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Arrow Electronics (ARW - Analyst Report) reported a net income (excluding restructuring, integration, and other charges) of $1.11 per share in the second quarter of 2012, missing the Zacks Consensus Estimate by a penny. The quarter's result was down from $1.36 per share in the year-ago quarter. 

Reported net income came in at $114.4 million or $1.02 per share compared with a net income of $156.2 million or $1.33 per share in the second quarter of 2011. 


Arrow reported sales of $5.15 billion, down 7% year over year and 5.32% sequentially. Excluding the impact of acquisitions and foreign currency, sales declined 5.0% year over year.

On a segmental basis, Global component sales were $3.45 billion, down 11.0% year over year. Asia Pacific was ahead of normal seasonality driven by China and Taiwan. In America, the company's business was in line with management’s expectations. Sales from Europe were down 14% year over year.

Revenues from Global enterprise computing solutions (ECS) came in at $1.70 billion, up 2.0% year over year, and in line with management's expectations. Europe was the growth driver. Arrow posted solid double-digit year-over-year growth in services, storage and software, which was partially offset by a decline in servers.


Operating margin came in at 3.7% compared with 4.5% in the year-ago quarter and 3.8% in the previous quarter.

Management stated that the macroeconomic environment was weak during the quarter. Hence, Arrow undertook $20 million in additional cost and expense reduction actions to maintain efficiency.

Balance Sheet and Cash Flows

Arrow ended the quarter with cash and cash equivalents of $325.8 million, down from $396.9 million at the end of the 2011. As of June 30, 2012, long-term debt was $1.96 billion, down from $2.25 billion at the end of the previous quarter.

During the quarter, the company generated $114.5 million of cash from operating activities and used $26.7 million for capital expenditure.

By the end of the second quarter, Arrow completed the previously announced $150 million share repurchase authorization. In June 2012, the Board of Directors authorized an additional $200 million share repurchase program.


Going forward, management expects sales in the third quarter of 2012 to come between $4.8 billion and $5.2 billion. The company continues to believe that opportunities in cloud computing continue to be a strategic priority.

Global components sales are projected between $3.3 billion and $3.5 billion. Global enterprise computing solutions sales are estimated between $1.5 billion and $1.7 billion. Assuming an average Euro to USD exchange rate of 1.20 to 1, earnings per share (excluding any one-time charges) are projected around $1.00 to $1.12.

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