Unassociated Document

UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.  20549

FORM 10-Q

x
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended October 2, 2010

OR

¨
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from            to           

Commission file number 1-4482

ARROW ELECTRONICS, INC.
(Exact name of registrant as specified in its charter)

New York
11-1806155
(State or other jurisdiction of
(I.R.S. Employer
incorporation or organization)
Identification Number)
   
50 Marcus Drive, Melville, New York
11747
(Address of principal executive offices)
(Zip Code)

(631) 847-2000
(Registrant's telephone number, including area code)

No Changes
(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes x   No ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
Yes x   No ¨
 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.  See the definitions of "large accelerated filer," "accelerated filer," and "smaller reporting company" in Rule 12b-2 of the Exchange Act:
 
Large accelerated filer x
Accelerated filer ¨
Non-accelerated filer ¨ (do not check if a smaller reporting company)
Smaller reporting company ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes ¨   No x

There were 115,801,922 shares of Common Stock outstanding as of October 22, 2010.

 

 

ARROW ELECTRONICS, INC.

INDEX

   
Page
Part I.
Financial Information
 
       
 
Item 1.
Financial Statements
 
   
Consolidated Statements of Operations
3
   
Consolidated Balance Sheets
4
   
Consolidated Statements of Cash Flows
5
   
Notes to Consolidated Financial Statements
6
       
 
Item 2.
Management's Discussion and Analysis of Financial Condition and Results of Operations
25
       
 
Item 3.
Quantitative and Qualitative Disclosures about Market Risk
34
       
 
Item 4.
Controls and Procedures
35
       
Part II.
Other Information
 
       
 
Item 1A.
Risk Factors
36
       
 
Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds
36
       
 
Item 6.
Exhibits
37
       
Signature
 
38
 
2

 

PART I.  FINANCIAL INFORMATION

Item 1.     Financial Statements.

ARROW ELECTRONICS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands except per share data)
(Unaudited)

   
Quarter Ended
   
Nine Months Ended
 
    
October 2,
2010
   
October 3,
2009
   
October 2,
2010
   
October 3,
2009
 
                          
Sales
  $ 4,657,841     $ 3,671,865     $ 13,506,514     $ 10,481,116  
                                 
Costs and expenses:
                               
Cost of sales
    4,049,047       3,250,804       11,771,311       9,226,865  
Selling, general and administrative expenses
    390,727       321,503       1,133,352       965,645  
Depreciation and amortization
    19,210       16,919       55,447       50,262  
Restructuring, integration, and other charges
    14,338       37,583       27,424       80,853  
      4,473,322       3,626,809       12,987,534       10,323,625  
                                 
Operating income
    184,519       45,056       518,980       157,491  
                                 
Equity in earnings of affiliated companies
    1,633       1,883       4,566       3,233  
                                 
Loss on prepayment of debt
    -       5,312       1,570       5,312  
                                 
Interest and other financing expense, net
    18,921       18,033       57,362       58,150  
                                 
Income before income taxes
    167,231       23,594       464,614       97,262  
                                 
Provision for income taxes
    48,729       11,018       142,878       36,868  
                                 
Consolidated net income
    118,502       12,576       321,736       60,394  
                                 
Noncontrolling interests
    -       (5 )     (5 )     (25 )
Net income attributable to shareholders
  $ 118,502     $ 12,581     $ 321,741     $ 60,419  
                                 
Net income per share:
                               
Basic
  $ 1.01     $ .10     $ 2.71     $ .50  
Diluted
  $ 1.00     $ .10     $ 2.68     $ .50  
                                 
Average number of shares outstanding:
                               
Basic
    116,958       119,888       118,813       119,745  
Diluted
    118,235       120,785       120,270       120,238  

See accompanying notes.

 
3

 

ARROW ELECTRONICS, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands except par value)
   
October 2,
2010
   
December 31,
2009
 
   
(Unaudited)
       
             
ASSETS
           
Current assets:
           
Cash and cash equivalents
  $ 509,724     $ 1,137,007  
Accounts receivable, net
    3,602,733       3,136,141  
Inventories
    2,013,711       1,397,668  
Other current assets
    215,130       168,812  
  Total current assets
    6,341,298       5,839,628  
Property, plant and equipment, at cost:
               
Land
    23,745       23,584  
Buildings and improvements
    134,631       137,539  
Machinery and equipment
    845,058       779,105  
      1,003,434       940,228  
Less: Accumulated depreciation and amortization
    (506,912 )     (479,522 )
Property, plant and equipment, net
    496,522       460,706  
                 
Investments in affiliated companies
    57,096       53,010  
Cost in excess of net assets of companies acquired
    1,253,092       926,296  
Other assets
    560,877       482,726  
Total assets
  $ 8,708,885     $ 7,762,366  
LIABILITIES AND EQUITY
               
Current liabilities:
               
Accounts payable
  $ 3,072,831     $ 2,763,237  
Accrued expenses
    626,926       445,914  
Short-term borrowings, including current portion of long-term debt
    16,854       123,095  
  Total current liabilities
    3,716,611       3,332,246  
Long-term debt
    1,627,501       1,276,138  
Other liabilities
    224,061       236,685  
                 
Equity:
               
Shareholders' equity:
               
Common stock, par value $1:
               
Authorized - 160,000 shares in 2010 and 2009
               
Issued - 125,337 and 125,287 shares in 2010 and 2009, respectively
    125,337       125,287  
Capital in excess of par value
    1,056,035       1,056,704  
Treasury stock (9,539 and 5,459 shares in 2010 and 2009, respectively), at cost
    (283,064 )     (179,152 )
Retained earnings
    2,016,258       1,694,517  
Foreign currency translation adjustment
    228,614       229,019  
Other
    (2,468 )     (9,415 )
Total shareholders' equity
    3,140,712       2,916,960  
Noncontrolling interests
    -       337  
Total equity
    3,140,712       2,917,297  
Total liabilities and equity
  $ 8,708,885     $ 7,762,366  
 
See accompanying notes.

 
4

 

ARROW ELECTRONICS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
 
    
Nine Months Ended
  
     
October 2,
2010
     
October 3,
 2009
 
                 
Cash flows from operating activities:
               
Consolidated net income
 
$
321,736
   
$
60,394
 
Adjustments to reconcile consolidated net income to net cash provided by (used for) operations:
               
Depreciation and amortization
   
55,447
     
50,262
 
Amortization of stock-based compensation
   
24,992
     
19,219
 
Amortization of deferred financing costs and discount on notes
   
1,686
     
1,681
 
Equity in earnings of affiliated companies
   
(4,566
)
   
(3,233
)
Deferred income taxes
   
29,027
     
21,933
 
Restructuring, integration, and other charges
   
19,146
     
61,268
 
Excess tax benefits from stock-based compensation arrangements
   
(1,740
)
   
1,741
 
       Loss on prepayment of debt
   
964
     
3,228
 
Change in assets and liabilities, net of effects of acquired businesses:
               
Accounts receivable
   
(351,362
)
   
413,790
 
Inventories
   
(595,588
)
   
331,098
 
Accounts payable
   
243,797
     
(157,827
)
Accrued expenses
   
89,250
     
(158,527
)
Other assets and liabilities
   
(74,058
)
   
4,292
 
Net cash provided by (used for) operating activities
   
(241,269
)
   
649,319
 
Cash flows from investing activities:
               
Acquisition of property, plant and equipment
   
(83,373
)
   
(99,022
)
Cash consideration paid for acquired businesses
   
(460,001
)
   
-
 
    Proceeds from sale of properties
   
16,971
     
1,153
 
Other
   
-
     
(272
)
Net cash used for investing activities
   
(526,403
)
   
(98,141
)
Cash flows from financing activities:
               
Change in short-term and other borrowings
   
(902
)
   
(32,009
)
Proceeds from long-term bank borrowings, net
   
360,400
     
-
 
Repurchase/repayment of senior notes
   
(69,545
)
   
(135,658
)
Net proceeds from note offering
   
-
     
297,430
 
Proceeds from exercise of stock options
   
3,196
     
3,069
 
Excess tax benefits from stock-based compensation arrangements
   
1,740
     
(1,741
)
Repurchases of common stock
   
(131,266
)
   
(2,323
)
Net cash provided by financing activities
   
163,623
     
128,768
 
Effect of exchange rate changes on cash
   
(23,234
)
   
19,552
 
Net increase (decrease) in cash and cash equivalents
   
(627,283
)
   
699,498
 
Cash and cash equivalents at beginning of period
   
1,137,007
     
451,272
 
Cash and cash equivalents at end of period
 
$
509,724
   
$
1,150,770
 

See accompanying notes.

 
5

 
 
ARROW ELECTRONICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands except per share data)
(Unaudited)

Note A – Basis of Presentation

The accompanying consolidated financial statements of Arrow Electronics, Inc. (the "company" or "Arrow") were prepared in accordance with accounting principles generally accepted in the United States and reflect all adjustments of a normal recurring nature, which are, in the opinion of management, necessary for a fair presentation of the consolidated financial position and results of operations at and for the periods presented.  The consolidated results of operations for the interim periods are not necessarily indicative of results for the full year.

These consolidated financial statements do not include all of the information or notes necessary for a complete presentation and, accordingly, should be read in conjunction with the company's Form 10-Q for the quarterly periods ended July 3, 2010 and April 3, 2010, as well as the audited consolidated financial statements and accompanying notes for the year ended December 31, 2009, as filed in the company's Annual Report on Form 10-K.

Quarter End

The company operates on a quarterly reporting calendar that closes on the Saturday following the end of the calendar quarter.

Reclassification

Certain prior period amounts were reclassified to conform to the current period presentation.

Note B – Impact of Recently Issued Accounting Standards

In October 2009, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update No. 2009-13, "Multiple-Deliverable Revenue Arrangements" ("ASU No. 2009-13"). ASU No. 2009-13 amends guidance included within Accounting Standards Codification ("ASC") Topic 605-25 to require an entity to use an estimated selling price when vendor specific objective evidence or acceptable third party evidence does not exist for any products or services included in a multiple element arrangement. The arrangement consideration should be allocated among the products and services based upon their relative selling prices, thus eliminating the use of the residual method of allocation. ASU No. 2009-13 also requires expanded qualitative and quantitative disclosures regarding significant judgments made and changes in applying this guidance. ASU No. 2009-13 is effective prospectively for revenue arrangements entered into or materially modified in fiscal years beginning on or after June 15, 2010.  Early adoption and retrospective application are also permitted.  The company is currently evaluating the impact of adopting the provisions of ASU No. 2009-13.

In October 2009, the FASB issued Accounting Standards Update No. 2009-14, "Certain Revenue Arrangements That Include Software Elements" ("ASU No. 2009-14"). ASU No. 2009-14 amends guidance included within ASC Topic 985-605 to exclude tangible products containing software components and non-software components that function together to deliver the product’s essential functionality.  Entities that sell joint hardware and software products that meet this scope exception will be required to follow the guidance of ASU No. 2009-13.  ASU No. 2009-14 is effective prospectively for revenue arrangements entered into or materially modified in fiscal years beginning on or after June 15, 2010.  Early adoption and retrospective application are also permitted.  The company is currently evaluating the impact of adopting the provisions of ASU No. 2009-14.

 
6

 

ARROW ELECTRONICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands except per share data)
(Unaudited)

Note C – Acquisitions

The results of operations of the below acquisitions were included in the company's consolidated results from their respective dates of acquisition.

Recently Announced Acquisitions

In September 2010, the company announced an agreement to acquire Nu Horizons Electronics Corp. ("Nu Horizons"), a leading global distributor of advanced technology semiconductor, display, illumination, and power solutions to a wide variety of commercial original equipment manufacturers and electronic manufacturing services providers in the components business, for approximately $130,000 in cash, or $7.00 per share.  Nu Horizons has sales facilities in more than 50 locations across North America, Asia and Europe, as well as regional logistics centers throughout the world, serving a wide variety of end markets including industrial, military, networking, and data communications. Nu Horizons is headquartered in Melville, N.Y., and has over 700 employees globally.  The acquisition has been approved by the Boards of Directors of both companies and is now subject to approval by Nu Horizons’ shareholders as well as customary regulatory approvals and is expected to close during the fourth quarter of 2010.  The company was named as a defendant in four shareholder class action lawsuits filed in the New York State Supreme Court in Suffolk County, relating to the proposed acquisition of Nu Horizons.  The complaints assert virtually identical claims for alleged breaches of fiduciary duty by Nu Horizons and its Board of Directors arising from their attempt to sell Nu Horizons to Arrow and charge the company with aiding and abetting those breaches of fiduciary duty.  The company does not expect the outcome of this matter to have a material adverse affect on its consolidated financial position or results of operations.

In September 2010, the company announced an agreement to acquire all the assets and operations of the RF, Wireless and Power Division ("RFPD") of Richardson Electronics, Ltd. ("Richardson") for approximately $210,000 in cash, subject to a post-closing working capital adjustment.  Richardson RFPD is a leading value-added global component distributor and provider of engineered solutions serving the global radio frequency and wireless communications market. Based in the Chicago area, with approximately 400 employees, Richardson RFPD’s product set includes solutions for infrastructure and wireless networks, power management and alternative energy markets.  The acquisition has been approved by the Boards of Directors of both companies and is now subject to the approval of Richardson's shareholders as well as customary regulatory approvals and is expected to close in early 2011.

2010

On September 8, 2010, the company acquired Shared Technologies Inc. ("Shared") for a purchase price of $261,288, which included debt paid at closing of $61,898, and is subject to a final working capital adjustment based upon a closing audit. Shared sells, installs, and maintains communications solutions, including the latest in unified communications, voice and data technologies, contact center, network security, and traditional telephony.  Shared is based in Irving, Texas, with locations throughout the U.S. and has approximately 1,000 employees.  Since the date of acquisition, Shared sales of $17,461 were included in the company's consolidated results of operations for both the third quarter and first nine months of 2010.  Total Shared sales for 2009 were approximately $250,000.

 
7

 

ARROW ELECTRONICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands except per share data)
(Unaudited)

The following table summarizes the preliminary allocation of the net consideration paid to the fair value of the assets acquired and liabilities assumed for the Shared acquisition:

Accounts receivable, net
  $ 41,117  
Inventories
    4,514  
Property, plant and equipment
    7,503  
Other assets
    5,226  
Identifiable intangible assets
    113,700  
Cost in excess of net assets of companies acquired
    188,196  
Accounts payable
    (20,235 )
Accrued expenses
    (36,268 )
Other liabilities
    (42,465 )
Cash consideration paid, net of cash acquired
  $ 261,288  

The company allocated $28,900 of the purchase price to intangible assets relating to customer relationships, with a useful life of 10 years, $78,000 to trade names with an indefinite useful life, $1,700 to developed technology, with a useful life of 10 years, and $5,100 to other intangible assets (consisting of non-competition agreements and sales backlog), with useful lives ranging from 1 to 2 years.

The cost in excess of net assets acquired related to the Shared acquisition was recorded in the company's global enterprise computing solutions business segment.  The intangible assets related to the Shared acquisition are not expected to be deductible for income tax purposes.

On June 1, 2010, the company acquired PCG Parent Corp., doing business as Converge ("Converge"), for a purchase price of $138,363, which included cash acquired of $4,803, and debt paid at closing of $27,546.  Converge is a leading provider of reverse logistics services, headquartered in Peabody, Massachusetts.  Converge, with approximately 350 employees, also has offices in Singapore and Amsterdam, with support centers throughout Europe, Asia, and the Americas.  Since the date of acquistion, Converge sales of $79,016 and $106,259 were included in the company's consolidated results of operations for the third quarter and first nine months of 2010, respectively.  Total Converge sales for 2009 were approximately $280,000.

The following table summarizes the company's unaudited consolidated results of operations for the third quarter and first nine months of 2010, as well as the unaudited pro forma consolidated results of operations of the company, as though the Shared and Converge acquisitions occurred on January 1, 2010:

   
Quarter Ended
October 2, 2010
   
Nine Months Ended
October 2, 2010
 
    
As Reported
   
Pro Forma
   
As Reported
   
Pro Forma
 
                          
Sales
  $ 4,657,841     $ 4,698,701     $ 13,506,514     $ 13,804,092  
Net income attributable to shareholders
    118,502       118,574       321,741       328,913  
Net income per share:
                               
Basic
  $ 1.01     $ 1.01     $ 2.71     $ 2.77  
Diluted
  $ 1.00     $ 1.00     $ 2.68     $ 2.73  

The unaudited pro forma consolidated results of operations do not purport to be indicative of the results obtained had the Shared and Converge acquisitions occurred as of the beginning of 2010, or of those results that may be obtained in the future. Additionally, the above table does not reflect any anticipated cost savings or cross-selling opportunities expected to result from these acquisitions.

 
8

 

ARROW ELECTRONICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands except per share data)
(Unaudited)

In April 2010, the company acquired Verical Incorporated, an ecommerce business geared towards meeting the end-of-life components and parts shortage needs of customers.  In June 2010, the company acquired Sphinx Group Limited, a United Kingdom-based value-added distributor of security and networking solutions.  In August 2010, the company acquired Transim Technology Corporation, a leading service provider of online component design and engineering solutions for technology manufacturers. On October 1, 2010, the company acquired Eshel Technology Group, Inc., a leading solid-state lighting distributor and value-added service provider.  The impact of these acquisitions was not material to the company's consolidated financial position and results of operations.  Annual sales for these acquisitions were approximately $103,000.

2009

On December 20, 2009, the company acquired A.E. Petsche Company, Inc. ("Petsche"), a leading provider of interconnect products, including specialty wire, cable, and harness management solutions, to the aerospace and defense markets. Petsche provides value-added distribution services to over 3,500 customers in the United States, Canada, Mexico, the United Kingdom, France, and Belgium.  Total Petsche sales for 2009 were approximately $190,000.

The following table summarizes the company's unaudited consolidated results of operations for the third quarter and first nine months of 2009, as well as the unaudited pro forma consolidated results of operations of the company, as though the Shared, Converge, and Petsche acquisitions occurred on January 1, 2009:

   
Quarter Ended
October 3, 2009
   
Nine Months Ended
October 3, 2009
 
    
As Reported
   
Pro Forma
   
As Reported
   
Pro Forma
 
                          
Sales
  $ 3,671,865     $ 3,846,558     $ 10,481,116     $ 11,011,137  
Net income attributable to shareholders
    12,581       14,801       60,419       71,960  
Net income per share:
                               
Basic
  $ .10     $ .12     $ .50     $ .60  
Diluted
  $ .10     $ .12     $ .50     $ .60  

The unaudited pro forma consolidated results of operations do not purport to be indicative of the results obtained had the Shared, Converge, and Petsche acquisitions occurred as of the beginning of 2009, or of those results that may be obtained in the future.  Additionally, the above table does not reflect any anticipated cost savings or cross-selling opportunities expected to result from these acquisitions.

Other

Amortization expense related to identifiable intangible assets was $5,342 and $14,636 for the third quarter and first nine months of 2010 and $3,855 and $11,531 for the third quarter and first nine months of 2009, respectively.

In March 2010, the company made a payment of $3,060 to increase its ownership in a majority-owned subsidiary.  The payment was recorded as a reduction to capital in excess of par value, partially offset by the carrying value of the noncontrolling interest.

 
9

 

ARROW ELECTRONICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands except per share data)
(Unaudited)

Note D – Cost in Excess of Net Assets of Companies Acquired

Cost in excess of net assets of companies acquired, allocated to the company's business segments, is as follows:

   
Global
Components
   
Global ECS
   
Total
 
                    
December 31, 2009
  $ 473,421     $ 452,875     $ 926,296  
Acquisitions
    117,426       212,755       330,181  
Foreign currency translation
    -       (3,385 )     (3,385 )
October 2, 2010
  $ 590,847     $ 662,245     $ 1,253,092  

Goodwill represents the excess of the cost of an acquisition over the fair value of the assets acquired.  The company tests goodwill for impairment annually as of the first day of the fourth quarter, or more frequently if indicators of potential impairment exist.

Note E – Investments in Affiliated Companies

The company owns a 50% interest in several joint ventures with Marubun Corporation (collectively "Marubun/Arrow") and a 50% interest in Altech Industries (Pty.) Ltd. ("Altech Industries"), a joint venture with Allied Technologies Limited.  These investments are accounted for using the equity method.

The following table presents the company's investment in Marubun/Arrow and the company's investment and long-term note receivable in Altech Industries:

    
October 2,
2010
   
December 31,
2009
 
              
Marubun/Arrow
  $ 40,686     $ 37,649  
Altech Industries
    16,410       15,361  
    $ 57,096     $ 53,010  

The equity in earnings (loss) of affiliated companies consists of the following:

    
Quarter Ended
   
Nine Months Ended
 
    
October 2,
2010
   
October 3,
2009
   
October 2,
2010
   
October 3,
2009
 
                         
Marubun/Arrow
  $ 1,262     $ 1,529     $ 3,739     $ 2,448  
Altech Industries
    371       354       827       803  
Other
    -       -       -       (18 )
    $ 1,633     $ 1,883     $ 4,566     $ 3,233  

Under the terms of various joint venture agreements, the company is required to pay its pro-rata share of the third party debt of the joint ventures in the event that the joint ventures are unable to meet their obligations.  At October 2, 2010, the company's pro-rata share of this debt was approximately $23,700. The company believes that there is sufficient equity in the joint ventures to meet their obligations.

 
10

 

ARROW ELECTRONICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands except per share data)
(Unaudited)

Note F – Accounts Receivable

Accounts receivable, net, consists of the following:

   
October 2,
2010
   
December 31,
2009
 
              
Accounts receivable
  $ 3,641,841     $ 3,175,815  
Allowances for doubtful accounts
    (39,108 )     (39,674 )
Accounts receivable, net
  $ 3,602,733     $ 3,136,141  

The company maintains allowances for doubtful accounts for estimated losses resulting from the inability of its customers to make required payments.  The allowances for doubtful accounts are determined using a combination of factors, including the length of time the receivables are outstanding, the current business environment, and historical experience.

Note G – Debt

Short-term borrowings, including current portion of long-term debt, consist of the following:

   
October 2,
2010
   
December 31,
2009
 
              
9.15% senior notes, due 2010
  $ -     $ 69,544  
Cross-currency swap, due 2010
    -       41,943  
Interest rate swaps designated as fair value hedges
    -       2,036  
Short-term borrowings in various countries
    16,854       9,572  
    $ 16,854     $ 123,095  

Short-term borrowings in various countries are primarily utilized to support the working capital requirements of certain international operations.  The weighted average interest rates on these borrowings at October 2, 2010 and December 31, 2009 were 2.3% and 3.5%, respectively.

Long-term debt consists of the following:

   
October 2,
2010
   
December 31,
2009
 
              
Revolving credit facility, due 2012
  $ 360,400     $ -  
Bank term loan, due 2012
    200,000       200,000  
6.875% senior notes, due 2013
    349,816       349,765  
6.875% senior debentures, due 2018
    198,398       198,241  
6.00% notes, due 2020
    299,916       299,909  
7.5% senior debentures, due 2027
    197,715       197,610  
Cross-currency swap, due 2011
    -       12,497  
Interest rate swaps designated as fair value hedges
    17,787       9,556  
Other obligations with various interest rates and due dates
    3,469       8,560  
    $ 1,627,501     $ 1,276,138  
 
 
11

 

ARROW ELECTRONICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands except per share data)
(Unaudited)

The 7.5% senior debentures are not redeemable prior to their maturity.  The 6.875% senior notes, 6.875% senior debentures, and 6.00% notes may be called at the option of the company subject to "make whole" clauses.

The estimated fair market value is as follows:

   
October 2,
2010
   
December 31,
2009
 
              
9.15% senior notes, due 2010
  $ -     $ 73,000  
6.875% senior notes, due 2013
    389,000       378,000  
6.875% senior debentures, due 2018
    226,000       214,000  
6.00% notes, due 2020
    324,000       300,000  
7.5% senior debentures, due 2027
    206,000       208,000  

The carrying amount of the company's short-term borrowings, revolving credit facility, bank term loan, and other obligations approximate their fair value.

During the second quarter of 2010, the company sold a property and was required to repay the related collateralized debt with a face amount of $9,000.  For the first nine months of 2010, the company recognized a loss on prepayment of debt of $1,570 ($964 net of related taxes or $.01 per share on both a basic and diluted basis) in the accompanying consolidated statements of operations.

In September 2009, the company repurchased $130,455 principal amount of its 9.15% senior notes due 2010.  The related loss on the repurchase for the third quarter and first nine months of 2009, including the premium paid and write-off of the related deferred financing costs, offset by the gain for terminating a portion of the related interest rate swaps aggregated $5,312 ($3,228 net of related taxes or $.03 per share on both a basic and diluted basis) and was recognized as a loss on prepayment of debt.  During the third quarter of 2010, the company repaid the remaining $69,545 principal amount of its 9.15% senior notes upon maturity.

In September 2009, the company completed the sale of $300,000 principal amount of 6.00% notes due in 2020.  The net proceeds of the offering of $297,430 were used to repay a portion of the previously discussed 9.15% senior notes due 2010 and for general corporate purposes.

The company has an $800,000 revolving credit facility with a group of banks that matures in January 2012.  Interest on borrowings under the revolving credit facility is calculated using a base rate or a euro currency rate plus a spread based on the company's credit ratings (.425% at October 2, 2010). The facility fee related to the credit facility is .125%.  At October 2, 2010, the company had $360,400 in outstanding borrowings under the revolving credit facility.  There were no outstanding borrowings under the revolving credit facility at December 31, 2009.

The company has a $300,000 asset securitization program collateralized by accounts receivables of certain of its North American subsidiaries which expires in March 2011.  The asset securitization program is conducted through Arrow Electronics Funding Corporation, a wholly-owned, bankruptcy remote subsidiary. The asset securitization program does not qualify for sale treatment.  Accordingly, the accounts receivable and related debt obligation remain on the company's consolidated balance sheet.  Interest on borrowings is calculated using a base rate or a commercial paper rate plus a spread, which is based on the company's credit ratings (.60% at October 2, 2010).  The facility fee is .50%.  The company had no outstanding borrowings under the asset securitization program at October 2, 2010 and December 31, 2009.
 
Both the revolving credit facility and asset securitization program include terms and conditions that limit the incurrence of additional borrowings, limit the company's ability to pay cash dividends or repurchase
 
 
12

 

ARROW ELECTRONICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands except per share data)
(Unaudited)
 
stock, and require that certain financial ratios be maintained at designated levels. As of October 2, 2010, the company was in compliance with all covenants relating to its revolving credit facility and is currently not aware of any events that would cause non-compliance with any covenants in the future.  In connection with the asset securitization program, on October 27, 2010, the lenders under the program agreed to waive any potential breach resulting from any failure by the company to comply with a non-financial covenant to maintain appropriate UCC filings arising out of a merger and changes in the names of several of the company’s subsidiaries that are originators of accounts receivable under the program.  Under certain circumstances the failure to file or amend the UCC filings may have resulted in the company being out of compliance with its obligations under the program and the company has taken the necessary actions to cure any non-compliance.
 
Interest and other financing expense, net, includes interest income of $1,635 and $3,255 for the third quarter and first nine months of 2010 and $278 and $2,686 for the third quarter and first nine months 2009, respectively.

Note H – Financial Instruments Measured at Fair Value

Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date.  The company utilizes a fair value hierarchy, which maximizes the use of observable inputs and minimizes the use of unobservable inputs when measuring fair value.  The fair value hierarchy has three levels of inputs that may be used to measure fair value:

Level 1
Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities.

Level 2
Quoted prices in markets that are not active; or other inputs that are observable, either directly or indirectly, for substantially the full term of the asset or liability.

Level 3
Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable.

The following table presents assets/(liabilities) measured at fair value on a recurring basis at October 2, 2010:

   
Level 1
   
Level 2
   
Level 3
   
Total
 
                          
Cash equivalents
  $ -     $ 135,154     $ -     $ 135,154  
Available-for-sale securities
    67,593       -       -       67,593  
Interest rate swaps
    -       17,787       -       17,787  
Foreign exchange contracts
    -       (2,086 )     -       (2,086 )
    $ 67,593     $ 150,855     $ -     $ 218,448  

The following table presents assets/(liabilities) measured at fair value on a recurring basis at December 31, 2009:

   
Level 1
   
Level 2
   
Level 3
   
Total
 
                         
Cash equivalents
  $ -     $ 744,125     $ -     $ 744,125  
Available-for-sale securities
    56,464       -       -       56,464  
Interest rate swaps
    -       11,592       -       11,592  
Cross-currency swaps
    -       (54,440 )     -       (54,440 )
Foreign exchange contracts
    -       544       -       544  
    $ 56,464     $ 701,821     $ -     $ 758,285  
 
13

 
 
ARROW ELECTRONICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands except per share data)
(Unaudited)
 
Available-For-Sale Securities

The company has a 2.7% equity ownership interest in WPG Holdings Co., Ltd. ("WPG") and an 8.4% equity ownership interest in Marubun Corporation ("Marubun"), which are accounted for as available-for-sale securities.

The fair value of the company's available-for-sale securities is as follows:

   
October 2, 2010
   
December 31, 2009
 
    
Marubun
   
WPG
   
Marubun
   
WPG
 
                          
Cost basis
  $ 10,016     $ 10,798     $ 10,016     $ 10,798  
Unrealized holding gain
    552       46,227       4,408       31,242  
Fair value
  $ 10,568     $ 57,025     $ 14,424     $ 42,040  

The fair value of these investments are included in "Other assets" in the accompanying consolidated balance sheets, and the related unrealized holding gains or losses are included in "Other" in the shareholders' equity section in the accompanying consolidated balance sheets.

Derivative Instruments

The company uses various financial instruments, including derivative financial instruments, for purposes other than trading.  Derivatives used as part of the company's risk management strategy are designated at inception as hedges and measured for effectiveness both at inception and on an ongoing basis.

The fair values of derivative instruments in the consolidated balance sheets are as follows:

   
Asset/(Liability) Derivatives
 
         
Fair Value
 
    
Balance Sheet
Location
 
October 2,
2010
   
December 31,
2009
 
Derivative instruments designated as hedges:
               
Interest rate swaps designated as fair value hedges
 
Other current assets
  $ -     $ 2,036  
Interest rate swaps designated as fair value hedges
 
Other assets
    17,787       9,556  
Cross-currency swaps designated as net investment hedges
 
Short-term borrowings
    -       (41,943 )
Cross-currency swaps designated as net investment hedges
 
Long-term debt
    -       (12,497 )
Foreign exchange contracts designated as cash flow hedges
 
Other current assets
    718       406  
Foreign exchange contracts designated as cash flow hedges
 
Accrued expenses
    (50 )     (272 )
Total derivative instruments designated as hedging instruments
        18,455       (42,714 )
Derivative instruments not designated as hedges:
                   
Foreign exchange contracts
 
Other current assets
    3,270       2,362  
Foreign exchange contracts
 
Accrued expenses
    (6,024 )     (1,952 )
Total derivative instruments not designated as hedging instruments
        (2,754 )     410  
Total
      $ 15,701     $ (42,304 )
 
 
14

 
 
ARROW ELECTRONICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands except per share data)
(Unaudited)

The effect of derivative instruments on the consolidated statement of operations is as follows:

    
Gain/(Loss) Recognized in Income
  
     
Quarter Ended
     
Nine Months Ended
  
     
October 2,
2010
     
October 3,
2009
     
October 2,
2010
     
October 3,
2009
  
                         
Fair value hedges:
                                
Interest rate swaps (a)
 
$
-
   
$
4,097
   
$
-
   
$
4,097
 
Total
 
$
-
   
$
4,097
   
$
-
   
$
4,097
 
                                 
Derivative instruments not designated as hedges:
                               
Foreign exchange contracts (b)
 
$
(4,608
)
 
$
(4,540
)
 
$
(1,171
)
 
$
(8,700
)
Total
 
$
(4,608
)
 
$
(4,540
)
 
$
(1,171
)
 
$
(8,700
)

   
Quarter Ended October 2, 2010
   
Nine Months Ended October 2, 2010
 
    
Effective Portion
   
Ineffective
Portion
   
Effective Portion
   
Ineffective
Portion
 
    
Gain/(Loss)
Recognized in
Other
Comprehensive
Income
   
Gain/(Loss)
Reclassified
into Income
   
Gain/(Loss)
Recognized
in Income
   
Gain/(Loss)
Recognized in
Other
Comprehensive
Income
   
Gain/(Loss)
Reclassified
into Income
   
Gain/(Loss)
Recognized
in Income
 
                                      
Cash Flow Hedges:
                                   
Foreign exchange contracts (d)
  $ 1,257     $ 83     $ -     $ 637     $ (7 )   $ -  
Total
  $ 1,257     $ 83     $ -     $ 637     $ (7 )   $ -  
                                                 
Net Investment Hedges:
                                               
Cross-currency swaps (c)
  $ -     $ -     $ -     $ 52,158     $ -     $ (91 )
Total
  $ -     $ -     $ -     $ 52,158     $ -     $ (91 )

   
Quarter Ended October 3, 2009
   
Nine Months Ended October 3, 2009
 
    
Effective Portion
   
Ineffective
Portion
   
Effective Portion
   
Ineffective
Portion
 
    
Gain/(Loss)
Recognized in
Other
Comprehensive
Income
   
Gain/(Loss)
Reclassified
into Income
   
Gain/(Loss)
Recognized
in Income
   
Gain/(Loss)
Recognized in
Other
Comprehensive
Income
   
Gain/(Loss)
Reclassified
into Income
   
Gain/(Loss)
Recognized
in Income
 
                                     
Cash Flow Hedges:
                                   
Interest rate swaps (c)
  $ 637     $ -     $ -     $ 1,379     $ -     $ -  
Foreign exchange contracts (d)
    772       56       -       (1,673 )     7       -  
Total
  $ 1,409     $ 56     $ -     $ (294 )   $ 7     $ -  
                                                 
Net Investment Hedges:
                                               
Cross-currency swaps (c)
  $ (14,638 )   $ -     $ 382     $ (13,262 )   $ -     $ 2,066  
Total
  $ (14,638 )   $ -     $ 382     $ (13,262 )   $ -     $ 2,066  

(a)
The amount of gain/(loss) recognized in income on derivatives is recorded in "Loss on prepayment of debt" in the accompanying consolidated statements of operations.

(b)
The amount of gain/(loss) recognized in income on derivatives is recorded in "Cost of sales" in the accompanying consolidated statements of operations.

(c)
Both the effective and ineffective portions of any gain/(loss) reclassified or recognized in income is recorded in "Interest and other financing expense, net" in the accompanying consolidated statements of operations.

 
15

 

ARROW ELECTRONICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands except per share data)
(Unaudited)

(d)
Both the effective and ineffective portions of any gain/(loss) reclassified or recognized in income is recorded in "Cost of sales" in the accompanying consolidated statements of operations.

Interest Rate Swaps

The company enters into interest rate swap transactions that convert certain fixed-rate debt to variable-rate debt or variable-rate debt to fixed-rate debt in order to manage its targeted mix of fixed- and floating-rate debt.  The effective portion of the change in the fair value of interest rate swaps designated as fair value hedges are recorded as a change to the carrying value of the related hedged debt, and the effective portion of the change in fair value of interest rate swaps designated as cash flow hedges are recorded in the shareholders' equity section in the accompanying consolidated balance sheets in "Other."  The ineffective portion of the interest rate swap, if any, is recorded in "Interest and other financing expense, net" in the accompanying consolidated statements of operations.

In June 2004 and November 2009, the company entered into interest rate swaps, with an aggregate notional amount of $275,000.  The swaps modify the company's interest rate exposure by effectively converting a portion of the fixed 6.875% senior notes to a floating rate, based on the six-month U.S. dollar LIBOR plus a spread (an effective rate of 4.37% and 4.18% at October 2, 2010 and December 31, 2009, respectively), through its maturity.  The swaps are classified as fair value hedges and had a fair value of $17,787 and $9,556 at October 2, 2010 and December 31, 2009, respectively.

Cross-Currency Swaps

The company occasionally enters into cross-currency swaps to hedge a portion of its net investment in euro-denominated net assets. The company’s cross-currency swaps are derivatives designated as net investment hedges.  The effective portion of the change in the fair value of derivatives designated as net investment hedges is recorded in "Foreign currency translation adjustment" included in the accompanying consolidated balance sheets and any ineffective portion is recorded in "Interest and other financing expense, net" in the accompanying consolidated statements of operations.  As the notional amounts of the company’s cross-currency swaps are expected to equal a comparable amount of hedged net assets, no material ineffectiveness is expected.  The company uses the hypothetical derivative method to assess the effectiveness of its net investment hedges on a quarterly basis.

In May 2006, the company entered into a cross-currency swap, with a maturity date of July 2011, for approximately $100,000 or €78,281 (the "2006 cross-currency swap").  In October 2005, the company entered into a cross-currency swap, with a maturity date of October 2010, for approximately $200,000 or €168,384 (the "2005 cross-currency swap").  These cross-currency swaps hedge a portion of the company's net investment in euro-denominated net assets, by effectively converting the interest expense on $300,000 of long-term debt from U.S. dollars to euros.   During the second quarter of 2010, the company paid $2,282, plus accrued interest, to terminate these cross-currency swaps.  The 2006 cross-currency swap and the 2005 cross-currency swap had a negative fair value at December 31, 2009 of $12,497 and $41,943, respectively.

Foreign Exchange Contracts

The company enters into foreign exchange forward, option, or swap contracts (collectively, the "foreign exchange contracts") to mitigate the impact of changes in foreign currency exchange rates.  These contracts are executed to facilitate the hedging of foreign currency exposures resulting from inventory purchases and sales and generally have terms of no more than six months. Gains or losses on these contracts are deferred and recognized when the underlying future purchase or sale is recognized or when the corresponding asset or liability is revalued. The company does not enter into foreign exchange contracts for trading purposes. The risk of loss on a foreign exchange contract is the risk of nonperformance by the counterparties, which the company minimizes by limiting its counterparties to
 
 
16

 
 
ARROW ELECTRONICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands except per share data)
(Unaudited)
 
major financial institutions.  The fair value of the foreign exchange contracts, which are nominal, are estimated using market quotes.  The notional amount of the foreign exchange contracts at October 2, 2010 and December 31, 2009 was $312,666 and $294,928, respectively.
 
Other

The carrying amount of cash and cash equivalents, accounts receivable, net, and accounts payable approximate their fair value due to the short maturities of these financial instruments.

Cash equivalents consist primarily of overnight time deposits and institutional money market funds with quality financial institutions.  These financial institutions are located in many different geographical regions, and the company's policy is designed to limit exposure with any one institution.  As part of its cash and risk management processes, the company performs periodic evaluations of the relative credit standing of these financial institutions.

Note I – Restructuring, Integration, and Other Charges

During the third quarters of 2010 and 2009, the company recorded restructuring, integration, and other charges of $14,338 ($9,506 net of related taxes or $.08 per share on both a basic and diluted basis) and $37,583 ($29,075 net of related taxes or $.24 per share on both a basic and diluted basis), respectively.  

During the first nine months of 2010 and 2009, the company recorded restructuring, integration, and other charges of $27,424 ($19,146 net of related taxes or $.16 per share on both a basic and diluted basis) and $80,853 ($61,268 net of related taxes or $.51 per share on both a basic and diluted basis), respectively.

The following table presents the components of the restructuring, integration, and other charges:

   
Quarter Ended
   
Nine Months Ended
 
   
October 2,
2010
   
October 3,
2009
   
October 2,
2010
   
October 3,
2009
 
                         
Restructuring charges - current period actions
  $ 8,432     $ 35,333     $ 19,419     $ 78,761  
Restructuring and integration charges - actions taken in prior periods
    314       2,250       1,407       2,092  
Acquisition-related expenses
    5,592       -       6,598       -  
    $ 14,338     $ 37,583     $ 27,424     $ 80,853  

2010 Restructuring Charge

The following table presents the components of the 2010 restructuring charge of $19,419 and activity in the restructuring accrual for the first nine months of 2010:

   
Personnel
Costs
   
Facilities
   
Other
   
Total
 
                         
Restructuring charge
  $ 12,389     $ 2,429     $ 4,601     $ 19,419  
Payments
    (9,507 )     (308 )     (2,104 )     (11,919 )
Non-cash usage
    -       -       (657 )     (657 )
Foreign currency translation
    62       15       94       171  
October 2, 2010
  $ 2,944     $ 2,136     $ 1,934     $ 7,014  
 
The restructuring charge of $19,419 for the first nine months of 2010 primarily includes personnel costs of
 
17

 
 
ARROW ELECTRONICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands except per share data)
(Unaudited)

$12,389 and facilities costs of $2,429.  The personnel costs are related to the elimination of approximately 160 positions within the global ECS business segment and approximately 90 positions within the global components business segment.  The facilities costs are related to exit activities for 7 vacated facilities in Europe and North America due to the company's continued efforts to streamline its operations and reduce real estate costs. These initiatives are due to the company's continued efforts to lower cost and drive operational efficiency.

2009 Restructuring Charge

The following table presents the activity in the restructuring accrual for the first nine months of 2010 related to the 2009 restructuring:

   
Personnel 
Costs
   
Facilities
   
Other
   
Total
 
                         
December 31, 2009
  $ 25,380     $ 6,287     $ 224     $ 31,891  
Restructuring charge (credit)
    2,828       (1,586 )     -       1,242  
Payments
    (24,206 )     (369 )     (158 )     (24,733 )
Foreign currency translation
    (1,584 )     (334 )     (17 )     (1,935 )
October 2, 2010
  $ 2,418     $ 3,998     $ 49     $ 6,465  

Restructuring and Integration Accruals Related to Actions Taken Prior to 2009

The following table presents the activity in the restructuring and integration accruals for the first nine months of 2010 related to restructuring and integration actions taken prior to 2009:

   
Personnel
Costs
   
Facilities
   
Other
   
Total
 
                         
December 31, 2009
  $ 1,728     $ 6,676     $ 1,822     $ 10,226  
Restructuring and integration charges (credits)
    (187 )     556       (204 )     165  
Payments
    (1,211 )     (1,524 )     -       (2,735 )
Non-cash usage
    -       (582 )     -       (582 )
Foreign currency translation
    (17 )     (164 )     (9 )     (190 )
October 2, 2010
  $ 313     $ 4,962     $ 1,609     $ 6,884  

Restructuring and Integration Accrual Summary

In summary, the restructuring and integration accruals aggregate $20,363 at October 2, 2010, all of which is expected to be spent in cash, and are expected to be utilized as follows:

·
The accruals for personnel costs of $5,675 to cover the termination of personnel are primarily expected to be spent within one year. 

·
The accruals for facilities totaling $11,096 relate to vacated leased properties that have scheduled payments of $5,016 in 2010, $3,818 in 2011, $1,211 in 2012, $824 in 2013, $190 in 2014, and $37 thereafter.

·
Other accruals of $3,592 are expected to be utilized over several years.

 
18

 
 
ARROW ELECTRONICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands except per share data)
(Unaudited)
   
Acquisition-Related Expenses

Included in restructuring, integration, and other charges for the third quarter and first nine months of 2010 are $5,592 and $6,598, respectively, of other acquisition-related expenses, primarily consisting of professional fees directly related to recent acquisition activity.

Note J – Net Income per Share

The following table sets forth the computation of net income per share on a basic and diluted basis (shares in thousands):

   
Quarter Ended
   
Nine Months Ended
 
   
October 2,
2010
   
October 3,
2009
   
October 2,
2010
   
October 3,
2009
 
                         
Net income attributable to shareholders
  $ 118,502     $ 12,581     $ 321,741     $ 60,419  
                                 
Weighted average shares outstanding - basic
    116,958       119,888       118,813       119,745  
Net effect of various dilutive stock-based compensation awards
    1,277       897       1,457       493  
Weighted average shares outstanding - diluted
    118,235       120,785       120,270       120,238  
                                 
Net income per share:
                               
Basic
  $ 1.01     $ .10     $ 2.71     $ .50  
Diluted (a)
  $ 1.00     $ .10     $ 2.68     $ .50  
 
(a)
Stock-based compensation awards for the issuance of 4,455 and 3,281 shares for the third quarter and first nine months of 2010 and 3,339 and 3,915 shares for the third quarter and first nine months of 2009, respectively, were excluded from the computation of net income per share on a diluted basis as their effect was anti-dilutive.
 
 
19

 
 
ARROW ELECTRONICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands except per share data)
(Unaudited)
    
Note K – Shareholders' Equity

Comprehensive Income

The components of comprehensive income are as follows:

   
Quarter Ended
   
Nine Months Ended
 
   
October 2,
2010
   
October 3,
2009
   
October 2,
2010
   
October 3,
2009
 
                         
Consolidated net income
  $ 118,502     $ 12,576     $ 321,736     $ 60,394  
Foreign currency translation adjustments (a)
    131,040       54,933       (405 )     72,909  
Other (b)
    6,867       4,346       6,947       17,664  
Comprehensive income
    256,409       71,855       328,278       150,967  
Comprehensive loss attributable to noncontrolling interests
    -       (9 )     -       (37 )
Comprehensive income attributable to shareholders
  $ 256,409     $ 71,864     $ 328,278     $ 151,004  

(a)
Except for unrealized gains or losses resulting from the company's cross-currency swaps, foreign currency translation adjustments were not tax effected as investments in international affiliates are deemed to be permanent.

(b)
Other includes unrealized gains or losses on securities, unrealized gains or losses on interest rate swaps designated as cash flow hedges, and other employee benefit plan items.  Each of these items is net of related taxes.

Share-Repurchase Program

In March 2010, the company announced its Board of Directors approved the repurchase of up to $100,000 of the company's common stock through a share-repurchase program.  In July 2010, the company's Board of Directors approved an additional repurchase of up to $100,000 of the company's common stock. As of October 2, 2010, the company repurchased 4,693,900 shares under these plans with a market value of $124,993 at the dates of repurchase.


 
20

 
 
ARROW ELECTRONICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands except per share data)
(Unaudited)
   
Note L – Employee Benefit Plans

The company maintains supplemental executive retirement plans and a defined benefit plan.  The components of the net periodic benefit costs for these plans are as follows:

   
Quarter Ended
   
Nine Months Ended
 
   
October 2,
2010
   
October 3,
2009
   
October 2,
2010
   
October 3,
2009