Electronic components and enterprise computing products distributor Arrow Electronics, Inc. (ARW) reported Wednesday a sharp decline in third-quarter profit, reflecting restructuring and integration charges as well as a drop in sales. On an adjusted basis, earnings per share came in above analysts' estimate by four cents. The company also provided an earnings outlook for the fourth quarter.
For the third quarter, net income attributable to shareholders dropped to $12.58 million or $0.10 per share from $76.07 million or $0.63 per share in the previous year.
The results of the latest quarter included restructuring and integration charges of $37.6 million mainly related to the company's initiatives to improve operating efficiencies. Arrow also recorded loss on prepayment of debt of $5.3 million associated with the repurchase of $130.5 million principal amount of its 9.15% senior notes due 2010. The prior-year results included restructuring and integration charges of $11.0 million.
Excluding items, earnings decreased to $44.88 million or $0.37 a share from $83.70 million or $0.70 a share in the year-ago quarter. On average, 12 analysts polled by Thomson Reuters expected the company to report earnings of $0.33 per share for the third quarter. Analysts' estimates typically exclude special items.
Operating income slid to $45.06 million from $131.77 million in the third quarter of the prior fiscal year.
Sales for the period decreased to $3.67 billion from $4.29 billion last year. Nine analysts were expecting revenue of $3.45 billion for the third quarter.
Michael Long, chief executive officer of the company said, "Our execution this quarter was excellent, exceeding our expectations for revenue, earnings per share, and cash flow. We continue to control well those things that we can, no matter the economic environment."
Segment wise, global components sales decreased 15% to $2.54 billion from $2.99 billion, while revenue from global enterprise computing solutions came down 14% to $1.13 billion from $1.31 billion in the corresponding quarter of fiscal 2008.
"Global components revenue exceeded our expectations with double-digit increases sequentially across all geographies. Year-over-year sales declines have begun to moderate in both North America and Europe, and Asia continues to post sales gains," Long said.
He also said that ECS sales were ahead of the midpoint of the company's expectations and above normal seasonality, helped by a strong federal government year-end, as well as sequential increases in storage and services. "In our worldwide server business the year-over-year declines have moderated," Long added.
For the nine-month period, net income attributable to shareholders plunged to $60.42 million or $0.50 per share from $258.16 million or $2.11 per share in fiscal 2008. Adjusted earnings declined to $124.9 million or $1.04 a share from $283.7 million or $2.32 a share in the past year. Sales declined to $10.48 billion from $12.67 billion in the same period of the prior fiscal year.
Looking ahead, for the fourth quarter, the company expects earnings of $0.44 - $0.56 per share on revenue ranging between $3.65 billion and $4.25 billion. Analysts are currently looking for earnings of $0.51 per share on revenue of $3.76 billion for the fourth quarter.
The company expects fourth quarter global component sales of between $2.25 billion and $2.65 billion and global enterprise computing solutions sales of between $1.4 billion and $1.6 billion.
ARW is currently trading at $27.49, down $0.13 or 0.47%, on the NYSE.
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