Arrow Electronics 2001 Annual Report Download - page 27

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10 Employee Benefit 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
$9,026,000, $7,279,000, and $5,801,000 in 2001, 2000, and 1999,
respectively. Certain domestic and foreign subsidiaries maintain
separate defined contribution plans for their employees and made
contributions thereunder which amounted to $1,863,000, $2,510,000,
and $2,056,000 in 2001, 2000, and 1999, respectively. As a result of
the Wyle acquisition, the 401(k) plan for Wyle employees was
merged with the company’s 401(k) plan on April 2, 2001.
The company maintains an unfunded supplemental retirement plan
for certain executives. The board of directors determines those
employees eligible to participate in the plan and their maximum
annual benefit upon retirement. The benefit obligation at
December 31, 2001 and 2000 was $22,313,000 and $20,325,000,
respectively. The assumptions utilized in determining this amount
include a discount rate of 5.5%. Wyle also sponsored a supple-
mental executive retirement plan for certain of its executives.
Benefit accruals for the Wyle plan were frozen as of December 31,
2000. The benefit obligation at December 31, 2001 and 2000 was
$6,738,000 and $6,120,000, respectively. The assumptions utilized in
determining this amount include a discount rate of 7.25% and 7.5%,
respectively. Expenses relating to the plans were $3,548,000,
$4,597,000, and $2,150,000 for the years ended December 31, 2001,
2000, and 1999, respectively.
Wyle provided retirement benefits for certain employees under a
defined benefit plan. Benefits under this plan were frozen as of
December 31, 2000, and former participants may now participate
in the company’s employee stock ownership plan. Pension infor-
mation for the years ended December 31 is as follows:
(Dollars in thousands) 2001 2000
Benefit obligation at end of year $75,866 $75,321
Fair value of plan assets at end of year $76,564 $80,219
Funded status of the plan
Funded status $ 698 $ 4,899
Unamortized net loss 7,446 1,636
Net amount recognized $ 8,144 $ 6,535
Weighted average assumptions
Discount rate 7.25% 7.50%
Expected return on assets 8.50% 8.50%
11 Lease Commitments
The company leases certain office, distribution, and other property
under noncancelable operating leases expiring at various dates
through 2053. Rental expense under noncancelable operating
leases, net of sublease income of $3,212,000, $3,151,000, and
$3,362,000 in 2001, 2000, and 1999, respectively, amounted to
$59,753,000 in 2001, $47,863,000 in 2000, and $40,382,000 in 1999.
Aggregate minimum rental commitments under all noncancelable
operating leases, exclusive of real estate taxes, insurance, and
leases related to facilities closed as a result of the integration
of acquired businesses and the restructuring of the company,
are $55,503,000 in 2002, $43,931,000 in 2003, $36,568,000 in 2004,
$22,649,000 in 2005, $18,209,000 in 2006, and $78,464,000 thereafter.
Minimum rental commitments for leases related to facilities closed
as a result of the integration of acquired businesses and the
restructuring of the company are $6,819,000 in 2002, $5,842,000
in 2003, $4,551,000 in 2004, $2,326,000 in 2005, $2,147,000 in 2006,
and $2,094,000 thereafter.
12 Financial Instruments
The company enters into foreign exchange forward contracts (the
“contracts”) to mitigate the impact of changes in foreign currency
exchange rates, principally the Euro, Swedish krona, Italian lira,
and British pound sterling. These contracts are executed to facilitate
the netting of offsetting foreign currency exposures resulting from
inventory purchases and sales and generally have terms of no
more than three months. Gains or losses on these contracts are
deferred and recognized when the underlying future purchase
or sale is recognized. The company does not enter into forward
contracts for trading purposes. The risk of loss on a contract
is the risk of nonperformance by the counterparties which
the company minimizes by limiting its counterparties to major
financial institutions. The fair value of the contracts is estimated
using market quotes. The notional amount of the contracts at
December 31, 2001 and 2000, was $151,507,000 and $81,736,000,
respectively. The carrying amounts, which are nominal, approxi-
mated fair value at December 31, 2001 and 2000.