Investor Day 2011

Investor Day 2011
Strength.Growth.Momentum.

Welcome

Mike Taunton
Vice President & Treasurer

Safe Harbor Statement
This presentation may include forward-looking statements, including statements addressing
future financial results. These statements are subject to numerous assumptions, risks, and
uncertainties, which could cause actual results or facts to differ materially from such statements
for a variety of reasons, including, but not limited to: industry conditions, the company's
implementation of its new enterprise resource planning system, changes in product supply,
pricing and customer demand, competition, other vagaries in the global components and global
ECS markets, changes in relationships with key suppliers, increased profit margin pressure, the
effects of additional actions taken to become more efficient or lower costs, and the company’s
ability to generate additional cash flow. Forward-looking statements are those statements,
which are not statements of historical fact. These forward-looking statements can be identified
by forward-looking words such as "expects," "anticipates," "intends," "plans," "may," "will,"
"believes," "seeks," "estimates," and similar expressions. Shareholders and other readers are
cautioned not to place undue reliance on these forward-looking statements, which speak only as
of the date on which they are made. The company undertakes no obligation to update publicly
or revise any of the forward-looking statements.

Investor Day 2011 3

Agenda
SESSION I
9:00 to 10:15AM Welcome Mike Taunton
Arrow’s Strategic Transformation Mike Long
Global ECS Update Andy Bryant
Session I Q&A All
Coffee Break
SESSION II
10:15 to 11:45AM Welcome Back Greer Aviv
Global Components Update Peter Kong
Arrow’s Services Transformation Ernie Keith
Arrow’s Financial Health Paul Reilly
Closing Comments Mike Long
Session II Q&A All

Investor Day 2011 4

Arrow’s Strategic
Transformation

Mike Long
Chairman, President, & CEO

be the premier
electronics
company in the world

Investor Day 2011

A Growth Company

Strength

Growth

Momentum
Investor Day 2011 7

Success across all Businesses

• Exceptional organic • Significant margin
sales growth expansion

• Best-in-class • Strategic expansion of
execution the portfolio

Maximized Shareholder Value
Investor Day 2011 9

Record Revenue: Driven by Organic Growth

12%
organic
CAGR

Investor Day 2011 10

Record Revenue: Supported by Acquisitions


Investor Day 2011
AND BEYOND

be the premier
electronics
company in the world


Global Strategy
Drive growth in the core, services & high-growth product sets

Core
Businesses
ECS
Global
Components

Services


Premier Electronics Company in the World

Computing Solutions
Production Reverse Logistics
Our comprehensive
portfolio
spans the full product
lifecycle and globe

Design IT Asset
Disposition


Expect to Be a $26+ Billion Company

Core Growth Incremental Growth Value-Added Services
Driven by core Expand product offerings Expand Arrow’s
competencies and geographic reach value proposition

$26+ Bn

$19 Bn Organic growth
Expanded markets
Higher-margin product sets
Strategic acquisitions

2010 2013


History of strength and growth

Growing core and new services business

Exceptional team

Premier electronics company
in the world


Global Enterprise
Computing Solutions

Andy Bryant
President, Global ECS

Leading Specialized Channel Management
Services Company

• 2010 sales of $5.6 billion grew 13% Y/Y

• Industry leading returns on working capital 2010 Revenue
$5.6 Bn
• Expanded global footprint to 28 geographies
across North America and Europe

• Approximately 13,000 value-added reseller
partners

• World-class data center products and
solutions capabilities – unified communications North America
EMEA
managed services


Outperformed the Market in 2010

22%
• Extended value Storage
14%
distribution model to
20%
new suppliers Software
4%

• Higher EMEA supplier Services
18%

penetration and 0%

geographic reach Proprietary
-9%
-7%
• Realigned go-to-market 33%
model in North America ISS
23%

-20 -10 0 10 20 30 40

Arrow Market

Source: IDC


Market Outlook: Increased IT Spend

• Macro environment is
$2,200 more stable than in
$2,000 recent years
$1,800
• Top IT spending
$1,600
priorities among CIOs:
IT Spend ($Bn)

$1,400
– Information
$1,200
management
$1,000
– Network
$800
– Virtualization
$600
• Expect to outgrow the
$400
1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011E 2012E 2013E 2014E market in our key
segments

Source: IDC


Our Strategy: Differentiating Arrow ECS

Grow in new Move
Expand services
market value
offering
segments upstream
Increase cloud,
Create new Evolve value managed services,
opportunities with proposition and consulting and
suppliers and integrate more education services
customers closely with partners



Grow in new Move
Expand services
market value
offering
segments upstream
Increase cloud,
Create new Evolve value managed services,
opportunities with proposition and consulting and
suppliers and integrate more education services
customers closely with partners


Create New Growth Opportunities

• Selectively expand into high
growth emerging markets Expanding our TAM to Capitalize on
• Established footprint in the Information Age
(2010 TAM, $in billions)
$17 $313
managed services and unified
$12
communications
$20
• Mobility and edge
$21
infrastructure of datacenter are
driving information boom $243

• Cloud expected to grow at 22%
Core Emerging UC Mobility Cloud Future
CAGR through 2015 TAM Markets TAM

Source: IDC, International Monetary Fund



Grow in new
Move value Expand services
market
upstream offering
segments
Evolve value Increase cloud,
Create new proposition and managed services,
opportunities with integrate more consulting and
suppliers and closely with partners education services
customers


Evolve Technology Mix to Meet Changing
Needs
Shift portfolio to high growth with innovative
solutions that deliver greater market penetration
Today - $243 Bn TAM 2013 - $313 Bn TAM
United Comm,
Virtualization, 5% Servers, 17%
Servers, 24% 11%
Software, 32%

Security, 13%

Services -
Managed, 1%
Software, 10% Storage, 21%
Storage, 24%

Services - Services - Networking,
Maint, 17% Managed, 5% 4%
Networking, Services -
3% Maint, 15%


Drive Value and Growth with Channel
Management
Channel Management Model • Expand VAD model to new
Delivers customer value and growth suppliers and customers
• Extends reach with current
suppliers and customers
Product portfolio
and solutions • Adds services that enable
partners to capitalize on new
Services trends and outperform market
• Incorporates business
Information Assets intelligence that increases market
penetration



Grow in new
Move value Expand services
market
upstream offering
segments
Evolve value Increase cloud,
Create new proposition and managed services,
opportunities with integrate more consulting and
suppliers and closely with partners education services
customers


Grow Managed Services
Unified communications, enterprise voice, video/data
and software

% of IT Spend by Segment • Arrow ECS’s Shared
2010 Technologies unified
communications (UC) service
IP telephony
56% strong, established offering
WAN app
delivery 3%
• Enterprise proliferation of
smart mobile devices driving
UC growth
• Video on enterprise network is
Video
conferencing expanding – telepresence,
23%
WLAN 18% training, conferencing, etc.

Source: IDC


Increase Private/Hybrid Cloud Adoption

• In 2011, global customers will spend:
Private vs. Public Cloud
– $29 billion on cloud services
(up 30% Y/Y)
– $13 billion on private clouds
Target

Large • By 2011, adoption will increase
to 33% of midsized U.S. firms
Private /
Medium
Hybrid Cloud • Large and medium companies will
prefer private / hybrid clouds
• Among CIOs, cloud computing is
Public Cloud the #1 one security concern for new
Small technologies

Source: IDC, IDC Enterprise Security Survey, 2010


Strength, Growth and Momentum
2010 Successes:
• Outpaced the market with revenue and
operating income growth of 13%+
• Record returns on working capital
• Industry-leading revenue growth of almost
20% in EMEA*
– Led by organic matrix expansion strategy

*Local currency


Strength, Growth and Momentum Will Drive
Future Success
2010 Successes:
• Outpaced the market with revenue and
operating income growth of 13%+
• Record returns on working capital
• Industry-leading revenue growth of almost
20% in EMEA*
– Led by organic matrix expansion strategy

• Poised to capitalize on fast growing unified
communications segment
• Well positioned for the private/hybrid cloud build-out
• Services strategy is accelerating
*Local currency


Poised for Exceptional Growth

$ in billions Services $8.3Bn
Move Value
Upstream $.4
New Market $.4
Segments $.5
$.5
Core $.6
Growth $.7

$1.2
$5.6Bn $1.2

2010 2013

New Suppliers Shift to Higher Growth Unified Comm., Cloud
Segments Mobility

Expand in new and existing markets to drive higher growth


Welcome Back

Greer Aviv
Senior Manager, Investor Relations

Global Components

Peter Kong
President, Global Components

Leading Value-Added Service Provider
to OEMs and EMS Companies

• In 48 countries across North America, 2010 Revenue
Europe, Asia-Pacific $13.2 Bn

• North America market share leader
30%
• Leading player in Europe and Asia-Pacific
39%
• Over 100,000 customers across all end
31%
markets and geographies
• A large portion of customer base uses
one or more value-added service
• Ship over 36,000 line items per day and North America
EMEA
manage over 1 million part numbers Asia/Pacific


Broad Technology Portfolio with 1,200+
Suppliers
Semi = 69%
PEMCO = 20%
Computing/
memory = 11%


Diverse Opportunities: Convergence of
Electronics in Everything We Do

Investor Day 2011

Demand Expected to Continue to Rebound

$350 • Industry estimates
call for mid-single
$300 digit market growth
Core Components TAM ($ Bn)

• We expect to
$250
continue to
outgrow the
$200 $307
$292 market
$242
$223 – 2-3x GDP organic
$150
growth
$100
2008 2009 2010 2011E

Source: SIA; core component TAM excluding memory and microprocessors, excluding Japan


Build on Core Expertise with Differentiated
Value
Niche Distribution Reverse Logistics

Global
Components
Core
Business

Web Enablement


Expand TAM to Drive Future Growth

2010 TAM Approximate 2011 Growth
Annual Sales Outlook

Global Components Core $300 Bn $13.2 Bn 5% - 10%

Converge & Verical $46 Bn $280 MM 16%

Intechra $22 Bn $75MM 16%

Richardson RFPD $11 Bn $360 MM 10%

Nu Horizons $5 Bn $670 MM 5% - 10%

Acquisitions represent an almost
30% increase in addressable market


We are the Technology Product Lifecycle
Leader

Transim

New Product Supply Chain Reverse Logistics /
Introduction Product Lifecycle IT Asset Disposition

Note: Not to scale; size gives general sense of TAM


Accelerated Profitable Growth

New
Global
Components • Expanded
market base
TAM • Elevated
margins
Services
Core Niche • Operational
excellence
Web Enablement

Margin



$ in billions
Cross Services $18.0
Selling $.5
Vertical
Markets $.8
Core
Growth $1.5

$2.0
$13.2

2010 2013

Vertical Market Shift to Higher Growth Strengthen Supplier Emerging
Expansion Segments Partnerships Markets

Expand in new and existing markets to drive higher growth


Arrow’s Services
Transformation

Ernie Keith
Vice President, Global Operations & Value-Added Services

Significant Scope and Scale in Global Logistics
and Value-Added Services Capabilities

Venlo
Lunda

Boston
Reno Milan Beijing
Phoenix Cleveland Suzhou Seoul
Columbus Shenzhen Shanghai
Nogales Dallas Taipei
Guadalajara Bangalore Hong Kong
Manila
Mexico City Penang
Manaus
Sorocaba Singapore
Sao Paulo
Buenos Aires Johannesburg
Melbourne
Wellington

Arrow Global Components Warehouse
Arrow Sales Territory


Arrow Runs One of the Most Complex Supply
Chains in the World

Original Equipment Contract
Manufacturer (OEM) Manufacturer

Customer
Supplier


Our Unique Competencies Position us Well
Extensive service offering

Expertise you can leverage

Proven track record

Fueled by industry-leading
relationships

Global supply chain
footprint

Investor Day 2011

2010 Highlights

• Exceptional organic • Significant margin
sales growth expansion

• Best-in-class • Strategic expansion of
execution the portfolio


Leadership in Lifecycle Services

Grow to $1 Bn in revenue by 2013
• Expand value proposition and global scale
• Establish leadership in targeted segments
• Deliver exceptional execution and best-in-class
customer service

Drive profitable growth


Lifecycle Services Is a Very Large,
Fast-Growing, Fragmented Market

Production Reverse Logistics
$100 Bn total addressable market

Design IT Asset
Disposition


Our Portfolio Now Spans the Entire Lifecycle
Design Production Reverse Logistics IT Asset Disposition
• Application • Supply chain, • Product returns • Secure data
Engineering logistics • Spare parts erasure
• Custom logic • Turnkey • Excess • Reuse
solutions • Programming, Inventory • Recycle
• System and module tape and reel mgmt.
design • Integration • Remarketing
• 3rd-party design • Assembly

Go-to-market requirements After-market requirements


Roadmap to $1 billion
$1 Bn+
$100MM Sales

$210MM

$225MM
$480MM

$220MM

2009 2010 2013
Reverse Logistics IT Asset Other Value-
Disposition Add Services


Arrow’s Financial Health

Paul Reilly
Executive Vice President, Finance and Operations & CFO

Operating Performance is a Foundation of
Strength
Revenue ($Bn) Operating Expense*/Sales
$18.7 15.0%
12% (630)
CAGR bps

$7.3 8.7%

2002 2010 2002 2010

EBITDA* ($MM) Diluted EPS*
$862 $4.13

17% 51%
CAGR CAGR

$253
$0.15

2002 2010 2002 2010
*Represents GAAP measure adjusted to exclude the impact of restructuring and other items affecting comparability


Transformed Balance Sheet to Further
Strengthen Arrow
Available Liquidity Net Debt ($MM)
($MM, inc. cash)
$2,326
$1,399

$1,444
$896

2002 2010 2002 2010
Net Debt to Capital Net Debt to EBITDA*
53%
5.5x

22%

1.0x

2002 2010 2002 2010
*Represents GAAP measure adjusted to exclude the impact of restructuring and other items affecting comparability


Emerged Even Stronger from the Recession
Industry-leading performance in 2010

($ in millions) 2008 2010 Change

Sales $16,761 $18,745 +12%  Outgrew the market

*Represents GAAP measure adjusted to exclude the impact of restructuring and other items affecting comparability; **ROIC = Annualized, tax effected op. income
and equity in earnings of affiliates excluding restructuring and other charges - annualized minority interest/(Avg Debt + Avg Equity – Avg Cash over $150MM)





 Operating income grew more than
Operating Income* $606 $784 +29%
2x faster than sales






OI %* 3.6% 4.2% +60bps
 Strong rebound in operating margin






OI %* 3.6% 4.2% +60bps
Net Income* $356 $494 +39%  Net income grew 3x growth in sales






OI %* 3.6% 4.2% +60bps
EPS* $2.93 $4.13 +41%  Record level EPS






OI %* 3.6% 4.2% +60bps
ROIC** 9.3% 14.0% +470bps  Significant increase in ROIC






OI %* 3.6% 4.2% +60bps
ROIC** 9.3% 14.0% +470bps  Significant increase in ROIC
Cash Flow $620 $221 -$399  Cash flow positive throughout the cycle



Continue to Create Shareholder Value

• ROIC > WACC
• Generate positive cash flow throughout the cycle
– Cumulative operating cash flow of almost $6 billion since 2001
– Manage working capital at “best-in-class” levels

• Absolute EPS
• EPS growth

Differentiated operating income margin


Continue to Generate Superior Returns

Return on Invested Capital Return on Working Capital
as a % of WACC
200% 40%
180% 35%
160%
30%
140%
25%
120%
100% 20%
80% 15%
60%
10%
40%
20% 5%

0% 0%
2002 2003 2004 2005 2006 2007 2008 2009 2010 2002 2003 2004 2005 2006 2007 2008 2009 2010

WACC


Generated Positive Cash Flow
Throughout the Cycle

Capital Allocation Strategy Cumulative Operating Cash Flow
($MM)
• Invest in the business $6,000
$5,500
• Acquisitions that meet our $5,000
value criteria to strategically $4,500
accelerate growth $4,000
$3,500
• Evaluate options to return $3,000
value to shareholders $2,500
$2,000
• Maintain investment grade $1,500
rating over the long-term $1,000
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010


Generated Industry Leading EPS
in the Last Five Years
$14.58
$13.38
$12.46

$10.42

$7.96

$6.24

$1.56 $1.24
$0.81

ARW Earnings Per Share*

*Cumulative EPS for the last five years beginning April 1, 2006; Source: company financial statements; Represents GAAP basis
(excluding goodwill impairments) through 1Q11; Companies included: AVT, IM, SNX, TECD, BHE, CLS, FLEX, JBL


Earnings Per Share Growth Has Been
Exceptional

51% EPS CAGR 2002 - 2010
$7.00
$6.00
Absolute EPS*

$5.00
$4.00
$3.00
$2.00
$1.00
$0.00
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011E** 2012E**

*Represents GAAP measure adjusted to exclude the impact of restructuring and other items affecting comparability; **First Call estimate as of 5/24/11


Grown and Diversified by Capitalizing on
New Opportunities

2002 2010
$7Bn $19Bn

ECS
Europe
8%
Americas
ECS ECS
Americas 27%
America America
28% 30% 21%

Asia
9% Europe Asia Europe
33% 21% 22%

Global Components
Global ECS


$26+ Bn Premier Electronics Company

Adjacent
markets + Synergistic
transactions
Geographic
and services expansion

Arrow Core $19Bn

Diversified Technology Lifecycle Products and Services


Three-Year Targets Reflect Continued EPS
Growth and Cash Flow Generation
Three-Year Targets
Sales $26+ Billion
Earnings Per Share* $6.00 - $7.00
Cash Flow from Operations 70% of Net Income
Return on Working Capital 30%+
Return on Invested Capital** 12.5% - 15.0%

Operating Margin* Targets
Global Components 5.3% - 6.6%
Global ECS 4.3% - 5.0%
*Excludes special charges **ROIC = Annualized, tax effected op. income and equity in earnings of affiliates excluding restructuring
and other charges - annualized minority interest/(Avg Debt + Avg Equity – Avg Cash over $150MM)


In Summary…

• We are well positioned for:
– Strong organic growth
– Growing earnings in the double digit range
– Exceptional cash flow
– ROIC well ahead of WACC

• We are continually looking for ways to operate our business more efficiently
• We are committed to continuing to increase shareholder value


Closing Comments

Mike Long
Chairman, President, & CEO

Investor Day 2011

Recomendados

Recomendados

Mais conteúdo relacionado

Mais procurados

Mais procurados (20)

Semelhante a Investor Day 2011

Semelhante a Investor Day 2011 (20)

Último

Último (20)

Investor Day 2011