Arrow Electronics 2000 Annual Report Download

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1999199819971996199519941993199219911990
2000 annual report
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Table of contents

  • Page 1
    1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 ! 2000 a n n u a l r e p o r t

  • Page 2
    ... 1994 1996 1998 2000 A RRO W EU RO P E Countries Austria Belgium Czech Republic Denmark England Estonia Finland France Germany Greece Hungary Ireland Employees 3,838 Sales locations 76 Distribution centers 10 Israel Italy Netherlands Norw ay Poland Portugal Slovenia South Africa Spain Sw eden Sw...

  • Page 3
    ... 1,487,319 95,628 2000 $12,959,250 784,107 357,931 3.70 3.62 1999* $9,312,625 338,661 124,153 1.31 1.29 1998 $8,344,659 352,504 145,828 1.53 1.50 * Includes a special charge associated w ith the acquisition and integration of Richey Electronics, Inc. and the electronics distribution group of Bell...

  • Page 4
    ... automated distribution facility in Venlo, the Netherlands. W ith the increased demand for programmable logic devices, Arrow value-added centers around the globe programmed more than 125 million components last year. To respond to the grow ing need for these services in the Asia/Pacific region...

  • Page 5
    ...many products that are a critical part of our everyday lives. This year's annual report is a tribute to the discovery, the support, the innovation, and the know ledge of the Arrow employees around the w orld w ho make that possible. Francis M . Scricco President and Chief Executive Officer Stephen...

  • Page 6
    ... stores - to programming parts- to complex e-commerce supply chain solutions, Arrow provides services and programs that increase design and production efficiency at more than 200,000 customers w orldw ide. Each day, our 12,000 employees w ork closely w ith our valued suppliers to understand the new...

  • Page 7
    ... of production. Arrow has programming centers in eight strategic locations around the globe. In North America alone, w e programmed more than 400,000 components daily in 2000. Our cable assembly and electromechanical value-added programs helped nearly 10,000 original equipment manufacturers (OEM...

  • Page 8
    ... supply and computer product life cycles. Arrow 's design services and end-of-life product management programs ensure that the approved components and products are available throughout the life cycle of the medical system. From the time a medical equipment manufacturer first conceives of a new...

  • Page 9
    ...medical imaging, instrumentation, and scientific testing manufacturers (In billions) $1.40 $.99 $.89 1998 1999 2000 Share of Arrow 2000 Sales 11% The technology discoveries of the past few years have brought solutions to the most pressing problems in medical diagnosis and treatment. Arrow teams...

  • Page 10
    ... value-added centers provide programming, connector and cable assembly services, flat panel display integrations, and systems integration and configuration services-all of w hich are designed to help customers speed their time to market. W ith the w orld's broadest programmable products line card...

  • Page 11
    ..., information, and the convenience that these products provide. Arrow flat panel display integration teams delivered more than 10,000 completed units to customers in 2000. At eight locations around the w orld, Arrow used state-of-the-art programming systems to program more than 125 million...

  • Page 12
    ... value-added services, the Arrow team stands ready to help manage the customer's total supply chain. Arrow specialists have the broadest range of materials and supply chain management solutions to offer. Combining the right services and programs for customers creates a custom solution. An in-plant...

  • Page 13
    ...for the right components to arrive in exactly the right place, at the right time, and in the exact quantity needed...everyw here in the w orld. In Hong Kong, Arrow Asia/ Pacific managers plan the implementation of the solution at their customer site. In M elville, New York, supply chain specialists...

  • Page 14
    ... access to information. Arrow 's sales to OEM s and resellers of data storage and midrange computing systems accounted for close to $3 billion of our sales in 2000. Our mid-range computer selling groups are at the center of this market, providing technical assistance, training, products, and systems...

  • Page 15
    ... $2.22 1998 1999 2000 Share of Arrow 2000 Sales 23% At one customer, a team of Arrow M OCA employees, w orking w ith a reseller, completed the installation of a data center designed to provide on-line and telephone access to a broad range of financial services. In 48 hours, the center w as fully...

  • Page 16
    ... self-service ordering and delivery tracking. Integrating Internet capabilities into our core business gives our customers more choices. They can research components, place orders, and perform other inventory functions on the Internet and still w ork w ith their Arrow sales and engineering team on...

  • Page 17
    Sales (In billions) Employees 5,884 $5.62 $3.56 $2.56 4,575 5,457 1998 1999 2000 1998 1999 2000 Productivity (Sales per employee in thousands) Transactions Per Day (In millions) 4.1 $956 $559 $653 1.9 2.7 1998 1999 2000 1998 1999 2000

  • Page 18
    ... in computer products and services. From value-added resellers, to Internet services providers, to OEM s, Arrow 's computer products teams deliver the latest technology information, design advice, and materials management and manufacturing support. M ichael J. Long President, Arrow North American...

  • Page 19
    Sales - Total NACP (In billions) Employees - Total NACP $2.79 $2.60 1,160 $2.47 985 1,031 1998 1999 2000 1998 1999 2000 Sales to OEM s and M id-Range Computer Resellers (In billions) Employees - OEM and M id-Range Computing Selling Groups $1.40 $1.35 $1.22 604 571 657 1998 1999 2000...

  • Page 20
    ... the region. As w e respond to the increasing need for products and services across multiple locations in Europe, w e w ill continue to build on the local strengths that have made us the first-choice distributor for European electronics manufacturers. Art Baer President, Arrow Electronics Europe

  • Page 21
    ... (In billions) Employees 3,838 $3.47 $2.40 $2.39 3,630 3,354 1998 1999 2000 1998 1999 2000 Productivity (Sales per employee in thousands) Transactions Per Day (In millions) $905 $714 $660 1.8 1.8 2.6 1998 1999 2000 1998 1999 2000 Carlo Giersch Chairman, Arrow Electronics Europe

  • Page 22
    ... strategically located distribution centers, w e can now provide more sophisticated inventory bonding and materials management support. Also in 2000, increased demand for programmable logic devices led to our construction of a new , state-of-the-art programming center in M alaysia. Arrow leads the...

  • Page 23
    ... (In millions) Employees $1,395 656 $758 $597 768 844 1998 1999 2000 1998 1999 2000 Productivity (Sales per employee in thousands) Transactions Per Day (In millions) $1,652 $987 .4 .6 1.1 $910 1998 1999 2000 1998 1999 2000 Steven W. M enefee President, Arrow Electronics Asia

  • Page 24
    ...and technical information about a component-press releases, new s articles, w hite papers, data sheets, application notes-making it possible for them to make informed design decisions. In a recent survey of North American design engineers by Electronic Engineering Times , arrow .com w as selected as...

  • Page 25
    ... (In billions) Registered arrow .com and PRO-Series Users (In thousands) $1.8 $1.1 127 $.95 63 0 1998 1999 2000 1998 1999 2000 Stock Searches Per M onth (In thousands) Employees dedicated to the development of e-commerce tools 655 116 272 32 18 1999 (Jan.) 2000 (Jan.) 2000 (Dec.) 1998 64...

  • Page 26
    ... and $40.4 million after taxes, respectively, associated w ith the realignment of Arrow 's North American Components Operations (NACO) and the acquisition and integration of the volume electronic component distribution businesses of Premier Farnell plc. Excluding these charges, operating income, net...

  • Page 27
    ... acquisition and integration of Richey Electronics, Inc. (" Richey" ) and the electronics distribution group of Bell Industries, Inc. (" EDG" ). This increase in operating income w as a result of increased sales in the core components businesses around the w orld and increased gross profit margins...

  • Page 28
    ... offset, in part, by increased payables and earnings for the year. The net amount of cash used for investing activities w as $1.4 billion, including $1.2 billion primarily for the acquisitions of W yle Electronics and W yle Systems (collectively, " W yle" ), the open computing alliance subsidiary of...

  • Page 29
    ... due to accelerated sales grow th in the fourth quarter offset, in part, by earnings for the year. The net amount of cash used for investing activities w as $543.3 million, including $459.1 million for the acquisitions of Richey, EDG, Industrade AG, interests in the Elko Group and Panamericana...

  • Page 30
    ...to purchase the product sold in Europe, the Asia/Pacific region, and Latin and South America. At the present time, the company ...2000. The company's interest expense, in part, is sensitive to the general level of interest rates in the Americas, Europe, and the Asia/Pacific region. The company manages...

  • Page 31
    ... statement of inc ome (In thousands except per share data) Years Ended December 31, Sales Costs and expenses Cost of products sold Selling, general, and administrative expenses Depreciation and amortization Integration charge 2000 $12,959,250 10,925,309 1,159,583 90,251 12,175,143 1999 $9,312...

  • Page 32
    ... Current liabilities Accounts payable Accrued expenses Short-term borrow ings, including current maturities of long-term debt Total current liabilities Long-term debt Other liabilities Shareholders' equity Common stock, par value $1 Authorized -160,000,000 and 120,000,000 shares in 2000 and 1999...

  • Page 33
    ... of effects of acquired businesses Accounts receivable Inventories Prepaid expenses and other assets Accounts payable Accrued expenses Other Net cash provided by (used for) operating activities Cash flow s from investing activities Acquisition of property, plant and equipment Cash consideration paid...

  • Page 34
    ...Comprehensive income Exercise of stock options Tax benefits related to exercise of stock options Restricted stock aw ards, net Amortization of employee stock aw ards Issuance of common stock Other Balance at December 31, 2000 See accompanying notes. Capital in Excess of Par Value $506,656 Retained...

  • Page 35
    ... majority-ow ned subsidiaries. All significant intercompany transactions are eliminated. Use of Estimates The preparation of financial statements in conformity w ith generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the...

  • Page 36
    ..." ), part of the electronics distribution businesses of Germany-based E.ON AG (formerly VEBA AG), and the open computing alliance subsidiary of M erisel, Inc. (" M OCA" ), one of the leading distributors of Sun M icrosystems products in North America. In addition, the company acquired Tekelec Europe...

  • Page 37
    ...2000 and 1999 as though the acquisitions made during 2000 and 1999 occurred on January 1, 1999: (In thousands except per share data) Sales...w ith the acquisition and integration of Richey Electronics, Inc. (" Richey" ) and the electronics distribution group of Bell Industries, Inc. (" EDG" ), pro ...

  • Page 38
    ... Richey, a leading specialty distributor of interconnect, electromechanical, and passive electronic components and provider of related value-added services to customers throughout North America, and EDG, one of the ten largest distributors of electronic components in North America. In addition...

  • Page 39
    ... ), an Internet marketplace for electronic components. VCE matches buyers w ith sellers and provides its members w ith supporting services such as real-time market availability and pricing information by device type or technology. This investment is accounted for using the equity method. The company...

  • Page 40
    ...of the follow ing: (In thousands) Floating rate notes Global multi-currency facility Short-term credit facility Commercial paper M oney market loan Other short-term borrow ings Current maturities of long-term debt Less debt refinanced $ $ 2000 200,000 388,069 400,000 541,366 41,000 255,665 1,826,100...

  • Page 41
    ... their fair value. Annual payments of borrow ...components of the company's deferred tax assets at December 31, w hich are included in prepaid expenses and other assets, are as follow s: (In thousands) Inventory reserves Allow ance for doubtful accounts Accrued expenses Integration reserves Other 2000...

  • Page 42
    ... company's acquisition and integration of Richey and EDG. Excluding the integration charge, net income and net income per share on a basic and diluted basis w ere $140,633,000, $1.48, and $1.46, respectively. 8 Employee Stock Plans Restricted Stock Plan Under the terms of the Arrow Electronics, Inc...

  • Page 43
    ... 1997, all employees of the North American operations below the level of vice president w ere granted a special aw ard of stock options totaling 1,255,320 at the then market price of the company's stock as an incentive related to the realignment of the North American Components Operations (" NACO...

  • Page 44
    ...: 2000 Expected life (months) Risk-free interest rate (percent) Expected volatility (percent)` 48 5.5 50 1999 48 5.8 40 1998 48 5.4 31 There is no expected dividend yield. Stock Ow nership Plan The company maintains a noncontributory employee stock ow nership plan w hich enables most North American...

  • Page 45
    ...000 in 2000, $40,382,000 in 1999, and $29,231,000 in 1998. Aggregate minimum rental commitments under all noncancelable operating leases, exclusive of real estate taxes, insurance, and leases related to facilities closed in connection w ith the realignment of NACO and the integration of the acquired...

  • Page 46
    ...North American Computer Products together w ith UK M icrotronica, Nordic M icrotronica, ATD (in Iberia), and Arrow Computer Products (in France). The prior years have been restated for comparative purposes. Revenue, operating income, and total assets by segment are as follow s: Electronic Components...

  • Page 47
    ...) associated w ith the acquisition and integration of Richey and EDG. Excluding this charge, net income w as $31,502,000 or $.33 per share on a basic and diluted basis. Report of Ernst & Young LLP, Independent Auditors The Board of Directors and Shareholders Arrow Electronics, Inc. We have audited...

  • Page 48
    ... statements. Executive Offices 25 Hub Drive M elville, New York 11747-3509 Independent Auditors Ernst & Young LLP 787 Seventh Avenue New York, New York 10019-6018 Transfer Agent and Registrar M ellon Investor Services, L.L.C. Overpeck Centre 85 Challenger Road Ridgefield Park, New Jersey 07660-2104...

  • Page 49
    ... Birns Treasurer OPERATING GROUP OFFICERS Arrow Americas Components Jan M . Salsgiver President Paul Buckley Senior Vice President, Arrow Supplier Services Group M . Sean Fernandez President, Arrow / Zeus Electronics Group Harriet Green President, Arrow Contract M anufacturing Services Distribution...

  • Page 50
    In mid-2000, Stephen P. Kaufman stepped dow n as Chief Executive Officer of Arrow , w hile retaining his position as Chairman of the Board. During the 14 years he served as CEO, Steve provided the inventive leadership and bold strategic vision that transformed Arrow from a $500 million national ...