proportionately higher sales of
lower margin commercial computer products and microprocessors
throughout the world and competitive pricing pressures in Europe
and the Asia/Pacific region, offset in part by the impact of
increased sales and the benefits of continuing economies of scale.
Operating expenses as a percent of sales declined to 9.8 percent
in 1996, the lowest in the company's history.
In 1995, the company's consolidated operating income increased to
$423.2 million, compared with operating income of $256 million in
1994. Included in the 1994 results were special charges of $45.3
million associated with the acquisition and integration of Gates
and Anthem into Arrow. The improvement in operating income
outpaced the growth in sales as the company benefited from cost
savings following the integration of Gates and Anthem. These cost
savings principally reflected reductions in personnel performing
duplicative functions and the elimination of duplicative
administrative facilities, computer and telecommunications
equipment, and selling and stocking locations. Operating expenses
as a percentage of sales declined to 10.3 percent in 1995.
The company's consolidated operating income increased to $256
million in 1994, compared with operating income of $226.1 million
in 1993. Excluding the special charges relating to Gates and
Anthem, operating income was $301.3 million. The improvement in
operating income, excluding the special charges, reflected the
impact of increased sales, continued economies of scale, expense
containment which reduced operating expenses as a percentage of
sales, and the consolidation of Silverstar, offset in part by
lower gross profit margins. Gross profit margins decreased from
1993 as a result of proportionately higher sales of lower margin
microprocessors and commercial computer products, coupled with
competitive pricing pressures. Operating expenses as a percentage
of sales, excluding the special charges, were 11.1 percent.
Interest
Interest expense of $38 million in 1996 decreased by $8.4 million
from the 1995 level. The decrease reflects the conversion of the
company's 5-3/4% convertible subordinated debentures in October
1995, lower borrowings resulting from improved working capital
usage, and lower borrowing costs, offset in part by borrowings to
fund purchases of common stock pursuant to a stock repurchase
program.
In 1995, interest expense increased to $46.4 million from $36.2
million in 1994, reflecting increases in working capital required
to support higher sales, interest related to borrowings associated
with acquisitions, and capital expenditures.
Interest expense of $36.2 million in 1994 increased by $9.6
million from 1993. The increase principally reflected the
consolidation of Silverstar and, to a lesser extent, interest
related to borrowings associated with acquisitions.
Income Taxes
The company recorded a provision for taxes at an effective tax
rate of 39.9 percent in 1996, compared with 40.4 percent in 1995.
The lower effective rate was the result of decreased earnings in
countries with higher tax rates.
In 1995, the company recorded a provision for taxes at an
effective tax rate of 40.4 percent compared with 40.6 percent,
excluding the special charges associated with the Gates and Anthem
acquisitions, in 1994.
The company recorded a provision for taxes at an effective tax
rate of 40.6 percent in 1994, compared with 41 percent in 1993.
The lower effective tax rate was the result of increased earnings
in countries with lower tax rates.
Net Income
Net income in 1996 was $202.7 million, an increase from $202.5
million in 1995. The increase in net income is attributable to
decreases in interest expense, income taxes, and minority
interest, offset in part by lower operating income.
In 1995, the company's net income advanced to $202.5 million from
$140.7 million in 1994, before the special charges of $45.3
million ($28.8 million after taxes) associated with Gates and
Anthem. The significant improvement in net income was principally
the result of the increase in operating income, offset in part by
higher interest expense.
Net income in 1994 was $111.9 million, an advance from $106.6
million in 1993. Excluding the special charges associated with
Gates and Anthem, net income in 1994 was $140.7 million.
Excluding the restructuring charge associated with the sale by
Anthem of its Eagle Technology Business Unit, net income was
$111.1 million in 1993. The increase in net income was due
principally to increased operating income, offset in part by
higher interest expense.
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 78 percent in
1996 and 1995.
In 1996, working capital increased by five percent, or $56
million, compared with 1995. This percentage increase was less
than that of sales as a result of improvements in working capital
usage.
The net amount of cash provided by operations in 1996 was $308.6
million, the principal element of which was the cash flow
resulting from net earnings and improved working capital usage.
The net amount of cash used by the company for investing purposes
was $57.1 million, including $38.9 million for various
acquisitions. Cash flows used for financing activities were
$202.6 million, principally reflecting the reduction in the
company's borrowings, purchases of common stock, and distributions
to partners.
In January 1997, the company issued $200 million of 10 year senior
notes bearing interest at 7 percent and $200 million of 30 year
senior debentures bearing interest at 7-1/2 percent. The net
proceeds of $393.3 million were used primarily to fund the
acquisition of the volume electronic component distribution
businesses of Premier Farnell plc in January 1997. The balance
will be used for working capital and other general corporate
purposes.
Working capital increased by $349 million, or 40 percent, in 1995
compared with 1994, primarily as a result of increased sales and,
to a lesser extent, acquisitions in Europe and the Asia/Pacific
region.
The net amount of cash used for the company's operating activities
in 1995 was $114.1 million, as the growth in accounts receivable
and inventories outpaced the increase in net income. The net
amount of cash used for investing activities was $132.7 million,
including $90.7 million for various investments and acquisitions.
The net amount of cash provided by financing activities was $228.1
million, principally reflecting the company's borrowings to
finance investments and acquisitions, distributions to partners,
and the repayment of certain debt.
In October 1995, the company redeemed its 5-3/4% convertible
subordinated debentures due 2002, which resulted in the issuance
of 3,772,254 shares of common stock and eliminated approximately
$125 million in long-term debt and $7.2 million of annual interest
charges.
In 1994, working capital increased by $103.6 million, or 14
percent, compared with 1993, as a result of increased sales, the
consolidation of Silverstar, and acquisitions.
The net amount of cash provided by operations in 1994 was $125.2
million, the principal element of which was the cash flow
resulting from higher net earnings, offset in part by increased
working capital needs to support sales growth. The net amount of
cash used by the company for investing purposes was $121.7
million, including $108.5 million for various acquisitions. Cash
flows from financing activities were $13.4 million, principally
from increased borrowings in part to finance acquisitions in
Europe and the Asia/Pacific region.
Item 8. Financial Statements.
--------------------
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
The Board of Directors and Shareholders
Arrow Electronics, Inc.
We have audited the accompanying consolidated balance sheet of
Arrow Electronics, Inc. as of December 31, 1996 and 1995, and the
related consolidated statements of income, cash flows, and
shareholders' equity for each of the three years in the period
ended December 31, 1996. Our audits also included the financial
statement schedule listed in the Index at Item 14(a). These
financial statements and the schedule are the responsibility of
the company's management. Our responsibility is to express an
opinion on these financial statements and the schedule based on
our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to
above present fairly, in all material respects, the consolidated
financial position of Arrow Electronics, Inc. at December 31, 1996
and 1995, and the consolidated results of its operations and its
cash flows for each of the three years in the period ended
December 31, 1996, in conformity with generally accepted
accounting principles. Also, in our opinion, the related
financial statement schedule, when considered in relation to the
basic financial statements taken as a whole, presents fairly in
all material respects the information set forth therein.
ERNST & YOUNG LLP
New York, New York
February 17, 1997
MANAGEMENT'S RESPONSIBILITY FOR FINANCIAL REPORTING
The consolidated financial statements of Arrow Electronics, Inc.
have been prepared by management, which is responsible for their
integrity and objectivity. These statements, prepared in
accordance with generally accepted accounting principles, reflect
our best use of judgment and estimates where appropriate.
Management also prepared the other information in the annual
report and is responsible for its accuracy and consistency with
the consolidated financial statements.
The company's system of internal controls is designed to provide
reasonable assurance that company assets are safeguarded from loss
or unauthorized use or disposition, and that transactions are
executed in accordance with management's authorization and are
properly recorded. In establishing the basis for reasonable
assurance, management balances the costs of the internal controls
with the benefits they provide. The system contains self-
monitoring mechanisms, and compliance is tested through an
extensive program of site visits and audits by the company's
operating controls staff.
The Audit Committee of the Board of Directors, consisting entirely
of outside directors, meets regularly with management, operating
controls staff, and independent auditors, and reviews audit plans
and results as well as management's actions taken in discharging
its responsibilities for accounting, financial reporting, and
internal controls. Management, operating controls staff, and
independent auditors have direct and confidential access to the
Audit Committee at all times.
The company's independent auditors, Ernst & Young LLP, were
engaged to audit the consolidated financial statements in
accordance with generally accepted auditing standards. These
standards include a study and evaluation of internal controls for
the purpose of establishing a basis for reliance thereon relative
to the scope of their audit of the consolidated financial
statements.
Stephen P. Kaufman
Chairman and Chief Executive Officer
Gerald Luterman
Senior Vice President and
Chief Financial Officer
ARROW ELECTRONICS, INC.
CONSOLIDATED BALANCE SHEET
(Dollars in thousands)
[Enlarge/Download Table]
December 31,
------------------------
1996 1995
ASSETS ---- ----
Current assets:
Cash and short-term investments $ 136,400 $ 93,947
Accounts receivable, less allowance for doubtful
accounts ($39,753 in 1996 and $38,670 in 1995) 902,878 940,049
Inventories 1,044,841 1,039,111
Prepaid expenses and other assets 36,004 31,610
---------- ----------
Total current assets 2,120,123 2,104,717
---------- ----------
Property, plant and equipment at cost
Land 8,712 14,527
Buildings and improvements 77,257 63,857
Machinery and equipment 127,633 112,883
---------- ----------
213,602 191,267
Less accumulated depreciation and amortization 98,377 73,932
---------- ----------
115,225 117,335
---------- ----------
Investment in affiliated company 34,200 36,031
Cost in excess of net assets of companies acquired,
less accumulated amortization ($57,802 in 1996
and $48,085 in 1995) 388,787 379,171
Other assets 52,016 63,762
---------- ----------
$2,710,351 $2,701,016
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $594,474 $ 561,834
Accrued expenses 180,129 207,738
Short-term borrowings, including current maturities of
long-term debt 71,504 117,085
---------- ---------
Total current liabilities 846,107 886,657 Long-term debt
---------- ---------
Long-term debt 344,562 451,706
Other liabilities 68,488 68,992
Minority interest 92,712 97,780
Shareholders' equity:
Common stock, par value $1:
Authorized--120,000,000 and 80,000,000 shares in 1996 and 1995
Issued--51,196,385 and 50,647,826 shares in 1996 and 1995 51,196 50,648
Capital in excess of par value 549,913 530,324
Retained earnings 805,342 602,633
Foreign currency translation adjustment 8,753 18,398
---------- ----------
1,415,204 1,202,003
Less: Treasury stock (1,069,699 and 22,297 shares
in 1996 and 1995), at cost 49,065 24
Unamortized employee stock awards 7,657 6,098
---------- ----------
Total shareholders' equity 1,358,482 1,195,881
---------- ----------
$2,710,351 $2,701,016
========== ==========
See accompanying notes.
ARROW ELECTRONICS, INC.
CONSOLIDATED STATEMENT OF INCOME
(In thousands except per share data)
[Enlarge/Download Table]
Years Ended December 31,
-------------------------------------
1996 1995 1994
---- ---- ----
Sales $6,534,577 $5,919,420 $4,649,234
---------- ---------- ----------
Costs and expenses:
Cost of products sold 5,492,556 4,888,746 3,832,169
Selling, general and administrative expenses 604,412 574,166 487,982
Depreciation and amortization 36,982 33,299 27,759
Integration charges - - 45,350
---------- ---------- ----------
6,133,950 5,496,211 4,393,260
---------- ---------- ----------
Operating income 400,627 423,209 255,974
Equity in earnings (loss)
of affiliated company (97) 2,493 -
Interest expense, net 37,959 46,361 36,168
---------- ---------- ----------
Earnings before income taxes
and minority interest 362,571 379,341 219,806
Provision for income taxes 144,667 153,139 91,206
---------- ---------- ----------
Earnings before minority interest 217,904 226,202 128,600
Minority interest 15,195 23,658 16,711
---------- ---------- ----------
Net income $ 202,709 $ 202,544 $111,889
========== ========== ==========
Per common share:
Primary $3.95 $4.21 $2.40
===== ===== =====
Fully diluted $3.95 $4.03 $2.31
===== ===== =====
Average number of common shares and common
share equivalents outstanding:
Primary 51,380 48,081 46,634
====== ====== ======
Fully diluted 51,380 51,123 50,407
====== ====== ======
See accompanying notes.
ARROW ELECTRONICS, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(In thousands)
[Enlarge/Download Table]
Years Ended December 31,
---------------------------------
1996 1995 1994
---- ---- ----
Cash flows from operating activities:
Net income $202,709 $202,544 $111,889
Adjustments to reconcile net income to net
cash provided by (used for) operations:
Minority interest in earnings 15,195 23,658 16,711
Depreciation and amortization 39,453 35,192 29,821
Equity in undistributed (earnings) loss of
affiliated company 97 (2,493) -
Integration charges - - 45,350
Deferred income taxes 10,280 14,210 8,167
Change in assets and liabilities, net of
effects of acquired businesses:
Accounts receivable 45,845 (221,840) (80,315)
Inventories (8,426) (288,301) (73,425)
Prepaid expenses and other assets (2,893) (8,675) 2,754
Accounts payable 26,276 139,257 93,987
Accrued expenses (23,870) (3,848) (37,275)
Other 3,926 (3,791) 7,511
-------- -------- --------
Net cash provided by (used for) operating activities 308,592 (114,087) 125,175
-------- -------- --------
Cash flows from investing activities:
Acquisition of property, plant and equipment (28,596) (42,254) (22,773)
Proceeds from sale of building 10,442 - -
Cash consideration paid for acquired businesses (38,851) (59,119) (108,478)
Investment in affiliate 1,734 (31,538) -
Other (1,791) 190 9,509
-------- -------- --------
Net cash used for investing activities (57,062) (132,721) (121,742)
-------- -------- --------
Cash flows from financing activities:
Change in short-term borrowings (53,992) 49,976 (35,811)
Change in credit facilities (96,783) 290,436 15,184
Proceeds from long-term debt - 5,701 36,037
Repayment of long-term debt (7,097) (102,370) (6,151)
Proceeds from exercise of stock options 12,323 13,717 4,897
Distributions to minority partners (7,967) (28,590) (524)
Purchases of common stock (48,993) - -
Other (123) (756) (200)
-------- -------- --------
Net cash (used for) provided by financing activities (202,632) 228,114 13,432
-------- -------- --------
Effect of exchange rate changes on cash (6,445) 7,035 7,779
Net increase (decrease) in cash and -------- --------
short-term investments 42,453 (11,659) 24,644
Cash and short-term investments at
beginning of year 93,947 105,606 80,962
-------- -------- --------
Cash and short-term investments at end of year $136,400 $ 93,947 $105,606
======== ======== ========
Supplemental disclosures of cash flow information:
Cash paid during the year for:
Income taxes $130,834 $142,101 $ 92,514
Interest 38,118 44,019 31,753
See accompanying notes.
ARROW ELECTRONICS, INC.
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
(In thousands)
[Enlarge/Download Table]
Common Foreign Unamortized
Stock Capital in Currency Employee
at Par Excess of Retained Translation Treasury Stock Awards
Value Par Value Earnings Adjustment Stock and Other Total
------- --------- -------- ---------- -------- ----------- -----
Balance at December 31, 1993 $45,753 $378,309 $288,200 $(7,492) $ (12) $ (2,959) $ 701,799
Net income - - 111,889 - - - 111,889
Exercise of stock options 337 4,560 - - - - 4,897
Tax benefits related to
exercise of stock options - 3,147 - - - - 3,147
Restricted stock awards, net 78 2,897 - - (1) (2,974) -
Amortization of employee
stock awards - - - - - 1,182 1,182
Other - - - - - 1,112 1,112
Translation adjustments - - - 13,859 - - 13,859
------- -------- -------- ------- ------ -------
Balance at December 31, 1994 46,168 388,913 400,089 6,367 (13) (3,639) 837,885
Net income - - 202,544 - - - 202,544
Conversion of subordinated
debentures 3,773 118,684 - - - - 122,457
Exercise of stock options 567 13,150 - - - - 13,717
Tax benefits related to
exercise of stock options - 4,758 - - - - 4,758
Restricted stock awards, net 140 4,819 - - (11) (4,948) -
Amortization of employee
stock awards - - - - - 2,313 2,313
Other - - - - - 176 176
Translation adjustments - - - 2,031 - - 12,031
------- -------- -------- ------- -------- -------- ----------
Balance at December 31, 1995 $50,648 $530,324 $602,633 $18,398 $ (24) $ (6,098) $1,195,881
(continued)
[Enlarge/Download Table]
ARROW ELECTRONICS, INC.
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
(In thousands)
Common Foreign Unamortized
Stock Capital in Currency Employee
at Par Excess of Retained Translation Treasury Stock Awards
Value Par Value Earnings Adjustment Stock and Other Total
------- ---------- -------- ----------- -------- ----------- ---------
Balance at December 31, 1995 $50,648 $530,324 $602,633 $18,398 $ (24) $ (6,098) $1,195,881
Net income - - 202,709 - - - 202,709
Exercise of stock options 462 12,236 - - (375) - 12,323
Tax benefits related to
exercise of stock options - 3,345 - - - - 3,345
Restricted stock awards, net 86 4,008 - - 327 (4,421) -
Amortization of employee
stock awards - - - - - 2,862 2,862
Purchases of common stock - - - - (48,993) - (48,993)
Translation adjustments - - - (9,645) - - (9,645)
------- -------- -------- ------- -------- -------- ----------
Balance at December 31, 1996 $51,196 $549,913 $805,342 $ 8,753 $(49,065) $ (7,657) $1,358,482
======= ======== ======== ======= ======== ======== ==========
See accompanying notes.
ARROW ELECTRONICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Summary of Significant Accounting Policies
Principles of Consolidation
---------------------------
The consolidated financial statements include the accounts of the
company and its majority-owned subsidiaries. The company's
investment in an affiliated company which is not majority-owned is
accounted for using the equity method. All significant
intercompany transactions are eliminated.
Use of Estimates
----------------
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect the amounts reported in
the consolidated financial statements and accompanying notes.
Actual results could differ from those estimates.
Inventories
-----------
Inventories are stated at the lower of cost or market. Cost is
determined on the first-in, first-out (FIFO) method.
Property and Depreciation
-------------------------
Depreciation is computed on the straight-line method for financial
reporting purposes and on accelerated methods for tax reporting
purposes. Leasehold improvements are amortized over the shorter
of the term of the related lease or the life of the improvement.
Cost in Excess of Net Assets of Companies Acquired
--------------------------------------------------
The cost in excess of net assets of companies acquired is being
amortized on a straight-line basis, principally over 40 years.
Foreign Currency
----------------
The assets and liabilities of foreign operations are translated at
the exchange rates in effect at the balance sheet date, with the
related translation gains or losses reported as a separate
component of shareholders' equity. The results of foreign
operations are translated at the monthly weighted average exchange
rates.
Income Taxes
------------
Income taxes are accounted for under the liability method.
Deferred taxes reflect the tax consequences on future years of
differences between the tax bases of assets and liabilities and
their financial reporting amounts.
Net Income Per Share
--------------------
Net income per share for 1996, 1995, and 1994 is based upon the
weighted average number of shares outstanding and dilutive common
share equivalents of 617,350, 749,216, and 634,739, respectively.
For 1995, the weighted average includes the conversion to common
stock of the 5-3/4% convertible subordinated debentures (the
"debentures") from October 1995. For 1995 and 1994, net income
per share on a fully diluted basis assumes that the debentures
were converted into common stock at the beginning of the year and
the related interest expense, net of taxes, was eliminated.
Cash and Short-term Investments
-------------------------------
Short-term investments which have a maturity of ninety days or less
at time of purchase are considered cash equivalents in the
consolidated statement of cash flows. The carrying amount reported
in the consolidated balance sheet for short-term investments
approximates fair value.
2. Acquisitions
During 1996, the company increased its holdings in Spoerle
Electronic Handelsgesellschaft mbH ("Spoerle") to 75 percent and
Silverstar Ltd., S.p.A. ("Silverstar") to 93 percent.
During 1995, Spoerle acquired HED Heinrich Electronic Distribution
GmbH. In addition, the company acquired Ally, Inc. in Taiwan and
Arrow Components (NZ) Limited in New Zealand. The company also
increased its interests in Silverstar to 86 percent; Amitron S.A.
and ATD Electronica S.A., the company's subsidiaries serving Spain
and Portugal, to 75 percent and 87 percent, respectively; and
Arrow Computer Products (formerly The Megachip Group), one of the
company's French subsidiaries, to 100 percent.
The cost of each acquisition has been allocated among the net
assets acquired on the basis of the respective fair values of the
assets acquired and liabilities assumed. For financial reporting
purposes, the acquisitions are accounted for as purchase
transactions beginning in the respective month of acquisition. The
aggregate consideration paid for these acquisitions exceeded the
net assets acquired by $20,674,000 and $30,671,000 in 1996 and
1995, respectively.
The company acquired Gates/FA Distributing, Inc. ("Gates") in
August 1994 and Anthem Electronics, Inc.("Anthem") in November
1994 through the exchange of 3,743,000 and 10,803,000 shares of
newly issued company stock, respectively. These acquisitions were
accounted for as poolings of interests. The 1994 consolidated
financial statements do not reflect the cost savings achieved from
the combination of Gates and Anthem with the company's business or
the sales attrition which may have resulted. These cost savings
principally reflected reductions in personnel performing
duplicative functions and the elimination of duplicative
administrative facilities, computer and telecommunications
equipment, and selling and stocking locations. The consolidated
financial statements for 1994 included special charges of
$28,850,000 after taxes ($.62 per share on a primary basis) of
costs associated with the acquisition and integration of the Gates
and Anthem businesses and related transaction fees. Such
integration costs included real estate termination costs and
severance and other expenses related to personnel performing
duplicative functions.
In connection with certain acquisitions, the company may be
required to make additional payments that are contingent upon the
acquired businesses achieving certain operating goals. During
1996 and 1995, the company made additional payments of $9,675,000
and $14,884,000, respectively, which have been capitalized as cost
in excess of net assets of companies acquired.
3. Investment in Affiliated Company
During 1995, the company acquired a 45 percent interest in Strong
Electronics Co., Ltd. ("Strong Electronics"), a joint venture with
Lite-On Inc., a Taiwan-based electronics distributor.
4. Debt
Long-term debt consisted of the following at December 31 (in
thousands):
1996 1995
---- ----
Global multi-currency credit facility $267,512 $294,903
8.29% senior notes 75,000 75,000
Lines of credit - 70,000
Other obligations with various
interest rates and due dates 2,254 13,968
--------- ---------
344,766 453,871
Less installments due within one year 204 2,165
--------- --------
$344,562 $451,706
========= ========
The company's revolving credit agreement (the "global multi-
currency credit facility") was amended in September 1996 to
increase to $650,000,000 the amount of available credit, to reduce
the applicable borrowing rates, and to extend the maturity date to
September 2001. The interest rate for loans under this facility
is at the applicable eurocurrency rate (5.6875 percent for U.S.
dollar denominated loans at December 31, 1996) plus a margin of
.20 percent. The company may also utilize the facility's
competitive advance option to obtain loans, generally at a lower
rate. The company pays the banks a facility fee of .08 percent per
annum.
The senior notes are payable in three equal annual installments
commencing in 1998.
The global multi-currency credit facility and the senior notes
limit, among other things, the payment of cash dividends and the
incurrence of additional borrowings and require that working
capital, net worth, and certain other financial ratios be
maintained at designated levels.
The company maintains uncommitted lines of credit with a group of
banks under which up to $84,000,000 could be borrowed at December
31, 1996 on such terms as the company and the banks may agree.
Borrowings under the lines of credit are classified as long-term
debt as the company has the ability to renew them or refinance
them under the global multi-currency credit facility. There are no
fees or compensating balances associated with these borrowings.
There were no outstanding borrowings under the lines of credit at
December 31, 1996.
The aggregate annual maturities of long-term debt for each of the
five years in the period ending December 31, 2001 are: 1997-
$204,000; 1998-$25,205,000; 1999-$25,223,000; 2000-$25,242,000;
and 2001-$267,774,000.
Short-term borrowings are principally utilized to support the
working capital requirements of certain foreign operations. The
weighted average interest rates of these borrowings at December
31, 1996 and 1995 were 9 percent and 10.4 percent, respectively.
The estimated fair market value of the senior notes at December
31, 1996 was 104 percent of par. The balance of the company's
borrowings approximate their fair value.
5. Income Taxes
The provision for income taxes consists of the following (in
thousands):
1996 1995 1994
Current ---- ---- ----
Federal $ 78,715 $ 78,639 $53,465
State 21,482 19,989 15,317
Foreign 29,507 37,330 28,063
-------- -------- -------
129,704 135,958 96,845
======== ======== =======
Deferred
Federal 4,758 2,625 (8,437)
State 1,087 600 (2,824)
Foreign 9,118 13,956 5,622
-------- -------- -------
14,963 17,181 (5,639)
-------- -------- -------
$144,667 $153,139 $91,206
======== ======== =======
The principal causes of the difference between the U.S. statutory
and effective income tax rates are as follows (in thousands):
1996 1995 1994
---- ---- ----
Provision at statutory rate $126,900 $132,769 $76,932
State taxes, net of federal
benefit 14,670 13,383 8,120
Foreign tax rate differential 6,625 4,959 4,841
Other (3,528) 2,028 1,313
-------- -------- -------
$144,667 $153,139 $91,206
======== ======== =======
For financial reporting purposes, income before income taxes
attributable to the United States was $279,149,000 in 1996,
$252,894,000 in 1995, and $184,241,000 excluding the special
charges of $45,350,000 in 1994, and income before income taxes
attributable to foreign operations was $83,422,000 in 1996,
$126,447,000 in 1995, and $80,915,000 in 1994.
The significant components of the company's deferred tax assets,
which are included in other assets, are as follows (in thousands):
1996 1995
------- -------
Inventory reserves $12,730 $10,268
Allowance for doubtful accounts 8,045 6,712
Accrued expenses 5,675 6,217
Other 2,050 3,303
------- -------
$28,500 $26,500
======= =======
Included in other liabilities are deferred tax liabilities of
$36,156,000 and $33,310,000 at December 31, 1996 and 1995,
respectively. The deferred tax liabilities are principally the
result of the differences in the bases of the German assets and
liabilities for tax and financial reporting purposes.
6. Shareholders' Equity
In May 1996, the shareholders approved an amendment to the
certificate of incorporation to increase the number of authorized
shares of common stock from 80,000,000 to 120,000,000. The
company has 2,000,000 authorized shares of serial preferred stock
with a par value of $1.
In 1988, the company paid a dividend of one preferred share
purchase right on each outstanding share of common stock. Each
right, as amended, entitles a shareholder to purchase one one-
hundredth of a share of a new series of preferred stock at an
exercise price of $50 (the "exercise price"). The rights are
exercisable only if a person or group acquires 20 percent or more
of the company's common stock or announces a tender or exchange
offer that will result in such person or group acquiring 30
percent or more of the company's common stock. Rights owned by
the person acquiring such stock or transferees thereof will
automatically be void. Each other right will become a right to
buy, at the exercise price, that number of shares of common stock
having a market value of twice the exercise price. The rights,
which do not have voting rights, expire on March 2, 1998 and may
be redeemed by the company at a price of $.01 per right at any
time until ten days after a 20 percent ownership position has been
acquired. In the event that the company merges with, or transfers
50 percent or more of its consolidated assets or earning power to,
any person or group after the rights become exercisable, holders
of the rights may purchase, at the exercise price, a number of
shares of common stock of the acquiring entity having a market
value equal to twice the exercise price.
In May 1996, the company's board of directors authorized
management to implement a stock repurchase program under which the
company may purchase, from time to time, at least $100,000,000 of
the company's common stock. Purchases were made in the open
market. The timing and amount of the purchases depended, among
other things, on market conditions and corporate requirements. As
of February 17, 1997, the company had acquired approximately
1,895,700 shares of its common stock and had substantially
completed the program.
7. Employee Stock Plans
Restricted Stock Plan
---------------------
Under the terms of the Arrow Electronics, Inc. Restricted Stock
Plan (the "Plan"), a maximum of 1,480,000 shares of common stock
may be awarded at the discretion of the board of directors to key
employees of the company. As many as 100 employees may be
considered for awards under the Plan.
Shares awarded under the Plan may not be sold, assigned,
transferred, pledged, hypothecated, or otherwise disposed of,
except as provided in the Plan. Shares awarded become free of
vesting restrictions over a four-year period. The company awarded
50,000 shares of common stock in early 1997 to 60 key employees in
respect of 1996, 119,860 shares of common stock to 81 key
employees during 1996, 106,350 shares of common stock to 79 key
employees during 1995, and 77,350 shares of common stock to 50 key
employees during 1994.
Forfeitures of shares awarded under the Plan were 24,637, 10,425,
and 1,000, during 1996, 1995, and 1994, respectively. The
aggregate market value of outstanding awards under the Plan at the
respective dates of award is being amortized over a four-year
period and the unamortized balance is included in shareholders'
equity as unamortized employee stock awards.
Stock Option Plan
-----------------
Under the terms of the Arrow Electronics, Inc. Stock Option Plan
(the "Option Plan"), both nonqualified and incentive stock options
for an aggregate of 6,000,000 shares of common stock were
authorized for grant to key employees at prices determined by the
board of directors in its discretion or, in the case of incentive
stock options, prices equal to the fair market value of the shares
at the dates of grant. Options currently outstanding have terms
of ten years and become exercisable in equal annual installments
over two- or three-year periods from date of grant. The options
issued and outstanding under the option plans of Gates and Anthem
at the dates of their acquisition have been converted into options
to purchase shares of the company's common stock at the same
exchange ratio as utilized in acquiring these businesses, and all
unissued options under those plans were canceled.
The company applies Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees", and related
interpretations in accounting for the Option Plan. Accordingly,
no compensation expense has been recognized in the company's
accounts for this plan.
The following information relates to the option plan for the years
ended December 31:
[Enlarge/Download Table]
Average Average Average
Exercise Exercise Exercise
1996 Price 1995 Price 1994 Price
--------- -------- --------- ------- --------- --------
Options outstanding at
beginning of year 2,438,575 $33.38 2,164,038 $27.82 1,806,818 $21.61
Granted 1,633,960 47.35 917,450 41.28 789,123 36.55
Exercised (461,985) 27.49 (566,504) 24.21 (336,481) 14.44
Forfeited (57,029) 37.75 (76,409) 36.15 (95,422) 40.05
Options outstanding --------- ------ --------- ------ --------- ------
at end of year 3,553,521 $40.50 2,438,575 $33.38 2,164,038 $27.82
========= ====== ========= ====== ========= ======
Prices per share of
options outstanding $3.63-55.38 $3.63-55.38 $2.53-52.43
Options available for future grant:
Beginning of year 1,793,281 2,667,389 2,446,345
End of year 216,350 1,793,281 2,667,389
The following table summarizes information about stock options
outstanding at December 31, 1996:
[Download Table]
Options Outstanding Options Exercisable
---------------------------------------- ------------------------
Weighted Weighted Weighted
Maximum Average Average Average
Exercise Number Remaining Exercise Number Exercise
Price Outstanding Contractual Life Price Exercisable Price
-------- ----------- ---------------- -------- ----------- ---------
$30.00 397,973 65 months $16.62 394,298 $16.53
35.00 491,335 94 months 33.83 460,187 33.93
40.00 358,235 76 months 37.42 327,140 37.41
45.00 1,234,743 103 months 42.38 403,713 42.43
60.00 1,071,235 116 months 51.28 314,566 51.84
--------- ---------
All 3,553,521 103 months $40.50 1,899,904 $35.69
========= =========
Had stock-based compensation costs been determined as prescribed
by Statement of Financial Accounting Standards No. 123,
"Accounting for Stock-Based Compensation", net income would have
been reduced by $4.8 million ($.05 per share on a primary basis)
in 1996 and $2.3 million ($.01 per share on a primary basis) in
1995. The pro forma effect on net income for 1996 and 1995 is not
comparable as the 1995 amount reflects only the pro forma
compensation expense related to grants made in 1995, whereas the
1996 amount reflects the pro forma compensation expense related to
grants made in both years.
The estimated weighted average fair value, utilizing the Black-
Scholes option-pricing model, at date of option grant during 1996
and 1995 was $11.98 and $13.51, per option, respectively. The
weighted average fair value was estimated using the following
assumptions:
1996 1995
---- ----
Expected life (months) 31 47
Risk-free interest rate (percent) 5.6 6.7
Expected volatility (percent) 30 36
There is no expected dividend yield.
Stock Ownership Plan
The company maintains a noncontributory employee stock ownership
plan which enables most North American employees to acquire shares
of the company's common stock. Contributions, which are
determined by the board of directors, are in the form of common
stock or cash which is used to purchase the company's common stock
for the benefit of participating employees. Contributions to the
plan for 1996, 1995, and 1994 amounted to $4,218,000, $3,878,000,
and $2,765,000, respectively.
8. Retirement Plans
The company has a defined contribution plan for eligible
employees, which qualifies under Section 401(k) of the Internal
Revenue Code. The company's contribution to the plan, which is
based on a specified percentage of employee contributions,
amounted to $4,608,000, $3,966,000, and $3,235,000 in 1996, 1995,
and 1994, respectively. Certain domestic and foreign subsidiaries
maintain separate defined contribution plans for their employees
and made contributions thereunder which amounted to $1,162,000,
$822,000, and $956,000 in 1996, 1995, and 1994, respectively.
The company maintains an unfunded supplemental retirement plan for
certain executives. The company's board of directors determines
those employees eligible to participate in the plan and their
maximum annual benefit upon retirement.
9. Lease Commitments
The company leases certain office, warehouse, and other property
under noncancelable operating leases expiring at various dates
through 2016. Rental expenses of noncancelable operating leases
amounted to $29,390,000 in 1996, $27,594,000 in 1995, and
$21,736,000 in 1994. Aggregate minimum rental commitments under
all noncancelable operating leases approximate $139,278,000
exclusive of real estate taxes, insurance, and leases related to
facilities closed in connection with the integration of the
acquired businesses. Such commitments on an annual basis are: 1997-
$27,830,000; 1998-$24,171,000; 1999-$19,537,000; 2000-$15,230,000;
2001-$11,822,000; and $40,688,000 thereafter. The company's
obligations under capitalized leases are reflected as a component
of other liabilities.
10. Financial Instruments
The company enters into foreign exchange forward contracts (the
"contracts") to reduce risk due to changes in currency exchange
rates, principally French francs, German deutsche marks, Italian
lira, and British pounds sterling. These contracts hedge firm
commitments of inventory purchases and generally are settled
within three months. Gains or losses on these contracts are
deferred and recognized when the underlying future purchase is
recognized. The risk of loss on a contract is the risk of
nonperformance by the counterparties. The fair value of the
contracts is estimated using market quotes. The notional amount
of the contracts at December 31, 1996 and December 31, 1995 was
$53,462,000 and $52,345,000, respectively. The carrying amount,
which is nominal, approximated fair value at December 31, 1996 and
1995.
11. Segment and Geographic Information
The company is engaged in one business, the distribution of
electronic components, systems, and related products. The
geographic distribution of consolidated sales, operating income
(loss), and identifiable assets is as follows (in thousands):
Sales to Identifiable
Unaffiliated Operating Assets at
Customers Income (Loss) December 31,
------------ ------------ ------------
1996
North America $4,309,839 $317,846 $1,463,528
Europe 1,855,821 101,326 1,040,326
Asia/Pacific 368,917 96 155,830
Corporate - (18,641) 16,467
Investment in affiliated
company - - 34,200
---------- -------- ----------
$6,534,577 $400,627 $2,710,351
========== ======== ==========
Sales to Identifiable
Unaffiliated Operating Assets at
Customers Income (Loss) December 31,
1995 ------------ ------------ -----------
North America $3,929,016 $295,941 $1,476,420
Europe 1,719,523 135,519 1,018,755
Asia/Pacific 270,881 8,884 134,947
Corporate - (17,135) 34,863
Investment in affiliated
company - - 36,031
---------- -------- ----------
$5,919,420 $423,209 $2,701,016
========== ======== ==========
1994
North America $3,339,210 $224,007 $1,169,696
Europe 1,146,726 89,879 739,863
Asia/Pacific 163,298 4,288 96,773
Corporate - (16,850) 32,442
Integration charges - (45,350) -
---------- -------- ----------
$4,649,234 $255,974 $2,038,774
========== ======== ==========
Strong Electronics, the company's Taiwanese affiliate, recorded
sales of approximately $104,000,000 and $97,000,000 in 1996 and
1995, respectively, which are not reflected in the company's
consolidated financial statements.
12. Quarterly Financial Data (Unaudited)
A summary of the company's quarterly results of operations follows
(in thousands except per share data):
First Second Third Fourth
Quarter Quarter Quarter Quarter
1996 ---------- ---------- ---------- ----------
Sales $1,703,318 $1,601,651 $1,597,379 $1,632,229
Gross profit 281,817 265,336 243,985 250,883
Net income 56,808 54,097 43,756 48,048
Per common share:
Primary 1.11 1.05 .85 .94
Fully diluted 1.11 1.05 .85 .94
1995
Sales $1,440,353 $1,458,213 $1,459,591 $1,561,263
Gross profit 246,330 262,838 256,794 264,712
Net income 44,851 51,752 50,958 54,983
Per common share:
Primary .96 1.09 1.07 1.09
Fully diluted .91 1.03 1.01 1.08
13. Subsequent Event
In January 1997, the company acquired the volume electronic
component distribution businesses of Premier Farnell plc for
approximately $300,000,000, subject to certain adjustments. The
acquisition was financed through the issuance of $200,000,000 of
10 year senior notes (interest at 7 percent per annum) and
$200,000,000 of 30 year senior debentures (interest at 7-1/2
percent per annum). The net proceeds of the offering were
approximately $393,296,000. The balance of the proceeds will be
used for working capital and other general corporate purposes.
The terms of the indenture are less restrictive than the terms of
the company's global credit facility and 8.29% senior notes.
Item 9. Changes In and Disagreements with Accountants on
------------------------------------------------
Accounting and Financial Disclosure.
-----------------------------------
None.
Part III
Item 10. Directors and Executive Officers of the Registrant.
-----------------------------------------------------
See "Executive Officers" in the response to Item 1 above. In
addition, the information set forth under the heading "Election
of Directors" in the company's Proxy Statement filed in
connection with the Annual Meeting of Shareholders scheduled to
be held May 14, 1997 hereby is incorporated herein by
reference.
Item 11. Executive Compensation.
----------------------
The information set forth under the heading "Executive
Compensation and Other Matters" in the company's Proxy
Statement filed in connection with the Annual Meeting of
Shareholders scheduled to be held May 14, 1997 hereby is
incorporated herein by reference.
Item 12. Security Ownership of Certain Beneficial Owners and
-----------------------------------------------------
Management.
----------
The information on page 3 and under the heading "Election of
Directors" in the company's Proxy Statement filed in connection
with the Annual Meeting of Shareholders scheduled to be held
May 14, 1997 hereby is incorporated herein by reference.
Item 13. Certain Relationships and Related Transactions.
----------------------------------------------
The information set forth under the heading "Executive
Compensation and Other Matters" in the company's Proxy
Statement filed in connection with the Annual Meeting of
Shareholders scheduled to be held May 14, 1997 hereby is
incorporated herein by reference.
Part IV
Item 14. Exhibits, Financial Statement Schedules and Reports on
------------------------------------------------------
Form 8-K.
--------
(a)1. Financial Statements.
--------------------
The financial statements listed in the accompanying index to
financial statements and financial statement schedule are filed
as part of this annual report.
2. Financial Statement Schedule.
----------------------------
The financial statement schedule listed in the accompanying
index to financial statements is filed as part of this annual
report.
All other schedules have been omitted since the required
information is not present or is not present in amounts
sufficient to require submission of the schedule, or because
the information required is included in the consolidated
financial statements, including the notes thereto.
ARROW ELECTRONICS, INC.
INDEX TO FINANCIAL STATEMENTS
AND FINANCIAL STATEMENT SCHEDULES
(Item 14 (a))
Page
----
Report of Ernst & Young LLP, independent auditors 13
Management's responsibility for financial reporting 14
Consolidated balance sheet at December 31, 1996 and 1995 15
For the years ended December 31, 1996, 1995 and 1994:
Consolidated statement of income 16
Consolidated statement of cash flows 17
Consolidated statement of shareholders' equity 18
Notes to consolidated financial statements for
the years ended December 31, 1996, 1995 and 1994 20
Consolidated schedule for the three years
ended December 31, 1996:
II - Valuation and qualifying accounts 36
3. Exhibits.
(2)(a)(i) Share Purchase Agreement, dated as of
October 10, 1991, among EDI Electronics Distribution
International B.V., Aquarius Investments Ltd., Andromeda
Investments Ltd., and the other persons named therein
(incorporated by reference to Exhibit 2.2 to the company's
Registration Statement on Form S-3, Registration No. 33-42176).
(ii) Standstill Agreement, dated as of
October 10, 1991, among Arrow Electronics, Inc., Aquarius
Investments Ltd., Andromeda Investments Ltd., and the other
persons named therein (incorporated by reference to Exhibit 4.1
to the company's Registration Statement on Form S-3, Registration
No. 33-42176).
(iii) Shareholder's Agreement, dated as of
October 10, 1991, among EDI Electronics Distribution
International B.V., Giorgio Ghezzi, Germano Fanelli, and Renzo
Ghezzi (incorporated by reference to Exhibit 2(f)(iii) to the
company's Annual Report on Form 10-K for the year ended December
31, 1993, Commission File No. 1-4482).
(b) Agreement and Plan of Merger, dated as
of June 24, 1994, by and among Arrow Electronics, Inc., AFG
Acquisition Company and Gates/FA Distributing, Inc. (incorporated
by reference to Exhibit 2 to the company's Registration Statement
on Form S-4, Commission File No. 35-54413).
(c) Agreement and Plan of Merger, dated as of
September 21, 1994, by and among Arrow Electronics, Inc., MTA
Acquisition Company and Anthem Electronics, Inc. (incorporated by
reference to Exhibit 2 to the company's Registration Statement on
Form S-4, Commission File No. 33-55645).
(d) Master Agreement, dated as of December 20,
1996, among Premier Farnell plc and Arrow Electronics, Inc.
relating to the sale and purchase of the Farnell Volume Business.
(3)(a)(i) Restated Certificate of Incorporation
of the company, as amended (incorporated by reference to Exhibit
3(a) to the company's Annual Report on Form 10-K for the year
ended December 31, 1994 Commission File No. 1-4482).
(ii) Certificate of Amendment of the
Certificate of Incorporation of Arrow Electronics, Inc., dated as
of August 30, 1996 (incorporated by reference to Exhibit 3 to the
company's Quarterly Report on Form 10-Q for the quarter ended
September 30, 1996, Commission File No. 1-4482).
(b) By-Laws of the company, as amended
(incorporated by reference to Exhibit 3(b) to the company's
Annual Report on Form 10-K for the year ended December 31, 1986,
Commission File No. 1-4482).
(4)(a)(i) Rights Agreement dated as of March 2, 1988
between Arrow Electronics, Inc. and Manufacturers Hanover Trust
Company, as Rights Agent, which includes as Exhibit A a
Certificate of Amendment of the Restated Certificate of
Incorporation for Arrow Electronics, Inc. for the Participating
Preferred Stock, as Exhibit B a letter to shareholders describing
the Rights and a summary of the provisions of the Rights
Agreement and as Exhibit C the forms of Rights Certificate and
Election to Exercise (incorporated by reference to Exhibit 1 to
the company's Current Report on Form 8-K dated March 3, 1988,
Commission File No. 1-4482).
(ii) First Amendment, dated June 30, 1989,
to the Rights Agreement in (4)(a)(i) above (incorporated by
reference to Exhibit 4(b) to the Company's Current Report on Form
8-K dated June 30, 1989, Commission File No. 1-4482).
(iii) Second Amendment, dated June 8, 1991,
to the Rights Agreement in (4)(a)(i) above (incorporated by
reference to Exhibit 4(i)(iii) to the company's Annual Report on
Form 10-K for the year ended December 31, 1991, Commission File
No. 1-4482).
(iv) Third Amendment, dated July 19, 1991,
to the Rights Agreement in (4)(a)(i) above (incorporated by
reference to Exhibit 4(i)(iv) to the company's Annual Report on
Form 10-K for the year ended December 31, 1991, Commission File
No. 1-4482).
(v) Fourth Amendment, dated August 26,
1991, to the Rights Agreement in (4)(a)(i) above (incorporated by
reference to Exhibit 4(i)(v) to the company's Annual Report on
Form 10-K for the year ended December 31, 1991, Commission File
No. 1-4482).
(b)(i) Indenture, dated as of January 15, 1997,
between the company and the Bank of Montreal Trust Company, as
Trustee.
(ii) Officers' Certificate, as defined by the
Indenture in 14(b)(i) above, dated as of January 22, 1997, with
respect to the company's $200,000,000 7% Senior Notes due 2007
and $200,000,000 7-1/2% Senior Debentures due 2027.
(10)(a)(i) Arrow Electronics Savings Plan, as
amended and restated through December 28, 1994 (incorporated by
reference to Exhibit 10(a)(iii) to the company's Quarterly Report
on Form 10-Q for the quarter ended March 31, 1996, Commission
File No. 1-4482).
(ii) Amendment No. 1, dated March 29, 1996,
to the Arrow Electronics Savings Plan in (10)(a)(i) above
(incorporated by reference to Exhibit 10(a)(iv) to the company's
Quarterly Report on Form 10-Q for the quarter ended March 31,
1996, Commission File No. 1-4482).
(iii) Arrow Electronics Stock Ownership Plan,
as amended and restated through December 28, 1994 (incorporated
by reference to Exhibit 10(a)(i) to the company's Quarterly
Report on Form 10-Q for the quarter ended March 31, 1996,
Commission File No. 1-4482).
(iv) Amendment No. 1, dated March 29, 1996,
to the Arrow Electronics Stock Ownership Plan in (10)(a)(iii)
above (incorporated by reference to Exhibit 10(a)(ii) to the
company's Quarterly Report on Form 10-Q for the quarter ended
March 31, 1996, Commission File No. 1-4482).
(v) Capstone Electronics Corp. Profit-
Sharing Plan, as amended and reinstated through December 28, 1994
(incorporated by reference to Exhibit 10(a)(v) to the company's
Quarterly Report on Form 10-Q for the quarter ended March 31,
1996, Commission File No. 1-4482).
(b)(i) Employment Agreement, dated as of
October 16, 1990, between the company and John C. Waddell
(incorporated by reference to Exhibit 10(c)(i) to the company's
Annual Report on Form 10-K for the year ended December 31, 1990,
Commission File No. 1-4482).
(ii) Employment Agreement, dated as of
February 22, 1995, between the company and Stephen P. Kaufman
(incorporated by reference to Exhibit 10(c)(ii) to the company's
Annual Report on Form 10-K for the year ended December 31, 1995,
Commission File No. 1-4482).
(iii) Form of agreement between the company
and the employees parties to the Employment Agreements listed in
10(b)(i) and (ii) above providing extended separation benefits
under certain circumstances (incorporated by reference to Exhibit
10(c)(iv) to the company's Annual Report on Form 10-K for the
year ended December 31, 1988, Commission File No. 1-4482).
(iv) Form of Employment Agreement, dated as
of September 1, 1994 between the company and Steven W. Menefee
(incorporated by reference to Exhibit 10(c)(v) to the company's
Annual Report on Form 10-K for the year ended December 31, 1994,
Commission File No. 1-4482).
(v) Form of Employment Agreement, dated as
of September 21, 1994, between the company and Robert S. Throop
(incorporated by reference to Exhibit 10(c)(x) to the company's
Annual Report on Form 10-K for the year ended December 31, 1994,
Commission File No. 1-4482).
(vi) Form of Employment Agreement, dated as
of April 15, 1996, between the company and Gerald Luterman.
(vii) Form of agreement between the company
and all corporate Vice Presidents, including the employees
parties to the Employment Agreements listed in 10(b)(iv)-(vi)
above, providing extended separation benefits under certain
circumstances (incorporated by reference to Exhibit 10(c)(ix) to
the company's Annual Report on Form 10-K for the year ended
December 31, 1988, Commission File No. 1-4482).
(viii) Form of agreement between the
company and non-corporate officers providing extended separation
benefits under certain circumstances (incorporated by reference
to Exhibit 10(c)(x) to the company's Annual Report on Form 10-K
for the year ended December 31, 1988, Commission File No. 1-
4482).
(ix) Unfunded Pension Plan for Selected
Executives of Arrow Electronics, Inc., as amended (incorporated
by reference to Exhibit 10(c)(xiii) to the company's Annual
Report on Form 10-K for the year ended December 31, 1994,
Commission File No. 1-4482).
(x) English translation of the Service
Agreement, dated January 19, 1993, between Spoerle Electronic and
Carlo Giersch (incorporated by reference to Exhibit 10(f)(v) to
the company's Annual Report on Form 10-K for the year ended
December 31, 1992, Commission File No. 1-4482).
(c)(i) Senior Note Purchase Agreement, dated
as of December 29, 1992, with respect to the company's 8.29
percent Senior Secured Notes due 2000 (incorporated by reference
to Exhibit 10(d) to the company's Annual Report on Form 10-K for
the year ended December 31, 1992, Commission File No. 1-4482).
(ii) First Amendment, dated as of December 22,
1993, to the Senior Note Purchase Agreement in 10(c)(i) above
(incorporated by reference to Exhibit 10(d)(ii) in the company's
Annual Report on form 10-K for the year ended December 31, 1993,
Commission File No. 1-4482).
(iii) Second Amendment, dated as of April 24,
1995, to the Senior Note Purchase Agreement in 10(c)(i) above.
(iv) Third Amendment, dated as of December
23, 1996, to the Senior Note Purchase Agreement in 10(c)(i)
above.
(d)(i) Amended and Restated Credit Agreement,
dated as of August 16, 1995 among Arrow Electronics, Inc., the
several Banks from time to time parties hereto, Bankers Trust
Company and Chemical Bank, as agents.
(ii) First Amendment, dated as of September
30, 1996, to the Arrow Electronics, Inc. Second Amended and
Restated Credit Agreement, dated August 16, 1995 in (10)(d)(i)
above (incorporated by reference to Exhibit 10 to the company's
Quarterly Report on Form 10-Q for the quarter ended September 30,
1996, Commission File No. 1-4482).
(e)(i) Arrow Electronics, Inc. Stock Option
Plan, as amended (incorporated by reference to Exhibit 10(i)(i)
to the company's Annual Report on Form 10-K for the year ended
December 31, 1994, Commission File No. 1-4482).
(ii) Form of Stock Option Agreement under
(e)(i) above (incorporated by reference to Exhibit 10(k)(ii) to
the company's Annual Report on Form 10-K for the year ended
December 31, 1986, Commission File No. 1-4482).
(iii) Form of Nonqualified Stock Option
Agreement under (e)(i) above (incorporated by reference to
Exhibit 10(k)(iv) to the company's Registration Statement on Form
S-4, Registration No. 33-17942).
(f)(i) Restricted Stock Plan of Arrow
Electronics, Inc., as amended and restated (incorporated by
reference to Exhibit 10(j)(i) to the company's Annual Report on
Form 10-K for the year ended December 31, 1994, Commission File
No. 1-4482).
(ii) Form of Award Agreement under (f)(i)
above (incorporated by reference to Exhibit 10(l)(iv) to the
company's Registration Statement on Form S-4, Registration No. 33-
17942).
(g) Form of Indemnification Agreement
between the company and each director (incorporated by reference
to Exhibit 10(m) to the company's Annual Report on Form 10-K for
the year ended December 31, 1986, Commission File No. 1-4482).
(11) Statement Re: Computation of Earnings
Per Share.
(21) List of Subsidiaries.
(23) Consent of Ernst & Young LLP
(28) (i) Record of Decision, issued by the EPA
on September 28, 1990, with respect to environmental clean-up in
Plant City, Florida (incorporated by reference to Exhibit 28 to
the company's Annual Report on Form 10-K for the year ended
December 31, 1990, Commission File No. 1-4482).
(ii) Consent Decree lodged with the U.S.
District Court for the Middle District of Florida, Tampa
Division, on December 18, 1991, with respect to environmental
clean-up in Plant City, Florida (incorporated by reference to
Exhibit 28(ii) to the company's Annual Report on Form 10-K for
the year ended December 31, 1991, Commission File No. 1-4482).
(b) Reports on Form 8-K
During the quarter ended December 31, 1996, the
following Current Reports on Form 8-K were filed:
Date of Report
(Date of Earliest Event Reported) Items Reported
--------------------------------- --------------
December 31, 1996 Announcement of Agreement to
acquire the volume electronic
businesses of Premier Farnell
plc.
ARROW ELECTRONICS, INC.
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
For the three years ended December 31, 1996
[Enlarge/Download Table]
Additions
--------------------------
Balance at Balance
beginning Charged Charged at end
of year to income to other (2) Write-offs of year
---------- --------- ------------ ---------- -----------
Allowance for
doubtful accounts
1996 $38,670,000 $15,495,000 $ - $14,412,000 $39,753,000
=========== =========== ========== =========== ===========
1995 $31,132,000 $21,344,000 $ 67,000 $13,873,000 $38,670,000
=========== =========== ========== =========== ===========
1994 (1) $24,263,000 $20,289,000 $3,251,000 $16,671,000 $31,132,000
=========== =========== ========== =========== ===========
(1) During 1994, the company acquired Gates/FA Distributing, Inc. and Anthem
Electronics, Inc. in transactions accounted for as poolings of interests, accordingly
the balance at the beginning of the year 1994 has been restated.
(2) Represents the allowance for doubtful accounts of the businesses acquired by the company
during each year.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the Registrant has duly caused
this annual report to be signed on its behalf by the undersigned,
thereunto duly authorized.
ARROW ELECTRONICS, INC.
By/s/ Robert E. Klatell
----------------------
Robert E. Klatell
Executive Vice President
March 27, 1997
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons
on behalf of the Registrant and in the capacities and on the
dates indicated:
By/s/Stephen P. Kaufman March 27, 1997
-----------------------------------------------
Stephen P. Kaufman, Chairman, Principal
Executive Officer, and Director
By/s/ Robert E. Klatell March 27, 1997
-----------------------------------------------
Robert E. Klatell, Executive Vice President,
Secretary and Director
By/s/ Gerald Luterman March 27, 1997
-----------------------------------------------
Gerald Luterman, Senior Vice President,
and Principal Financial Officer
By/s/ Paul J. Reilly March 27, 1997
-----------------------------------------------
Paul J. Reilly, Vice President, Controller
and Principal Accounting Officer
By/s/ Daniel W. Duval March 27, 1997
-----------------------------------------------
Daniel W. Duval, Director
By/s/ Carlo Giersch March 27, 1997
-----------------------------------------------
Carlo Giersch, Director
By/s/ Gaynor N. Kelley March 27, 1997
-----------------------------------------------
Gaynor N. Kelley, Director
By/s/ Roger King March 27, 1997
-----------------------------------------------
Roger King, Director
By/s/ Karen Gordon Mills March 27, 1997
-----------------------------------------------
Karen Gordon Mills, Director
By/s/ Richard S. Rosenbloom March 27, 1997
-----------------------------------------------
Richard S. Rosenbloom, Director
By/s/ Robert S. Throop March 27, 1997
-----------------------------------------------
Robert S. Throop, Director
By/s/ John C. Waddell March 27, 1997
-----------------------------------------------
John C. Waddell, Vice Chairman
Dates Referenced Herein and Documents Incorporated by Reference
4 Subsequent Filings that Reference this Filing
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