Annual Report (Form 10-K), fiscal year 1993

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.
The company's electronics distribution networks, spanning North America, Europe, and the Pacific Rim, incorporate over 150 selling locations, ten primary distribution centers (four of which employ advanced automation), and 4,000 remote on-line terminals--all serving the needs of 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.
In 1993, the company acquired an additional 15% share in Spoerle Electronic, the largest electronics distributor in Germany, increasing its holdings to a majority interest. The company also acquired Zeus Components, Inc. a distributor of high-reliability electronic components and value-added services, Microprocessor & Memory Distribution Limited, a focused U.K. distributor of high- technology semiconductor products, and Components Agent Limited, one of the largest distributors in Hong Kong. In addition, in 1993 the company acquired Amitron S.A. and ATD Electronica S.A., distributors serving the Spanish and Portuguese markets, and CCI Electronique, a distributor serving the French marketplace. On February 28, 1992, the company acquired the electronics distribution businesses of Lex Service PLC ("Lex") in the U.K. and France (the "European businesses"), and Spoerle acquired the electronics distribution business of Lex in Germany. On September 27, 1991, the company acquired Lex Electronics Inc. and Almac Electronics Corporation, the North American electronics distribution businesses of Lex (the "North American businesses"), the third largest electronics distribution business in the United States.
Early in 1994, the company acquired an additional 15% interest in Spoerle, bringing its holdings to 70%, and increased its holdings in Silverstar, the company's Italian affiliate, to a majority share. Additionally, the company acquired the electronic component distribution business of Field Oy, the largest distributor of electronic components in Finland, and TH:s Elektronik, a leading distributor in Sweden and Norway. For information with respect to these acquisitions, the company's results of operations, and other matters, see Item 6 (Selected Financial Data), Item 7 (Management's Discussion and Analysis of Financial Condition and Results of Operations), and Item 8 (Financial Statements) appearing elsewhere in this Annual Report.
In North America, the company is organized into four product- specific sales and marketing groups: The Arrow/Schweber Electronics Group is the largest dedicated semiconductor distributor in the
world. Zeus Electronics is the only specialist distributor serving the military and high-reliability markets. Capstone Electronics focuses exclusively on the distribution of connectors, electromechanical, and passive components. And Arrow's Commercial Systems Group 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) Ltd. in Britain; Spoerle Electronic in Central Europe; Silverstar Ltd. S.p.A. in Italy; and Amitron-Arrow and ATD Electronica S.A. in Spain and Portugal. Arrow Electronique is the fourth largest electronics distributor in France, and Arrow's Nordic companies, Field Oy and TH:s Elektronik, are among the largest distributors in the markets of Finland, Norway, and Sweden.
Arrow is the first American electronics distributor to be present in the Pacific Rim market. Arrow's Components Agent Limited (C.A.L.), headquartered in Hong Kong, is the region's leading multinational distributor, maintaining seven additional facilities in key cities in Singapore, Malaysia, the People's Republic of China, and South Korea; an additional Arrow company serves India. 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.
The company distributes a broad range of electronic components, computer products, and related equipment manufactured by others. About 66% of the company's consolidated sales are of semiconductor products; industrial and commercial computer products, including microcomputer boards and systems, design systems, desktop computer systems, terminals, printers, disc drives, controllers, and communication control equipment account for about 24%; and the remaining 10% of sales are of passive, electromechanical, and connector products, principally capacitors, resistors, potentiometers, power supplies, relays, switches and connectors. Worldwide, the company maintains a $435 million inventory of more than 300,000 different electronic components and computer products at the company's primary distribution centers.
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 its 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. 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 125,000 industrial and commercial customers in North America, Europe, and the Pacific Rim. 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% of the company's 1993 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. Sales are managed and coordinated by regional sales managers and by product managers principally located at the company's headquarters in Melville, New York.
Of the approximately 200 manufacturers whose products are sold by the company, the ten largest accounted for about 57% of the business' purchases during 1993. Intel Corporation accounted for approximately 18% of the business' purchases because of the market demand for microprocessors. No other supplier accounted for more than 9% of 1993 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 62% 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 multinational, national, and numerous regional and local, distributors. As the world's largest electronics distributor, the company is greater in terms of financial resources and sales than most of its competitors.
The company and its affiliates employ approximately 4,600 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
John C. Waddell 56 Chairman of the Board Stephen P. Kaufman 52 President and Chief Executive Officer Robert E. Klatell 48 Senior Vice President, Chief Financial Officer, General Counsel, Secretary, and Treasurer Carlo Giersch 56 President and Chief Executive Officer of Spoerle Electronic Robert J. McInerney 48 Vice President; President, Commercial Systems Group Steven W. Menefee 49 Vice President; President, Arrow/Schweber Electronics Group Wesley S. Sagawa 46 Vice President; President, Capstone Electronics Corp. Jan Salsgiver 37 Vice President; 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.
John C. Waddell has been Chairman of the Board of the company for more than five years.
Stephen P. Kaufman has been President and Chief Executive Officer of the company for more than five years.
Robert E. Klatell has been Senior Vice President and has served as General Counsel and Secretary of the company for more than five years. He has been Chief Financial Officer since January 1992 and Treasurer of the company since October 1990.
Carlo Giersch has been President and Chief Executive Officer of Spoerle Electronic for more than five years.
Robert J. McInerney has been a Vice President of the company for more than 5 years and President of the company's Commercial Systems Group since April 1989.
Steven W. Menefee has been a Vice President of the company and President of the company's Arrow/Schweber Electronics Group since November 1990. For more than five years prior thereto, he was a Vice President of Avnet, Inc., principally an electronics distributor, and an executive of Avnet's Electronic Marketing Group.
Wesley S. Sagawa has been a Vice President of the company for more than 5 years and President of Capstone Electronics Corp., the company's subsidiary which markets passive, electromechanical, and connector products, since January 1990.
Jan Salsgiver has been a Vice President of the company since September 1993 and President of the company's Zeus Electronics since July 1993. For more than five years prior thereto, she held a variety of senior marketing positions in the company, the most recent of which was Vice President, Semiconductor Marketing of the Arrow/Schweber Electronics Group.
Item 2.



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. One additional facility is owned by the company, and another two facilities have been sold and leased back in connection with the financing thereof.
Item 3.

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. During 1991, the company engaged in settlement negotiations with the EPA, resulting in the execution of a consent decree defining those obligations which was entered by a federal court in Florida and became effective on April 22, 1992. The consent decree requires the company to fund and implement remedial design and remedial action activity addressing environmental impacts to site soils and sediment, underlying ground
water, and wetland areas. The company, through its technical contractors, has begun implementation of these requirements. Between January 1, 1993 and the date of this report, a substantial amount of the work necessary to prepare the site for the planned remediation activities was completed, the plans for the treatment and discharge of ground water contemplated by the consent decree were finalized, the plans for the remediation and mitigation of the wetland areas were finalized and approved in principle by the relevant agencies, and the company began the bid process for certain of the contracts relating to the performance of the remediation activities (including a previously-agreed upon plan for treating soils and sediment). Such activities are expected to commence in mid-1994 and the company believes that a substantial part of such activities will be completed over the next three years. The extent of such remediation activities (including the estimated cost thereof and the time necessary to complete them) is subject to change based upon conditions actually encountered during remediation, and 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.

Item 4. Submission of Matters to a Vote of Security Holders.
None.
PART II
Item 5.

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 1993 and 1992 were as follows:
Year High Low
1993: Fourth Quarter $42-1/4 $33-5/8 Third Quarter 43-1/8 34-5/8 Second Quarter 36-1/4 29-3/4 First Quarter 34-3/8 26-1/2
1992: Fourth Quarter $30-1/2 $22-1/8 Third Quarter 22-3/4 18-1/2 Second Quarter 19-1/2 15-1/8 First Quarter 18-1/2 14-3/8
Holders
On March 9, 1994, there were approximately 4,000 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 two years. While it is the intention of the Board of Directors to consider 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 U.S. credit agreement, senior notes, and certain foreign debt (see Note 4 of the Notes to Consolidated Financial Statements) restrict the payment of cash dividends, limit long-term debt and short-term borrowings, and require that the ratio of earnings to interest expense, ratio of operating cash flow to interest expense, working capital, and net worth be maintained at certain designated levels.
Item 6.

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.
Item 7.

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.
Included in the 1993 consolidated results is Spoerle Electronic, which had been accounted for under the equity method prior to January 1993 when the company acquired an additional 15% share, increasing its holdings to a majority interest. The 1993 consolidated results also include the acquired businesses of Zeus Components, Inc., a distributor of high- reliability electronic components and value-added services, Microprocessor & Memory Distribution Limited, a focused U.K. distributor of high- technology semiconductor products, and Components Agent Limited, one of the largest distributors in Hong Kong. In addition, the 1993 results include Amitron-Arrow S.A. and ATD Electronica S.A., distributors serving the Spanish and Portuguese markets, and CCI Electronique, a distributor serving the French marketplace. On February 28, 1992, the company acquired the electronics distribution businesses of Lex Service PLC ("Lex") in the U.K. and France (the "European businesses"), and Spoerle Electronic acquired the electronics distribution business of Lex in Germany. On September 27, 1991, the company acquired Lex Electronics Inc. and Almac Electronics Corporation, the North American electronics distribution businesses of Lex (the "North American businesses"), the third largest electronics distribution business in the United States. See Note 2 of the Notes to Consolidated Financial Statements for information with respect to the 1993 and 1992 acquisitions and the pro forma effect of these transactions on the company's statement of operations.
Sales
In 1993, consolidated sales of $2.5 billion were 56% ahead of the 1992 sales of $1.6 billion. Excluding Spoerle, sales were $2.2 billion, an advance of 34% over the year-earlier period. This sales growth was principally due to increased activity levels in each of the company's distribution groups and, to a lesser extent, acquisitions in North America, Europe, and the Pacific Rim, offset in part by weaker currencies in Europe.
Consolidated sales of $1.6 billion in 1992 were 55% higher than 1991 sales of $1 billion. This increase principally reflects the acquisitions of the North American and European businesses in September 1991 and February 1992, respectively, and increased North American sales.
In 1991, consolidated sales of $1 billion were 7.5% higher than 1990 sales of $971 million. The increase in sales primarily reflects the inclusion of the North American businesses during the fourth quarter of 1991, which more than offset the 5% decrease in sales for the nine months ended September 30, 1991 principally resulting from declining sales of commercial computer products and related systems owing to soft market conditions.
Operating Income
In 1993, the company's consolidated operating income increased to $181.5 million, compared with 1992 operating income of $103.8 million. The significant improvement in operating income reflects the impact of increased sales and the consolidation of Spoerle, offset in part by lower gross profit margins primarily reflecting proportionately higher sales of low-margin microprocessors. Excluding Spoerle, operating income was $146.2 million in 1993, and operating expenses as a percentage of sales were 12.4%, the lowest in the company's history.
The company's 1992 consolidated operating income increased to $103.8 million, compared with operating income of $34.4 million in 1991. Operating income in 1991 included the recognition of approximately $9.8 million of costs associated with the integration of the North American businesses. The significant improvement in operating income in 1992 primarily reflected the impact of the company's acquisition of the North American businesses, improved gross profit margins reflecting a product mix now more heavily weighted to semiconductor products, and improved North American sales. The rapid and successful integration of the North American businesses resulted in the realization of sizable economies of scale which, when combined with increased sales, enabled the company to reduce operating expenses as a percentage of sales from 17.6% in 1991 to 14.7% in 1992, the then lowest level in the company's history. Such economies of scale principally resulted from reductions in personnel performing duplicative functions and the elimination of duplicative administrative facilities, selling and stocking locations, and computer and telecommunications equipment.
In 1991, the company's consolidated operating income increased to $34.4 million, an advance of 5% over 1990. This improvement was principally the result of increased sales and reduced operating expenses as a percentage of sales in the fourth quarter of 1991. The improved fourth quarter operating results, combined with lower operating expenses through September 1991, more than offset the special charge of $9.8 million reflecting integration expenses associated with the North American businesses, the effect of a 5% decrease in sales through September 1991, and a decrease in the company's gross profit margin as a result of competitive pricing pressures in the commercial computer products and related systems markets.
Interest
In 1993, interest expense decreased to $25 million from $30.1 million in 1992. The decrease principally reflects the full-year effect of the retirement during 1992 of $46 million of the company's 13-3/4% subordinated debentures and the refinancing of the company's remaining high-yield debt with securities bearing lower interest rates, offset in part by the consolidation of Spoerle and borrowings associated with acquisitions.
Interest expense of $30.1 million in 1992 increased by $.9 million from the 1991 level, reflecting the company's borrowings to finance the cash portion of the purchase price of the North American and European businesses, to pay fees and expenses relating to the acquisitions, to refinance existing credit facilities of the company, and to provide the company with working capital. Such increased borrowings were partially
offset by the company's redemption in May of $46 million of its 13-3/4% subordinated debentures with the proceeds from the public offering of 4.7 million shares of common stock and lower effective interest rates.
In 1991, interest expense of $29.1 million increased $.1 million from 1990's level as the financing expense for the purchase of the North American businesses offset lower interest rates and reduced borrowings resulting from operating cash flow and improvements in asset management.
Income Taxes
In 1993, the company's effective tax rate was 40.7% compared with 37.4% in 1992. The higher effective tax rate reflects increased U.S. taxes as a result of higher statutory rates and the consolidation of Spoerle.
The company recorded a provision for taxes at an effective tax rate of 37.4% in 1992 compared with 20.4% in 1991. The higher effective tax rate reflects the depletion of the company's remaining $5.8 million U.S. net operating loss carryforwards in 1991.
The company's effective tax rate in 1991 was 20.4%, principally as a result of the utilization of the remaining $5.8 million of U.S. net operating loss carryforwards.
Net Income
Net income in 1993 was $81.6 million, an advance from $44.8 million in 1992 (after giving effect to extraordinary charges of 5.4 million reflecting the net unamortized discount and issuance expenses associated with the redemption of high-coupon subordinated debentures and other debt in 1992). The increase in net income is due principally to the increase in operating income and lower interest expense offset in part by higher taxes.
The company recorded net income of $50.2 million in 1992, before extraordinary charges aggregating $5.4 million, compared with net income of $8.7 million in 1991. Including these charges, net income in 1992 was $44.8 million. Included in 1991's results was a special charge of $9.8 million ($6.5 million after taxes) associated with the integration of the acquired businesses. The improvement in net income was principally the result of the increase in operating income offset in part by the higher provision for income taxes.
The company's net income in 1991 of $8.7 million decreased 14% from $10.1 million in 1990. The decrease in net income was principally the result of the $9.8 million special charge ($6.5 million after taxes) reflecting integration expenses associated with the North American businesses and the provision for income taxes. Excluding the special charge, net income was $15.2 million, an increase of 50% over 1990.
Net income also included the company's equity in earnings of affiliated companies of $1.7 million in 1993, $6.6 million in 1992, and $5.7 million in 1991. The decrease in the company's equity in earnings of affiliated companies in 1993 was due to the consolidation of Spoerle.
In 1993, the earnings of Silverstar, the company's Italian affiliate, advanced as a result of significant sales growth offset in part by a weaker lira. The increase in the company's equity in earnings of affiliated companies in 1992 was the result of Silverstar's profitability. The decrease in 1991 was the result of lower earnings in Germany and a loss in Italy.
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 73% in 1993 and 70% in 1992.
Working capital increased in 1993 by $160 million, or 43%, compared with 1992, as a result of increased sales, the consolidation of Spoerle, and acquisitions. Working capital increased by $42 million in 1992, as a result of the acquisition of the European businesses and increased sales.
The net amount of cash provided by operations in 1993 was $41.7 million, the principal element of which was the cash flow resulting from higher net earnings offset by increased working capital needs to support sales growth. The net amount of cash used by the company for investing activities in 1993 amounted to $111.7 million, including $87.9 million for various acquisitions. Cash flows from financing activities were $100.3 million, principally resulting from increased borrowings to finance the 1993 acquisitions in the U.S., Europe, and the Pacific Rim (see Notes 2 and 4 of the Notes to Consolidated Financial Statements for additional information regarding these acquisitions).
In September 1993, the company completed the conversion of all of its outstanding series B $19.375 convertible exchangeable preferred stock, into 1,009,086 shares of its common stock. This conversion eliminated the company's obligation to pay $1.3 million of annual dividends.
The net amount of cash provided by operating activities in 1992 was $71.5 million, attributable primarily to the higher net earnings of the company. The net amount of cash used by the company for investing activi- ties in 1992 amounted to $45.8 million, including $37.2 million for the acquisition of the European businesses.
The aggregate cost of the company's acquisition of the electronics distribution businesses of Lex in the U.K. and France, and Spoerle's acquisition of the Lex electronics distribution business in Germany, was $52 million, of which $32 million was paid in cash and $20 million was paid in the form of a senior subordinated note due in June 1997. The company financed the cash portion of the purchase price through the sale of 66,196 shares of newly-created series B preferred stock and U.K. bank borrowings. In addition, a portion of the proceeds from the company's public offering of common stock and the issuance of the 5-3/4% convertible subordinated debentures was used to repay the senior subordinated note. The German business was purchased by Spoerle for cash (see Notes 2, 4, and 6 of the Notes to Consolidated Financial Statements for additional information regarding these acquisitions).
The net amount of cash used for financing activities in 1992 was $23.9 million, principally reflecting the redemption of high-yield
subordinated debentures, repayment of long-term debt, and the payment of preferred stock dividends and financing fees, offset by the public offering of 4,703,500 shares of common stock and the 5-3/4% convertible subordinated debentures, the issuance of the senior secured notes, and U.K. bank borrowings.
In September 1992, the company completed the conversion of all of its outstanding depositary shares, each representing one-tenth share of its $19.375 convertible exchangeable preferred stock, into 3,615,056 shares of its common stock. This conversion eliminated the company's obligation to pay $4.6 million of annual dividends relating to the depositary shares.
Early in 1994, the company purchased an additional 15% share in Spoerle for approximately $23 million in cash. The company financed the acquisition through its U.S. credit agreement and German bank borrowings. Additionally, the company increased its holdings in Silverstar to a majority share and acquired the electronic component distribution business of Field Oy, the largest distributor of electronic components in Finland, and TH:s Elektronik, a leading distributor in Sweden and Norway.
Item 8.


Item 8. Financial Statements.
REPORT OF ERNST & YOUNG, 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, 1993 and 1992, and the related consolidated statements of operations, cash flows, and shareholders' equity for each of the three years in the period ended December 31, 1993. Our audits also included the financial statement schedules listed in the Index at Item 14(a). These financial statements and schedules are the responsibility of the company's management. Our responsibility is to express an opinion on these financial state- ments and schedules 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, 1993 and 1992, and the consolidated results of its operations and its cash flows for each of the three years in the period ended December 31, 1993, in conformity with generally accepted accounting princi- ples. Also, in our opinion, the related financial statement schedules, when considered in relation to the basic financial statements taken as a whole, present fairly in all material respects the information set forth therein.
ERNST & YOUNG
New York, New York February 24, 1994
See accompanying notes.
See accompanying notes.
See accompanying notes.
See accompanying notes.
ARROW ELECTRONICS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1993, 1992, AND 1991
1. Summary of Significant Accounting Policies
Principles of Consolidation
The financial statements include the accounts of the company and its consolidated subsidiaries. The company's investments in its affiliated companies which are not majority-owned are accounted for using the equity method. All significant intercompany transactions are eliminat- ed.
Basis of Presentation
Certain prior year amounts have been reclassified to conform to the current year's presentation.
Inventories
Inventories are stated at the lower of cost or market. Cost is deter- mined 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 purpos- es. 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 amor- tized 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 share- holders' equity. The results of foreign operations are translated at the weighted average exchange rates for the year. Gains or losses resulting from foreign currency transactions, other than transactions used to hedge the value of foreign investments, are included in the statement of operations.
ARROW ELECTRONICS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
Income Taxes
Effective January 1, 1991, the company adopted Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes" ("SFAS 109"), which requires that the accounting for income taxes be on 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 Common Share
Net income per common share is computed after deducting preferred stock dividends and is based upon the weighted average number of shares of common stock and common stock equivalents outstanding. The average number of common stock equivalents was 631,973, 885,137, and 552,128 for 1993, 1992, and 1991, respectively.
Net income per common share on a fully diluted basis assumes that the convertible exchangeable preferred shares and the convertible subordi- nated debentures were converted to common stock at either the beginning of each period or the date of issuance. The dividends related to the convertible exchangeable preferred stock and the interest expense on the 5-3/4% convertible subordinated debentures, net of taxes, are eliminat- ed. The 9% convertible subordinated debentures are not assumed to be converted into common stock in 1992 as they would have been antidilutive. For 1991, the aforementioned adjustments were not required as they would have been antidilutive.
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 statement of cash flows. The carrying amount reported in the balance sheet for cash and short-term investments approximates its fair value.
2. Acquisitions of Electronics Distribution Businesses
In January 1993, the company acquired an additional 15% share, for approximately $25,145,000, in Spoerle Electronic Handelsgessellschaft mbH and Co. and its general partner, Spoerle GmbH (collectively, "Spoerle") the largest distributor of electronic components in Germany, increasing its holdings to a 55% majority interest. In May 1993, the company acquired the high-reliability electronic component distribution and value-added service businesses of Zeus Components, Inc. ("Zeus"). In June 1993, the company acquired Microprocessor & Memory Distribution Limited ("MMD"), a U.K.-based electronics distributor which focuses on the distribution of high-technology semiconductor products. In August 1993, the company acquired Components Agent Limited, one of the largest electronics distributors in Hong Kong. During the third quarter of 1993 the company acquired a majority interest in Amitron S.A. and the ATD Group, electronics distributors serving the Spanish and Portuguese markets. In November 1993, the company augmented its French operations by acquiring CCI Electronique. The aggregate cost of the acquisitions was $87,875,000, including $4,757,000 for non-competition agreements. Each acquisition was accounted for as a purchase transaction beginning in the month of acquisition.
ARROW ELECTRONICS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
The following summarizes the allocation of the aggregate consider- ation paid for the aforementioned acquisitions, except Spoerle, to the fair market value of the assets acquired and liabilities assumed by the company (in thousands):
Current assets: Accounts receivable ..................$48,010 Inventories........................... 31,726 Other................................. 2,972 $ 82,708
Property, plant and equipment........... 3,876 Cost in excess of net assets of acquired businesses................... 50,797 Other assets............................ 9,113 146,494 Current liabilities: Accounts payable.....................$(30,412) Accrued expenses..................... (35,374) Other................................ (16,789) (82,575) Net consideration paid................. $ 63,919
In February 1992, the company acquired the electronics distribution businesses of Lex Service PLC ("Lex") in the U.K. and France, and Spoerle acquired the electronics distribution business of Lex in Germany. The aggregate cost of the acquisitions was $51,983,000, of which $31,983,000 was paid in cash and $20,000,000 was paid in the form of a 12% senior subordinated note due June 1997. The company financed the cash portion of the purchase price through the sale of 66,196 shares of newly-created series B preferred stock and bank borrowings in the U.K. The German business of Lex was purchased by Spoerle for cash of $14,800,000. The acquisitions of the European businesses of Lex are being accounted for as purchase transactions effective February 28, 1992.
The following summarizes the allocation of the consideration paid for the electronics distribution businesses in the U.K. and France to the fair market value of the assets acquired and liabilities assumed by the company (in thousands):
Current assets: Accounts receivable.................$ 27,479 Inventories......................... 17,947 Other............................... 1,662 $ 47,088
Property, plant and equipment......... 2,975 Cost in excess of net assets of acquired businesses.................. 21,065 Other assets......................... 3,150 74,278 Current liabilities: Accounts payable.....................$(10,397) Accrued expenses..................... (26,698) (37,095) Net consideration paid............... $ 37,183
ARROW ELECTRONICS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
In September 1991, the company acquired the North American electronics distribution businesses of Lex, consisting of Lex Electron- ics Inc. and Almac Electronics Corporation (collectively the "North American businesses"). The aggregate cost of the acquisition was $173,257,000, including $7,292,000 for a five-year non-competition agreement, and payment consisted of $111,706,000 of cash and 6,839,000 shares of the company's common stock valued at $61,551,000. The cash portion of the purchase price was financed under the company's U.S. credit agreement. The acquisition of the North American businesses has been accounted for as a purchase transaction effective September 27, 1991.
In October 1991, the company acquired a 50% interest in Silverstar Ltd. S.p.A. ("Silverstar") in exchange for 926,000 shares of common stock valued at $8,330,000.
Set forth below is the unaudited pro forma combined summary of operations for the years ended December 31, 1993 and 1992 as though each of the acquisitions had been made on January 1, 1992.
1993 1992 (In thousands except per share data)
Sales..................................$2,658,000 $2,182,000
Operating income....................... 185,000 140,000
Earnings before extraordinary charges.. 83,000 51,000
Net income............................. 83,000 45,000
Per common share: Primary: Earnings before extraordinary charges............ 2.63 1.78 Net income......................... 2.63 1.57 Fully diluted: Earnings before extraordinary charges............ 2.44 1.70 Net income......................... 2.44 1.52
Average number of common shares and common share equivalents outstanding: Primary.............................. 30,994 26,109 Fully diluted........................ 35,533 30,045
The unaudited pro forma combined summary of operations has been prepared utilizing the historical financial statements of Arrow and the acquired businesses. The unaudited pro forma combined summary of operations does not reflect all sales attrition which may result from the combination of Zeus and MMD with Arrow's businesses or the sales attrition which may have resulted from the combination of the European businesses. It also does not reflect the full cost savings the company expects to achieve from the combination of the Zeus and MMD businesses with its own.
ARROW ELECTRONICS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
The 1992 unaudited pro forma combined summary of operations does not reflect the cost savings achieved from the combination of the U.K. business of Lex with its own or any sales attrition which may have resulted from the combination.
The cost savings achieved result principally from reductions in personnel performing duplicative functions and the elimination of duplicative administrative facilities, selling and stocking locations, and computer and telecommunications equipment. The unaudited pro forma combined summary of operations does not purport to be indicative of the results which actually would have been obtained if the acquisitions had been made at the beginning of 1992.
The unaudited pro forma combined summary of operations includes the effects of the purchase price allocation adjustments, the additional interest expense on debt incurred in connection with the acquisitions as if the debt had been outstanding from the beginning of the periods presented, and the issuance of additional shares of the company's preferred stock. The purchase price allocation adjustments include the adjustment of the net assets acquired to fair market value and the estimated costs associated with the integration of the businesses. Such estimated costs include professional fees as well as real estate lease termination costs, costs associated with the elimination of certain redundant franchised lines, and severance and other expenses related to personnel performing duplicative functions, all of which are associated with facilities and personnel of the acquired businesses.
Early in 1994, the company acquired an additional 15% interest in Spoerle, bringing its holdings to 70%, and increased its holdings in Silverstar to a majority share. Silverstar will be consolidated into the company's results in 1994. Additionally, the company acquired the electronic component distribution business of Field Oy, the largest distributor of electronic components in Finland, and TH:s Elektronik, a leading distributor in Sweden and Norway.
3. Investments in Affiliated Companies
At December 31, 1993, the company had a 50% interest in Silverstar, the largest distributor of electronic components in Italy. Prior to 1993 when it increased its holdings to a 55% majority interest, the company had a 40% interest in Spoerle. The investment in Silverstar is account- ed for using the equity method as was the investment in Spoerle prior to 1993. For the year ended December 31, 1993, Silverstar recorded net sales of $158,546,000, gross profit of $46,111,000, income before taxes of $8,959,000 and net income of $4,000,000. For the year ended December 31, 1992, Spoerle and Silverstar recorded net sales of $487,179,000, gross profit of $135,200,000, income before income taxes of $32,185,000, and net income of $26,082,000. For the year ended December 31, 1991, Spoerle recorded net sales of $226,890,000, gross profit of $66,038,000,
ARROW ELECTRONICS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
income before income taxes of $26,748,000, and net income of $20,466,000. Such results are exclusive of interest expense associated with financing the investment and purchase accounting adjustments (including amortization of costs assigned to identifiable assets, principally franchise agreements which are being amortized over 30 years, amortization over 40 years of costs in excess of the company's interest in net assets acquired, and related income taxes). A summary of Silverstar's balance sheet at December 31, 1993 and both affiliates' balance sheets at December 31, 1992, exclusive of the aforementioned adjustments, follows:
1993 1992 (In thousands)
Current assets........................... $ 94,624 $194,232 Noncurrent assets........................ 4,854 25,946 Total assets ....................... $ 99,478 $220,178
Current liabilities..................... $ 78,836 $106,912 Noncurrent liabilities.................. 7,822 17,603 Equity.................................. 12,820 95,663 Total liabilities and equity....... $ 99,478 $220,178
The above amounts have been translated from deutsche marks and lira into U.S. dollars based on exchange rates in effect at the end of the respective year or during such year.
4. Long-Term Debt and Subordinated Debentures
Long-term debt at December 31, 1993 and 1992 consisted of the following:
1993 1992 (In thousands)
8.29% senior notes due 2000.................... $ 75,000 $ 75,000 U.S. credit agreement due 1998................. 35,000 - Deutsche mark term loan due 2000............... 28,794 15,442 Pound sterling term loan due 1998.............. 18,596 7,573 Other obligations with various interest rates.. 1,634 3,131 159,024 101,146 Less installments due within one year......... 5,196 713 $ 153,828 $100,433
ARROW ELECTRONICS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
The senior notes are payable in three equal annual installments commenc- ing in 1998. The senior notes restrict the payment of cash dividends, limit long-term debt and short-term borrowings, and require net worth and the ratio of operating cash flow to interest expense be maintained at certain designated levels.
The company's credit agreement with a group of banks (the "U.S. credit agreement") was amended in January 1994 to release all collater- al, to increase to $175,000,000 the amount of loans available, to reduce the borrowing rate, and to extend the maturity date to January 1998. At February 24, 1994, the company had outstanding borrowings of $30,500,000 under the U.S. credit agreement and unused borrowing capacity of $144,500,000.
At the company's option, the interest rate for loans under the U.S. credit agreement is at the agent bank's prevailing prime rate (6% at December 31, 1993) or the U.S. dollar London Interbank Offered Rate ("LIBOR") (3.25% at December 31, 1993) plus .75%. The company pays the banks a commitment fee of .25% per annum on the aggregate unused portion of the U.S. credit agreement.
The U.S. credit agreement restricts the payment of cash dividends, limits long-term debt and short-term borrowings, and requires that working capital, net worth, and the ratio of earnings to interest expense be maintained at certain designated levels.
The company's wholly-owned German subsidiary has a 50,000,000 deutsche mark term loan from a group of German banks. The loan is payable in installments and bears interest at deutsche mark LIBOR (5.9375% at December 31, 1993) plus .75%. The loan is secured by an assignment of the subsidiary's interest in profit distributions from Spoerle and is guaranteed by the company. The obligations of the company under the guarantee are subordinated to the company's obliga- tions under the U.S. credit agreement and the senior notes.
In January 1994, in connection with the acquisition of an addi- tional 15% interest in Spoerle, the company borrowed 25,000,000 deutsche marks from the German banks thereby increasing the loan balance to 75,000,000 deutsche marks.
The company's wholly-owned U.K. subsidiary has a loan agreement with a British bank which, as amended in June 1993, includes a L8,000,000 term loan, payable in semi-annual installments from 1994 through 1998, and a revolving credit facility which provides for loans of up to L5,000,000. Borrowings under the loan agreement bear interest at sterling LIBOR (5.5% at December 31, 1993) plus 1.5% and are secured by the assets and common stock of the subsidiary. The loan agreement also requires that operating cash flow, as defined, and the ratio of earnings to interest expense be maintained by the subsidiary at certain designated levels.
ARROW ELECTRONICS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
In April 1992, the company used the net proceeds of its common stock offering to redeem $46,000,000 of its 13-3/4% subordinated debentures and to repay approximately $13,000,000 of the company's 12% senior subordinated note issued to Lex in connection with the acquisi- tion of the European businesses. The redemption of the subordinated debentures resulted in an extraordinary charge of $4,039,000 ($2,424,000 after taxes), reflecting the net unamortized discount and issuance expenses of the subordinated debentures.
In November 1992, the company issued $125,000,000 of 5-3/4% convertible subordinated debentures due in 2002. The debentures are convertible at any time prior to maturity, unless previously redeemed, into shares of the company's common stock, at a conversion price of $33.125. The debentures are not redeemable at the option of the company prior to October 1995. The net proceeds from the issuance of the debentures together with the proceeds from the private placement of the senior notes were used to redeem the balance of the 13-3/4% subordinated debentures, the 12% subordinated debentures, and the 9% convertible subordinated debentures, to repay the balance of the 12% senior subordi- nated note issued to Lex, to repay the then existing term loan under the U.S. credit agreement, and to provide the company with general working capital. The redemption of the subordinated debentures and repayment of the term loan resulted in an extraordinary charge of $4,925,000 ($3,000,000 after taxes). The charge resulted from the amortization of the net unamortized discount and issuance expenses.
The aggregate annual maturities of long-term debt and subordinated debentures for each of the five years in the period ending December 31, 1998 are: 1994--$5,196,000; 1995--$5,053,000; 1996--$5,056,000; 1997-- $6,943,000; and 1998--$74,151,000.
The carrying amounts of the company's U.S. credit agreement and foreign borrowings approximate their fair value. At December 31, 1993, the closing price of the 5-3/4% convertible subordinated debentures on the New York Stock Exchange was 140% of par. The estimated fair market value of the 8.29% senior notes at December 31, 1993 was 106% of par.
5. Income Taxes
The provision for income taxes for 1993, 1992, and 1991 consisted of the following:
1993 1992 1991 (In thousands) Current Federal..................... $39,106 $14,080 $ 5,200 State....................... 9,432 3,744 1,000 Foreign..................... 9,376 - - 57,914 17,824 6,200 Deferred Federal..................... 2,760 9,869 (3,974) State....................... 552 2,333 - Foreign..................... 3,222 - - 6,534 12,202 (3,974) $64,448 $30,026 $ 2,226
ARROW ELECTRONICS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
The principal causes of the difference between the U.S. statutory and effective income tax rates for 1993, 1992, and 1991 are as follows:
1993 1992 1991 (In thousands)
Provision at statutory rate... $55,380 $27,292 $ 3,710 State taxes, net of federal benefit..................... 6,490 4,011 660 Minority interest............. (4,277) - - Foreign tax rate differential 3,448 - - Effect of equity income and foreign loss................ (385) (1,199) (716) Amortization of goodwill...... 1,124 775 513 Other differences............. 2,960 176 208 Tax benefit of loss and credit carryforwards............... (292) (1,029) (2,149) Income tax provision.......... $64,448 $30,026 $ 2,226
For financial reporting purposes in 1993, income before income taxes attributable to the United States and foreign operations was $120,112,000 and $38,116,000, respectively.
The significant components of the company's deferred tax assets are as follows:
1993 1992 (In thousands)
Inventory reserves............ $ 4,913 $ 8,082 Acquired net operating loss carryforwards............... 2,931 3,662 Other......................... 1,927 1,192 $ 9,771 $12,936
At December 31, 1993, the company had approximately $7,000,000 of acquired U.S. net operating loss carryforwards available for tax return purposes which expire in the years 2001 through 2006. Such carry- forwards are subject to certain annual restrictions on the amount that can be utilized for tax return purposes. In France, the company had approximately $9,500,000 of net operating loss carryforwards, of which approximately $8,900,000 was acquired, which expire through 1997. In accordance with SFAS 109, the cost in excess of net assets of companies acquired has been adjusted by $24,600,000 in conjunction with various acquisitions to reflect the tax benefits of these net operating loss carryforwards and other differences in the tax and book bases of the assets and liabilities acquired. Included in other liabilities are deferred tax liabilities of $11,954,000 and $11,436,000 at December 31, 1993 and 1992, respectively. The deferred tax liabilities are princi- pally the result of the differences in the bases of the German assets and liabilities for tax and financial reporting purposes.
ARROW ELECTRONICS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
6. Shareholders' Equity
The company has 2,000,000 authorized shares of serial preferred stock with a par value of $1. In February 1992, the company issued 66,196 shares of newly-created series B $19.375 convertible exchangeable preferred stock (the "series B preferred stock") for approximately $15,721,000 to provide partial funding for the acquisition of the European electronics distribution businesses of Lex.
In September 1993, the company completed the conversion of all of its outstanding series B preferred stock into 1,009,086 shares of its common stock. This conversion eliminated $1.3 million of annual dividends.
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 acquired 20% 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% or more of the company's common stock. Rights owned by the person acquiring such stock or transferees thereof will automatical- ly 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% ownership position has been acquired. In the event that the company merges with, or transfers 50% 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.
7. Employee Stock Plans
Restricted Stock Plan
Under the terms of the Arrow Electronics, Inc. Restricted Stock Plan (the "Plan"), a maximum of 1,330,000 shares of common stock may be awarded at the discretion of the Board of Directors to key employees of the company. The company believes that as many as 50 employees may be considered for awards under the Plan.
Shares awarded under the Plan may not be sold, assigned, trans- ferred, pledged, hypothecated, or otherwise disposed of, except as provided in the Plan. Shares awarded become free of such restrictions over a four-year period. The company awarded 40,000 shares of common stock in early 1994 to 35 key employees in respect of 1993, 49,250 shares of common stock to 35 key employees during 1993 (including 39,750 shares of common stock in early 1993 to 31 key employees in respect of
ARROW ELECTRONICS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
1992), 84,000 shares of common stock to 32 key employees during 1992 (including 63,000 shares awarded in early 1992 to 30 key employees in respect of 1991), and 11,000 shares of common stock to five key employ- ees during 1991. Forfeitures of shares awarded under the Plan were 7,625, 11,875, and 2,875 during 1993, 1992, and 1991, 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 unamor- tized 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 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. In 1993, the shareholders of the company approved an increase in the number of shares of common stock authorized for stock options to an aggregate of 4,500,000 shares.
The following information relates to the Option Plan:
Year ended December 31, 1993 1992 1991
Options outstanding at beginning of year...... 989,755 1,532,504 1,503,780 Granted.................. 367,250 473,900 268,550 Exercised................ (392,934) (978,446) (202,225) Forfeited................ (36,337) (38,203) (37,601) Options outstanding at end of year............ 927,734 989,755 1,532,504 Prices per share of options outstanding....$3.63-39.75 $3.63-28.25 $3.63-14.63 Average price per share of options exercised... $9.06 $5.86 $5.29 Average price per share of options outstanding. $17.02 $9.73 $6.21 Exercisable options...... 715,170 665,821 1,145,599 Options available for future grant: Beginning of year.... 748,959 1,184,656 165,605 End of year.......... 1,918,046 748,959 1,184,656
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 company 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 1993, 1992, and 1991 aggregated $2,525,000, $2,360,000, and $1,550,000, respectively.
ARROW ELECTRONICS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
8. Retirement Plan
The company has a defined contribution plan for eligible employ- ees, 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 $2,286,000, $2,131,000, and $1,302,000 in 1993, 1992, and 1991, respectively.
9. Lease Commitments
The company leases certain office, warehouse, and other property under noncancellable operating leases expiring at various dates through 2016. Rental expenses of noncancellable operating leases amounted to $16,375,000 in 1993, $12,943,000 in 1992, and $11,588,000 in 1991. Aggregate minimum rental commitments under all noncancellable operating leases approximate $69,922,000, exclusive of real estate taxes, insur- ance, and leases related to facilities closed in connection with the integration of the acquired businesses. Such commitments on an annual basis are: 1994-$15,012,000; 1995-$12,145,000; 1996-$9,858,000; 1997- $6,859,000; 1998-$5,539,000 and $20,509,000 thereafter. The company's obligations under capitalized leases are reflected as a component of deferred income taxes and other liabilities.
10. Segment and Geographic Information
The company is engaged in one business segment, the distribution of electronic components, systems, and related products. The geographic distribution of consolidated sales, operating income, and identifiable assets for 1993 and 1992 are as follows (in thousands):
Sales to Identifiable Unaffiliated Operating Assets at 1993 Customers Income (Loss) December 31,
North America.... $1,890,615 $156,014 $ 717,566
Europe........... 600,935 40,153 367,102
Pacific Rim...... 44,034 1,706 57,416
Eliminations and Corporate.. - (16,331) 35,849 $2,535,584 $181,542 1,177,933
Investment in affiliated company 13,371 Total assets at December 31, 1993 $1,191,304
ARROW ELECTRONICS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
Sales to Identifiable Unaffiliated Operating Assets at 1992 Customers Income (Loss) December 31,
North America.... $1,504,958 $116,007 $598,017
Europe........... 116,577 1,420 94,145
Pacific Rim...... - - -
Eliminations and Corporate.. - (13,646) 23,838 $1,621,535 $103,781 716,000
Investments in affiliated companies 64,893 Total assets at December 31, 1992 $780,893
11. Quarterly Financial Data (Unaudited)
A summary of the company's quarterly results of operations for 1993 and 1992 follows:
First Second Third Fourth Quarter Quarter Quarter Quarter (In thousands except per share data)
1993: Sales.......................$551,391 $584,069 $697,825 $702,299 Gross profit................ 120,091 120,847 136,876 135,517 Net income.................. 17,982 19,114 21,734 22,729 Per common share:........... Primary .................. .59 .62 .69 .72 Fully diluted............. .55 .58 .64 .67
First Second Third Fourth Quarter Quarter Quarter Quarter (In thousands except per share data)
1992: Sales.......................$378,679 $382,041 $407,421 $453,394 Gross profit................ 78,930 82,706 87,038 93,215 Earnings before extraordinary charges..... 9,270 11,518 13,323 16,133 Net income.................. 9,270 9,094 13,323 13,133 Per common share: Earnings before extraordinary charges.... .38 .41 .47 .53 Extraordinary charges ..... - (.10) - (.10) Net income.................... .38 .31 .47 .43
Item 9.

Item 9. Changes In and Disagreements with Accountants on Accounting and Financial Disclosure.
None. Part III
Item 10.



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 10, 1994 hereby is incorporated herein by reference.
Item 11.

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 10, 1994 hereby is incorporated herein by reference.
Item 12.

Item 12. Security Ownership of Certain Beneficial Owners and Manage- ment.
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 10, 1994 hereby is incorporated herein by reference.
Item 13.

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 10, 1994 hereby is incorporated herein by reference.
Part IV
Item 14.

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 schedules are filed as part of this annual report.
2. Financial Statement Schedules.
The financial statement schedules listed in the accompanying index to financial statements and financial statement schedules are 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. AND FINANCIAL STATEMENT SCHEDULES (Item 14 (a))
Page
Report of Ernst & Young, independent auditors 15
Consolidated balance sheet at December 31, 1993 and 1992 16
For the years ended December 31, 1993, 1992 and 1991:
Consolidated statement of operations 17
Consolidated statement of cash flows 18
Consolidated statement of shareholders' equity 19
Notes to consolidated financial statements for the years ended December 31, 1993, 1992 and 1991 20
Consolidated schedules for the three years ended December 31, 1993:
II - Amounts receivable from employees 45
VIII - Valuation and qualifying accounts 46
IX - Short-term borrowings 47
3. Exhibits.
(2)(a) Restated Agreement of Purchase and Sale, dated as of September 20, 1987, between Ducommun Incorporated and Arrow Electronics, Inc. (incorporated by reference to Exhibit 2(b) to the company's Registration Statement on Form S-4, Commission File No. 33-17942).
(b) Letter Agreement dated January 11, 1988 between Ducommun Incorporated and Arrow Electronics, Inc. (incorporated by reference to Exhibit 2(b) to the company's Current Report on Form 8-K dated January 21, 1988, Commission File No. 1-4482).
(c) Acquisition Agreement, dated July 28, 1988, between Craig, Hochreiter & Co., Incorporated and Arrow Electronics, Inc., as amended and supplemented (incorporated by reference to Exhibit 2 to the company's Quarterly Report on Form 10-Q for the quarter ended September 30, 1988, Commission File No. 1-4482).
(d)(i) Acquisition Agreement, dated July 6, 1989, between Arrow Electronics (UK) Limited and Electrocomponents plc (incorporated by reference to Exhibit 2(d)(i) to the company's Annual Report on Form 10-K for the year ended December 31, 1989, Commission File No. 1-4482).
(ii) English language translation of Acquisition Agreement, dated July 6, 1989, between Spoerle Electronic Handelsgesell- schaft mbH & Co. and Retron Manger Electronic GmbH and Eldi GmbH Electronik Distributor (incorporated by reference to Exhibit 2(d)(ii) to the company's Annual Report on Form 10-K for the year ended December 31, 1989, Commission File No. 1-4482).
(iii) Umbrella Agreement, dated July 6, 1989, between Electrocomponents plc; Retron Elektronische Bauteile und Gerate Handelsgesellschaft mbH, Manger Elektronik GmbH, and Eldi GmbH Elektro- nik Distributor; Arrow Electronics, Inc.; Arrow Electronics (UK) Limited; and Spoerle Electronic Handelsgesellschaft GmbH & Co. (incorpo- rated by reference to Exhibit 2(d)(iii) to the company's Annual Report on Form 10-K for the year ended December 31, 1989, Commission File No. 1-4482).
(e)(i) Agreement of Purchase and Sale, as amended, by and among Lex Service PLC, Lex Burlington Inc., and Arrow Electron- ics, Inc. (incorporated by reference to Exhibit 6(a) to the company's Quarterly Report on Form 10-Q for the quarter ended September 30, 1991, Commission File No. 1-4482).
(ii) Stockholders' Agreement dated as of September 27, 1991 by and among Arrow Electronics, Inc., Lex Service PLC, and Lex Burlington Inc. (incorporated by reference to Exhibit 2(e)(ii) to the company's Annual Report on Form 10-K for the year ended December 31, 1991, Commission File No. 1-4482).
(iii) Amendment No. 1 dated as of February 28, 1992 to the Stockholders' Agreement in (2)(e)(ii) above (incorporated by reference to Exhibit 2(g)(iii) to the company's Annual Report on Form 10-K for the year ended December 31, 1991, Commission File No. 1-4482).
(iv) Amendment No. 2 dated as of July 30, 1992 to the Stockholders' Agreement in (2)(e)(ii) above (incorporated by reference to Exhibit 2(e)(iv) to the company's Annual Report on Form 10-K for the year ended December 31, 1992, Commission File No. 1-4482).
(v) Amendment No. 3 dated as of February 1, 1993 to the Stockholders' Agreement in (2)(e)(ii) above (incorporated by reference to Exhibit 2(e)(v) to the company's Annual Report on Form 10-K for the year ended December 31, 1992, Commission File No. 1-4482).
(vi) Registration Rights Agreement dated as of September 27, 1991 by and among Arrow Electronics, Inc., Lex Service PLC, and Lex Burlington Inc. (incorporated by reference to Exhibit 2(e)(iii) to the company's Annual Report on Form 10-K for the year ended December 31, 1991, Commission File No. 1-4482).
(vii) Amendment No. 1 dated as of February 28, 1992 to the Registration Rights Agreement in (2)(e)(vi) above (incorporated by reference to Exhibit (2)(g)(iv) to the company's Annual Report on Form 10-K for the year ended December 31, 1991, Commission File No. 1-4482).
(viii) Amendment No. 2 dated as of July 30, 1992 to the Registration Rights Agreement in (2)(e)(vi) above (incorporated by reference to Exhibit (2)(e)(viii) to the company's Annual Report on Form 10-K for the year ended December 31, 1992, Commission File No. 1-4482).
(ix) Amendment No. 3 dated as of February 1, 1993 to the Registration Rights Agreement in (2)(e)(vi) above (incorporated by reference to Exhibit (2)(e)(ix) to the company's Annual Report on Form 10-K for the year ended December 31, 1992, Commission File No. 1-4482).
(f)(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.
(g) Asset Purchase Agreement, dated as of February 12, 1993, between Zeus Components, Inc. and Arrow Electronics, Inc. (incorporated by reference to Exhibit 10(1) to the company's Annual Report on Form 10-K for the year ended December 31, 1992, Commission File No. 1-4482).
(h) Agreement dated as of February 28, 1992 among Lex Service PLC, Arrow Electronics (UK) Limited, EDI Electronics Distribution International (France) SA, Arrow Electronics GmbH, and Arrow Electronics, Inc. (incorporated by reference to Exhibit 2(1) to the company's Current Report on Form 8-K, dated March 11, 1992, Commis- sion File No. 1-4482).
(i) Subscription Agreement dated February 7, 1992, between Arrow Electronics, Inc. and various purchasers, pertaining to the sale of the company's Series B $19.375 Convertible Exchangeable Preferred Stock (incorporated by reference to Exhibit 2(h) to the company's Annual Report on Form 10-K for the year ended December 31, 1991, Commission File No. 1-4482).
(3) (a) Amended and Restated Certificate of Incorpo- ration of the company, as amended (incorporated by reference to Exhibit 4(1) to the company's Registration Statement on Form S-3, Registration No. 33-67890). (b) Certificate of Amendment of the Amended and Restated Certificate of Incorporation of the company dated as of August 24, 1993 (incorporated by reference to Exhibit 4(2) to the company's Registration Statement on Form S-3, Registration No. 33-67890).
(c) By-Laws of the company, as amended (incorpo- rated 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) Indenture, including Debenture, dated as of November 25, 1992 between the company and the Bank of Montreal Trust Company, as Trustee, with respect to the company's 5-3/4% Convertible Subordinated Debentures due 2004 (incorporated by reference to Exhibit 4(a) to the company's Annual Report on Form 10-K for the year ended December 31, 1992, Commission File No. 1-4482).
(b)(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 share- holders 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)(b)(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)(b)(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)(b)(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)(b)(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).
(10)(a) Investment Management Agreement, dated as of September 28, 1981, between the company and Fayez Sarofim & Co. (incor- porated by reference to Exhibit 10(b)(ii) to the company's Quarterly Report on Form 10-Q for the quarter ended September 30, 1981, Commission File No. 1-4482).
(b)(i) Arrow Electronics Savings Plan, as amended and restated through January 1, 1989 (incorporated by reference to Exhibit 10(b)(i) to the company's Annual Report on Form 10-K for the year ended December 31, 1989, Commission File No. 1-4482).
(ii) Amendment No. 1, dated December 7, 1989, to the Arrow Electronics Savings Plan in (10)(b)(i) above (incorporated by reference to Exhibit 10(b)(ii) to the company's Annual Report on Form 10-K for the year ended December 31, 1992, Commission File No. 1-4482).
(iii) Amendment No. 2, dated January 18, 1990, to the Arrow Electronics Savings Plan in (10)(b)(i) above (incorporated by reference to Exhibit 10(b)(ii) to the company's Annual Report on Form 10-K for the year ended December 31, 1991, Commission File No. 1-4482).
(iv) Amendment No. 3, dated February 21, 1992, to the Arrow Electronics Savings Plan in (10)(b)(i) above (incorporated by reference to Exhibit 10(b)(iv) to the company's Annual Report on Form 10-K for the year ended December 31, 1992, Commission File No. 1-4482).
(v) Supplement, dated September 27, 1991, to the Arrow Electronics Savings Plan in (10)(b)(i) above (incorporated by reference to Exhibit 10(b)(v) to the company's Annual Report on Form 10-K for the year ended December 31, 1992, Commission File No. 1-4482).
(vi) Supplement No. 3, dated August 24, 1993, to the Arrow Electronics Savings Plan in 10(b)(i) above.
(vii) Arrow Electronics Stock Ownership Plan, as amended and restated through January 1, 1989 (incorporated by reference to Exhibit 10(b)(ii) to the company's Annual Report on Form 10-K for the year ended December 31, 1989, Commission File No. 1-4482).
(viii) Amendment No. 1, dated November 29, 1989, to the Arrow Electronics Stock Ownership Plan in (10)(b)(vii) above (incor- porated by reference to Exhibit 10(b)(vii) to the company's Annual Report on Form 10-K for the year ended December 31, 1992, Commission File No. 1-4482).
(ix) Amendment No. 2, dated December 7, 1989, to the Arrow Electronics Stock Ownership Plan in (10)(b)(vii) above (incor- porated by reference to Exhibit 10(b)(viii) to the company's Annual Report on Form 10-K for the year ended December 31, 1992, Commission File No. 1-4482).
(x) Amendment No. 3, dated January 18, 1990, to the Arrow Electronics Stock Ownership Plan in (10)(b)(vii) above (incorporated by reference to Exhibit 10(b)(iv) to the company's Annual Report on Form 10-K for the year ended December 31, 1991, Commission File No. 1-4482).
(xi) Amendment No. 4, dated December 31, 1992 to the Arrow Electronics Stock Ownership Plan in (10)(b)(vii) above (incor- porated by reference to Exhibit 10(b)(x) to the company's Annual Report on Form 10-K for the year ended December 31, 1992, Commission File No. 1-4482). (xii) Supplement No. 1, dated September 8, 1992, to the Arrow Electronics Stock Ownership Plan in (10)(b)(vii) above (incor- porated by reference to Exhibit 10(b)(xi) to the company's Annual Report on Form 10-K for the year ended December 31, 1992, Commission File No. 1-4482).
(xiii) Supplement No. 3, dated August 24, 1993, to the Arrow Electronics Stock Ownership Plan in (10)(b)(vii) above.
(xiv) Capstone Electronics Corp. Profit-Sharing Plan, effective January 1, 1990 (incorporated by reference to Exhibit 10(b)(iii) to the company's Annual Report on Form 10-K for the year ended December 31, 1990, Commission File No. 1-4482).
(xv) Supplement No. 1, dated September 8, 1992, to the Capstone Electronics Profit-Sharing Plan in (10)(b)(xiv) above (incorporated by reference to Exhibit 10(b)(xiii) to the company's Annual Report on Form 10-K for the year ended December 31, 1992, Commission File No. 1-4482).
(xvi) Supplement No. 2, dated August 24, 1993, to the Capstone Electronics Profit Sharing Plan in (10)(b)(xiv) above.
(c)(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 March 13, 1991, 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, 1990, Commission File No. 1-4482).
(iii) Employment Agreement, dated as of March 13, 1991, between the company and Robert E. Klatell (incorporated by reference to Exhibit 10(c)(iii) to the company's Annual Report on Form 10-K for the year ended December 31, 1990, Commission File No. 1-4482).
(iv) Form of agreement between the company and the employees parties to the Employment Agreements listed in 10(c)(i), (ii), and (iii) 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).
(v) Form of Employment Agreement, dated as of April 1, 1989, between the company and Robert J. McInerney (incorporated by reference to Exhibit 10(c)(v) to the company's Annual Report on Form 10-K for the year ended December 31, 1989, Commission File No. 1-4482).
(vi) Form of Employment Agreement, dated as of March 13, 1991, between the company and Steven W. Menefee (incorporated by reference to Exhibit 10(c)(vi) to the company's Annual Report on Form 10-K for the year ended December 31, 1990, Commission File No. 1-4482).
(vii) Form of Employment Agreement, as amended and restated as of January 1, 1990, between the company and Wesley S. Sagawa (incorporated by reference to Exhibit 10(c)(vi) to the company's Annual Report on Form 10-K for the year ended December 31, 1989, Commission File No. 1-4482).
(viii) Form of Employment Agreement, dated as of October 27, 1988, between the company and William J. Smith (incorporated by reference to Exhibit 10(c)(v) to the company's Annual Report on Form 10-K for the year ended December 31, 1988, Commission File No. 1-4482).
(ix) Employment Agreement, dated as of October 19, 1990, between the company and Don E. Burton (incorporated by reference to Exhibit 10(c)(ix) to the company's Annual Report on Form 10-K for the year ended December 31, 1990, Commission File No. 1-4482).
(x) Employment Agreement, dated as of January 7, 1991, between the company and Betty Jane Scheihing (incorporated by reference to Exhibit 10(c)(xi) to the company's Annual Report on Form 10-K for the year ended December 31, 1990, Commission File No. 1-4482).
(xi) Employment Agreement, dated as of January 7, 1991, between the company and John S. Smith (incorporated by reference to Exhibit 10(c)(xii) to the company's Annual Report on Form 10-K for the year ended December 31, 1990, Commission File No. 1-4482).
(xii) Employment Agreement, dated as of March 17, 1993, between the company and Jan Salsgiver.
(xiii) Form of agreement between the company and all corporate Vice Presidents, including the employees parties to the Employment Agreements listed in 10(c)(v)-(xii) 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).
(xiv) 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).
(xv) Unfunded Pension Plan for Selected Executives of Arrow Electronics, Inc. (incorporated by reference to Exhibit 10(c)(xv) to the company's Annual Report on Form 10-K for the year ended December 31, 1990, Commission File No. 1-4482).
(xvi) 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).
(d)(i) Senior Note Purchase Agreement, dated as of December 29,1992, with respect to the company's 8.29% 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(d)(i) above.
(e) Amended and Restated Credit Agreement dated as of January 28, 1994 among Arrow Electronics, Inc., the several Banks from time to time parties hereto, Bankers Trust Company and Chemical Bank, as agents.
(f)(i) English translation of the Agreement of Purchase and Sale, dated January 19, 1993, between Carlo Giersch and Arrow Electronics GmbH with respect to the purchase of an additional 15% interest in Spoerle Electronic (incorporated by reference to Exhibit 10(f)(i) to the company's Annual Report on Form 10-K for the year ended December 31, 1992, Commission File No. 1-4482).
(ii) English translation of the Offer Agreement, with supplemental letters attached, dated January 19, 1993, between Arrow Electronics GmbH and Carlo Giersch with respect to the purchase of a second 15% interest in Spoerle Electronic (incorporated by reference to Exhibit 10(f)(ii) to the company's Annual Report on Form 10-K for the year ended December 31, 1992, Commission File No. 1-4482).
(iii) English translation of the Partnership Agreement of Spoerle Electronic, dated January 19, 1993 (incorporated by reference to Exhibit 10(f)(iii) to the company's Annual Report on Form 10-K for the year ended December 31, 1992, Commission File No. 1-4482).
(iv) English translation of the Articles of Spoerle GmbH, dated as of January 1, 1993 (incorporated by reference to Exhibit 10(f)(iv) to the company's Annual Report on Form 10-K for the year ended December 31, 1992, Commission File No. 1-4482).
(g) Amendment and Restatement Agreement relating to a Facilities Agreement dated February 28, 1992, between Arrow Electronics (UK) Limited and National Westminster Bank PLC.
(h)(i) Credit Agreement, dated April 14, 1993, between Berliner Handels- und Frankfurter Bank and Arrow Electronics GmbH. (ii) Amendment, dated January 28, 1994, to the Credit Agreement in (10)(h)(i) above.
(iii) Guarantee, dated January 16, 1990, between Arrow Electronics, Inc. and Berliner Handels- und Frankfurter Bank (incorporated by reference to Exhibit 10(h)(ii) to the company's Annual Report on Form 10-K for the year ended December 31, 1989, Commission File No. 1-4482).
(iv) Subordination Agreement, dated January 16, 1990, between Berliner Handels- und Frankfurter Bank, Arrow Electronics, Inc., and The First National Bank of Chicago (incorporated by reference to Exhibit 10(h)(iii) to the company's Annual Report on Form 10-K for the year ended December 31, 1989, Commission File No. 1-4482).
(v) First Amendment, dated December 29, 1992, to the Subordination Agreement in (10)(h)(iv) above (incorporated by reference to Exhibit 10(h)(iv) to the company's Annual Report on Form 10-K for the year ended December 31, 1992, Commission File No. 1-4482).
(vi) Second Amendment, dated January 26, 1993, to the Subordination Agreement in (10)(h)(iv) above (incorporated by reference to Exhibit 10(h)(v) to the company's Annual Report on Form 10-K for the year ended December 31, 1992, Commission File No. 1-4482).
(vii) Third Amendment, dated April 12, 1993, to the Subordination Agreement in (10)(h)(iv) above.
(viii) Fourth Amendment, dated January 28, 1994, to the Subordination Agreement in (10)(h)(iv) above.
(viv) Assignments, dated January 16, 1990, by Arrow Electronics GmbH in favor of Berliner Handels- und Frankfurter Bank (incorporated by reference to Exhibit 10(h)(iv) to the company's Annual Report on Form 10-K for the year ended December 31, 1989, Commission File No. 1-4482).
(i)(i) Arrow Electronics, Inc. Stock Option Plan, as amended (incorporated by reference to Exhibit (27)(a) to the company's Registration Statement on Form S-8, Registration No. 33-66594).
(ii) Form of Stock Option Agreement under (i)(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 (i)(i) above (incorporated by reference to Exhibit 10(k)(iv) to the company's Registration Statement on Form S-4, Registration No. 33-17942).
(j)(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, 1991, Commission File No. 1-4482).
(ii) Form of Award Agreement under (j)(i) above (incorporated by reference to Exhibit 10(l)(iv) to the company's Registration Statement on Form S-4, Registration No. 33-17942).
(k) 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).
(l) Share Purchase Agreement dated as of July 2, 1993 between Baring Brothers (Guernsey) Limited and Others and Arrow Electronics (UK) Limited.
(m) Share Sale Agreement dated as of August 17, 1993 between Ocean Information Holdings Limited and Arrow Electronics, Inc.
(11) Statement Re: Computation of Earnings Per Share.
(22) List of Subsidiaries.
(24) Consent of Ernst & Young
(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
None.
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration Statements (Forms S-8 No. 33-66594, No. 33-48252, No. 33-20428 and No. 2-78185) and in the related Prospectuses pertaining to the employee stock plans of Arrow Electronics, Inc., in Amendment No. 1 to the Registration Statement (Form S-3 No. 33-67890) and in the related Prospectus pertaining to the registration of 1,009,086 shares of Arrow Electronics, Inc. Common Stock, and in Amendment No. 1 to the Registra- tion Statement (Form S-3 No. 33-42176) and in the related Prospectus pertaining to the registration of up to 944,445 shares of Arrow Elec- tronics, Inc. Common Stock held by Aquarius Investments Ltd. and Andromeda Investments Ltd. of our report dated February 24, 1994 with respect to the consolidated financial statements and schedules of Arrow Electronics, Inc. included in this Annual Report on Form 10-K for the year ended December 31, 1993.
ERNST & YOUNG
New York, New York March 25, 1994
ARROW ELECTRONICS, INC.