Arrow Electronics 2010 Annual Report Download - page 33

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31
in response to the decline in sales, as well as the impact of foreign exchange rates. This decrease was
offset, in part, by expenses incurred by LOGIX, which was acquired in June 2008. Selling, general and
administrative expenses, as a percentage of sales, was 8.9% and 9.6% for 2009 and 2008, respectively.
Loss on Prepayment of Debt
During 2010, the company recognized a loss on prepayment of debt of $1.6 million ($1.0 million net of
related taxes or $.01 per share on both a basic and diluted basis), related to a property the company sold
and was required to repay the related collateralized debt with a face amount of $9.0 million. The loss on
prepayment of debt was offset by a gain on the sale of this property of $1.7 million, which is included in
restructuring, integration, and other charges in 2010.
During 2009, the company recorded a loss on prepayment of debt of $5.3 million ($3.2 million net of
related taxes or $.03 per share on both a basic and diluted basis), related to the repurchase of $130.5
million principal amount of its 9.15% senior notes due 2010. The loss on prepayment of debt includes the
premium paid and write-off of the related deferred financing costs, offset by the gain for terminating the
related interest rate swaps.
Loss on Write-Down of an Investment
During 2008, the company determined that an other-than-temporary decline in the fair value of its
investment in Marubun Corporation occurred and, accordingly, recognized a loss of $10.0 million ($.08 per
share on both a basic and diluted basis) on the write-down of this investment.
Interest and Other Financing Expense, Net
Net interest and other financing expense decreased by 8.1% in 2010 to $76.6 million, compared with
$83.3 million in 2009, primarily due to lower interest rates on the company’s variable rate debt and a
reduction in interest expense of $3.8 million ($2.3 million net of related taxes or $.02 per share on both a
basic and diluted basis) primarily related to the settlement of certain income tax matters (discussed in
"Income Taxes" below).
Net interest and other financing expense decreased by 16.6% in 2009 to $83.3 million, compared with
$99.9 million in 2008, primarily due to lower interest rates on the company’s variable rate debt and lower
average debt outstanding.
Income Taxes
The company recorded a provision for income taxes of $199.4 million (an effective tax rate of 29.4%) for
2010. During the fourth quarter of 2010, the company recorded a net reduction of the provision of $9.4
million ($.08 per share on both a basic and diluted basis) primarily related to the settlement of certain tax
matters covering multiple tax years. The company's provision and effective tax rate for 2010 were
impacted by the previously discussed settlement of certain income tax matters, restructuring, integration,
and other charges, and loss on the prepayment of debt. Excluding the impact of the above-mentioned
items, the company's effective tax rate was 30.5% for 2010.
The company recorded a provision for income taxes of $65.4 million (an effective tax rate of 34.6%) for
2009. The company's provision and effective tax rate for 2009 were impacted by the previously
discussed restructuring, integration, and other charges and loss on the prepayment of debt. Excluding
the impact of the above-mentioned items, the company's effective tax rate was 32.5% for 2009.
The company recorded a provision for income taxes of $16.7 million (an effective tax rate of (2.8%)) for
2008. During the fourth quarter of 2008, the company recorded a reduction of the provision of $8.5
million ($.07 per share on both a basic and diluted basis) primarily related to the settlement of certain
international tax matters covering multiple tax years. The company's provision and effective tax rate for
2008 were impacted by the previously discussed settlement of certain international income tax matters,