Introduction to Arrow Electronics, Inc.
Arrow at a glance Founded:
1935
Ticker Symbol:
ARW (New York Stock Exchange)
Web Site:
www.arrow.com
2012 Sales:
$20.4 billion
Global Components:
$13.4 billion
ECS:
$7.0 billion
2012 Net Income*:
$488.4 million
2012 EPS*:
$4.40
Employees:
16,500
Locations:
Global network of more than 470 locations in 55 countries and territories
Corporate Headquarters: Englewood, Colorado Customers:
100,000
Fortune 500 Rank:
133
*Represents GAAP measure adjusted to exclude the impact of restructuring and other items affecting comparability.
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Arrow is…
A global provider of products, services and solutions to industrial and commercial users of electronic components and enterprise computing solutions
Global customer base of more than100,000 Wireline and Wireless Networking Infrastructure
Medical Imaging, Instrumentation and Scientific Testing Military and Aerospace
Medical Services
Electronic Manufacturing Services
Machine Tools and Industrial Controls
Enterprise Computing
GIDDINGS & LEWIS
No single customer represents more than 3% of revenue
Our vision is…
To be the premier electronics company in the world
Global strategy – drive growth in the core, services, and high-growth product sets
Core Businesses
Services
Arrow’s leadership
Michael J. Long Chairman, President and Chief Executive Officer
Peter S. Brown Senior Vice President and General Counsel
Andrew S. Bryant President, Arrow Enterprise Computing Solutions
Peter T. Kong President, Arrow Global Components
Vin Melvin Vice President and Chief Information Officer
M. Catherine Morris Senior Vice President and Chief Strategy Officer
Gretchen Zech Senior Vice President, Global Human Resources
Paul J. Reilly Executive Vice President, Finance and Operations, and Chief Financial Officer
Business Segment Overview
Global components Arrow Global Components – Arrow Americas – 44% of components sales – Arrow EMEA (Europe, Middle East, Africa) – 27% of components sales – Arrow Asia-Pacific – 29% of components sales
Core Drivers
Differentiators
• • • • •
• Global strength and depth • Design win performance • Highest ranked level of customer service • Industry leading operating margins • Financial resources
Broad line card Broad customer base – 100,000+ Engineering focus Demand creation Value-added programs
Breakdown of 2012 Component Sales • • • •
66% Semiconductor 20% PEMCO (passive, electro-mechanical and connector) 9% Computing and memory 5% Other products and services
Powering the supply chain: global components Design System hardware, OS Configuration & development, product specification, RoHS compliance, complete solutions
Production Prototype, manufacturing, integration, breaking tape and reel, programming
Distribution On-time delivery, direct fulfillment, supply chain solutions, post sales/end of life, quality and process control
Service Local support, new online search/user interface, materials management and logistics
Global components by region
Americas
Europe, Middle East, Africa
Asia-Pacific
2012 Sales: $5.9 billion
2012 Sales: $3.7 billion
2011 Sales: $3.8 billion
COUNTRIES Argentina Brazil Canada Mexico United States
COUNTRIES Austria Belgium Bulgaria Czech Republic Denmark Egypt Estonia Finland France Germany Greece Hungary Israel Italy
COUNTRIES Australia China Hong Kong India Indonesia Japan Korea Malaysia New Zealand Philippines Singapore Taiwan Thailand Vietnam
www.arrownac.com
Netherlands Norway Poland Portugal Romania Russian Federation Slovakia Slovenia South Africa Spain Sweden Switzerland Turkey Ukraine United Kingdom
www.arroweurope.com
www.arrowasia.com
Market expertise Aerospace and Defense Alternative Energy
Custom Logic
Lighting Medical Power Supplies
Embedded Computing
Machine-to-Machine
Industrial
Transportation/ Automotive
Enterprise computing solutions Arrow Enterprise Computing Solutions (ECS) – Arrow ECS is the global business group that provides enterprise and midrange computing products, services and solutions to value-added resellers and system integrators – ECS Americas – 68% of ECS sales – ECS Europe – 32% of ECS sales Core Drivers
Differentiators
•
• • • •
• • • • • • • • •
Small and medium sized customers – 13,000 VAR partners Business continuity Server consolidation Compliance/regulatory environment Engineering and technical expertise Education and training services Enterprise Solutions Centers (Atlanta & Minneapolis) Financing programs Business development & marketing expertise Innovation and investments
Customer service Customer and OEM relations Solutions focused Non-compete relationship with reseller customers • Unparalleled line card
Enterprise computing solutions accounted for 35% of Arrow’s 2012 sales
Powering the supply chain: ECS
ECS by region
Americas
Europe, Middle East, Africa
2012 Sales: $4.8 billion
2012 Sales: $2.3 billion
COUNTRIES Canada United States
COUNTRIES Austria Belgium Croatia Czech Republic Denmark Estonia Finland France Germany Hungary Iceland Israel Latvia
www.ecs.arrow.com
Lithuania Luxembourg Morocco Netherlands Norway Poland Portugal Serbia Slovenia Spain Sweden Switzerland United Kingdom
www.arrowecs.eu
Financial Overview
Investment considerations
Outstanding organic sales growth Significant margin expansion Committed to strong cash flow generation Strategic expansion of the portfolio
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Revenue growth – a balanced approach 2006 sales of $13.6 billion $21.4
18%
$20.4
$18.7
82% $16.0
$16.8 $14.7
$13.6
2012 sales of $20.4 billion 35%
65% 2006
Global components
Global ECS
2007
2008
2009
2010
2011
2012 ($ in billions)
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Industry-leading operating margin 5.0%
4.6%
4.5%
4.4%
4.0%
4.2% 3.8%
3.6%
3.0%
2.7% 2.5%
2.4%
2.6%
2.6%
2.5% 2.2%
2.1% 2.0%
1.0% 2006
2007
2008 Operating margin*
2009
2010
2011
2012
Peer margin
* Peer group includes AVT, IM, SNX, TECD, and WPG
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Excellent record of cash flow generation $4,000 $3,458
$3,500 $3,000
$2,783 $2,662
$2,500
$2,441
$2,000 $1,591
$1,500 $1,000 $500
$972
$121
$0 2006
2007
2008
2009
2010
2011
2012 ($ in millions)
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Superior returns on capital: 40% above WACC 200%
180%
160%
140%
120%
100%
80% 2006
2007
2008
ROIC as % of WACC
2009
2010
2011
2012
WACC 21
Capital allocation strategy Invest in the business Acquisitions that meet our value criteria to strategically accelerate growth Evaluate options to return value to shareholders
Maintain investment grade rating over the long-term
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Outperforming the industry and our targets
5-Year Performance
Deliver to Commitments
Revenue Growth Operating Margin Expansion EPS Growth Return on Working Capital Operating Cash Flow
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We have and will continue to invest in businesses that lessen the exposure to economic and technology cycles.
2010
2011
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