Arrow Electronics Second Quarter Earnings Exceed Expectations Non-GAAP Earnings Per Share of $.84

MELVILLE, N.Y., Jul 23, 2008 (BUSINESS WIRE) -- Arrow Electronics, Inc.

(NYSE:ARW) today reported second quarter 2008 net income of $96.2 million ($.79 per share on both a basic and diluted basis) on sales of $4.35 billion, compared with net income of $99.2 million ($.80 and $.79 per share on a basic and diluted basis, respectively) on sales of $4.04 billion in the second quarter of 2007.

Sales increased 8 percent year over year. Excluding the impact of the acquisition of LOGIX S.A., which closed on June 2, sales increased 6 percent year over year. The company's results for the second quarters of 2008 and 2007 include a number of items outlined below that impact their comparability. A complete reconciliation of these items is provided under the heading "Certain Non-GAAP Financial Information." Excluding those items, on a non-GAAP basis, net income for the quarter ended June 30, 2008, would have been $102.1 million ($.84 per share on both a basic and diluted basis) and net income for the quarter ended June 30, 2007, would have been $101.5 million ($.82 and $.81 per share on a basic and diluted basis, respectively).

"This quarter's results exceeded our own expectations, driven by strong performance in both global components and global enterprise computing solutions.

We continue to deliver on our strategy with near-record levels of performance across the board, despite the backdrop of an unsettled economy," said William E.

Mitchell, chairman and chief executive officer. "We occupy a unique, value-added space in the supply chain with growth opportunities across many customer segments, end markets, geographies, and technologies. We will continue to create value for not only our business partners, but also our shareholders as we move forward with the strategy we have laid out to capture both profitable growth and improve our return on invested capital." Global enterprise computing solutions ("ECS") sales of $1.39 billion increased 9 percent year over year. Excluding the impact of the acquisition of LOGIX S.A., sales increased 4 percent year over year and exceeded the company's guidance range. "ECS posted excellent results this quarter, as we generated sales above expectations and our operating margin returned to an industry-leading level.

Performance year over year was driven by double-digit growth in storage, software, and services, with growth also in proprietary servers. We experienced strong sequential growth in all of our product segments and notable double-digit gains in proprietary servers. We also achieved a major enterprise resource planning system milestone with the successful transition of our North American Sun group without any delay in processing orders or shipping and receiving product," added Michael J. Long, president and chief operating officer.

Global components sales of $2.96 billion increased 7 percent year over year. "In global components, performance also came in above expectations with particularly strong, above-seasonal growth from our Asia Pacific region where we significantly outgrew the market. Our strategy in this region continues to pay off with prior investments driving gains in profitability. North America remained relatively stable and further efficiency improvements led to an operating margin increase year over year despite the challenging macro environment. And as we anticipated, conditions in Europe remained soft in the second quarter. Overall, the market remains relatively stable, yet cautious. In response, we continue to manage our business responsibly to take advantage of growth opportunities, while at the same time focusing on ways to further leverage our global scale to take us to the next level of profitability," Mr.

Long said.

The company's results for the second quarter of 2008 and 2007 include the items outlined below that impact their comparability: -- During the second quarter of 2008, the company recorded a restructuring and integration charge of $8.2 million ($5.9 million net of related taxes or $.05 per share on both a basic and diluted basis) primarily related to initiatives taken by the company to improve operating efficiencies.

-- During the second quarter of 2007, the company recorded a restructuring and integration charge of $3.4 million ($2.3 million net of related taxes or $.02 per share on both a basic and diluted basis) primarily related to initiatives taken by the company to improve operating efficiencies and the acquisition of KeyLink.

SIX-MONTH RESULTS Arrow's net income for the first six months of 2008 was $182.1 million ($1.49 and $1.48 per share on a basic and diluted basis, respectively) on sales of $8.38 billion, compared with net income of $195.5 million ($1.58 and $1.57 per share on a basic and diluted basis, respectively) on sales of $7.54 billion in the first six months of 2007. Sales in the first six months of 2008 increased 11 percent year over year. Pro forma to include the impact of the acquisitions of LOGIX S.A. and KeyLink Systems Group, sales increased 6 percent year over year.

Net income for the first six months of 2008 includes a restructuring and integration charge of $14.7 million ($10.1 million net of related taxes or $.08 per share on both a basic and diluted basis) primarily related to initiatives taken by the company to improve operating efficiencies and a charge, including legal fees, related to a preference claim from 2001 of $12.9 million ($7.8 million net of related taxes or $.06 per share on both a basis and diluted basis). Excluding these items, net income would have been $200.0 million ($1.64 and $1.63 per share on a basic and diluted basis, respectively) for the first six months of 2008.

Net income for the first six months of 2007 includes a restructuring and integration credit of $2.7 million ($2.2 million net of related taxes or $.02 per share on both a basic and diluted basis) primarily related to the gain on the sale of facilities offset, in part, by the aforementioned restructuring initiatives, and the acquisition of KeyLink. Excluding these items, net income would have been $193.3 million ($1.57 and $1.55 per share on a basic and diluted basis, respectively) for the first six months of 2007.

"We have been monitoring the marketplace and our leading indicators very carefully to keep a close watch on trends with our customers and our suppliers.

Looking ahead, we believe that total third quarter sales will be between $4.1 and $4.4 billion, with global component sales between $2.85 and $3.05 billion and global enterprise computing solutions sales between $1.25 and $1.35 billion.

We expect earnings per share, on a diluted basis, excluding any charges, to be in the range of $.73 to $.78," said Paul J. Reilly, senior vice president and chief financial officer.

Arrow Electronics (www.arrow.com) is a global provider of products, services and solutions to industrial and commercial users of electronic components and enterprise computing solutions. Headquartered in Melville, N.Y., Arrow serves as a supply channel partner for approximately 700 suppliers and 140,000 original equipment manufacturers, contract manufacturers and commercial customers through a global network of more than 300 locations in 50 countries and territories.

Certain Non-GAAP Financial Information In addition to disclosing results that are determined in accordance with Generally Accepted Accounting Principles ("GAAP"), the company provides certain non-GAAP financial information relating to operating income, net income and net income per basic and diluted share, each as adjusted for certain charges, credits and losses that the company believes impact the comparability of its results of operations. These charges, credits and losses arise out of the company's efficiency enhancement initiatives and certain legal matters. A reconciliation of the company's non-GAAP financial information to GAAP is set forth in the table below.

The company believes that such non-GAAP financial information is useful to investors to assist in assessing and understanding the company's operating performance and underlying trends in the company's business because management considers the charges, credits and losses referred to above to be outside the company's core operating results. This non-GAAP financial information is among the primary indicators management uses as a basis for evaluating the company's financial and operating performance. In addition, the company's Board of Directors may use this non-GAAP financial information in evaluating management performance and setting management compensation.

The presentation of this additional non-GAAP financial information is not meant to be considered in isolation or as a substitute for, or alternative to, operating income, net income and net income per basic and diluted share determined in accordance with GAAP. Analysis of results and outlook on a non-GAAP basis should be used as a complement to, and in conjunction with, data presented in accordance with GAAP.

ARROW ELECTRONICS, INC.

EARNINGS RECONCILIATION (In thousands except per share data) Three Months Ended Six Months Ended June 30, June 30, ----------------- ----------------- 2008 2007 2008 2007 -------- -------- -------- -------- Operating income, as reported $164,958 $173,154 $309,101 $335,813 Restructuring and integration charge (credit) 8,196 3,425 14,674 (2,722) Preference claim from 2001 - - 12,941 - -------- -------- -------- -------- Operating income, as adjusted $173,154 $176,579 $336,716 $333,091 -------- -------- -------- -------- Net income, as reported $ 96,215 $ 99,211 $182,086 $195,505 Restructuring and integration charge (credit) 5,929 2,286 10,088 (2,236) Preference claim from 2001 - - 7,822 - -------- -------- -------- -------- Net income, as adjusted $102,144 $101,497 $199,996 $193,269 -------- -------- -------- -------- Net income per basic share, as reported $ .79 $ .80 $ 1.49 $ 1.58 Restructuring and integration charge(credit) .05 .02 .08 (.02) Preference claim from 2001 - - .06 - -------- -------- -------- -------- Net income per basic share, as adjusted $ .84 $ .82 $ 1.64 $ 1.57 -------- -------- -------- -------- Net income per diluted share, as reported $ .79 $ .79 $ 1.48 $ 1.57 Restructuring and integration charge(credit) .05 .02 .08 (.02) Preference claim from 2001 - - .06 - -------- -------- -------- -------- Net income per diluted share, as adjusted $ .84 $ .81 $ 1.63 $ 1.55 -------- -------- -------- -------- The sum of the components for basic and diluted net income per share, as adjusted, may not agree to totals, as presented, due to rounding.

Information Relating to Forward-Looking Statements This press release includes forward-looking statements that 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.

ARROW ELECTRONICS, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands except per share data) Three Months Ended Six Months Ended June 30, June 30, --------------------- --------------------- 2008 2007 2008 2007 ---------- ---------- ---------- ---------- Sales $4,347,477 $4,038,083 $8,375,968 $7,535,647 ---------- ---------- ---------- ---------- Costs and expenses: Cost of products sold 3,735,006 3,459,113 7,177,206 6,417,046 Selling, general and administrative expenses 421,839 383,936 827,351 754,162 Depreciation and amortization 17,478 18,455 34,695 31,348 Restructuring and integration charge (credit) 8,196 3,425 14,674 (2,722) Preference claim from 2001 - - 12,941 - ---------- ---------- ---------- ---------- 4,182,519 3,864,929 8,066,867 7,199,834 ---------- ---------- ---------- ---------- Operating income 164,958 173,154 309,101 335,813 Equity in earnings of affiliated companies 932 1,685 3,286 3,670 Interest expense, net 24,129 28,035 49,201 51,103 ---------- ---------- ---------- ---------- Income before income taxes and minority interest 141,761 146,804 263,186 288,380 Provision for income taxes 45,418 46,483 80,938 91,039 ---------- ---------- ---------- ---------- Income before minority interest 96,343 100,321 182,248 197,341 Minority interest 128 1,110 162 1,836 ---------- ---------- ---------- ---------- Net income $ 96,215 $ 99,211 $ 182,086 $ 195,505 ---------- ---------- ---------- ---------- Net income per share: Basic $ .79 $ .80 $ 1.49 $ 1.58 ---------- ---------- ---------- ---------- Diluted $ .79 $ .79 $ 1.48 $ 1.57 ---------- ---------- ---------- ---------- Average number of shares outstanding: Basic 121,379 123,808 122,078 123,401 Diluted 122,157 124,959 122,996 124,690 This interim report is subject to independent audit at year-end.

ARROW ELECTRONICS, INC.

CONSOLIDATED BALANCE SHEETS (In thousands except par value) December June 30, 31, 2008 2007 ---------- ---------- ASSETS Current assets: Cash and cash equivalents $ 284,483 $ 447,731 Accounts receivable, net 3,326,534 3,281,169 Inventories 1,890,171 1,679,866 Prepaid expenses and other assets 195,786 180,629 ---------- ---------- Total current assets 5,696,974 5,589,395 ---------- ---------- Property, plant and equipment, at cost: Land 41,804 41,553 Buildings and improvements 182,716 175,979 Machinery and equipment 648,285 580,278 ---------- ---------- 872,805 797,810 Less: Accumulated depreciation and amortization (471,951) (442,649) ---------- ---------- Property, plant and equipment, net 400,854 355,161 ---------- ---------- Investments in affiliated companies 47,749 47,794 Cost in excess of net assets of companies acquired 2,017,527 1,779,235 Other assets 375,609 288,275 ---------- ---------- Total assets $8,538,713 $8,059,860 ---------- ---------- LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable $2,517,611 $2,535,583 Accrued expenses 518,267 438,898 Short-term borrowings, including current portion of long-term debt 65,404 12,893 ---------- ---------- Total current liabilities 3,101,282 2,987,374 ---------- ---------- Long-term debt 1,376,490 1,223,337 Other liabilities 280,965 297,289 Shareholders' equity: Common stock, par value $1: Authorized - 160,000 shares in 2008 and 2007 Issued - 125,048 and 125,039 shares in 2008 and 2007, respectively 125,048 125,039 Capital in excess of par value 1,028,936 1,025,611 Retained earnings 2,366,830 2,184,744 Foreign currency translation adjustment 453,145 312,755 Other (14,047) (8,720) ---------- ---------- 3,959,912 3,639,429 Less: Treasury stock (5,424 and 2,212 shares in 2008 and 2007, respectively), at cost (179,936) (87,569) ---------- ---------- Total shareholders' equity 3,779,976 3,551,860 ---------- ---------- Total liabilities and shareholders' equity $8,538,713 $8,059,860 ---------- ---------- This interim report is subject to independent audit at year-end.

ARROW ELECTRONICS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) Three Months Ended June 30, ---------------------- 2008 2007 ----------- --------- Cash flows from operating activities: Net income $ 96,215 $ 99,211 Adjustments to reconcile net income to net cash provided by operations: Depreciation and amortization 17,478 18,455 Amortization of stock-based compensation 4,175 5,330 Amortization of deferred financing costs and discount on notes 570 523 Equity in earnings of affiliated companies (932) (1,685) Minority interest 128 1,110 Excess tax benefits from stock-based compensation arrangements 35 (1,687) Deferred income taxes 1,623 616 Restructuring and integration charge 5,929 2,286 Change in assets and liabilities, net of effects of acquired businesses: Accounts receivable (131,934) (181,101) Inventories (56,375) 103,564 Prepaid expenses and other assets (10,869) 1,345 Accounts payable 139,751 270,649 Accrued expenses 30,682 23,363 Other 4,628 3,354 ----------- --------- Net cash provided by operating activities 101,104 345,333 ----------- --------- Cash flows from investing activities: Acquisition of property, plant and equipment (37,026) (39,383) Cash consideration paid for acquired businesses (199,716) (4,592) Proceeds from sale of facilities - 4,186 Other (84) (117) ----------- --------- Net cash used for investing activities (236,826) (39,906) ----------- --------- Cash flows from financing activities: Change in short-term borrowings 9,050 (7,757) Repayment of long-term borrowings (1,015,222) (902,605) Proceeds from long-term borrowings 1,133,893 757,500 Proceeds from exercise of stock options 1,487 13,668 Excess tax benefits from stock-based compensation arrangements (35) 1,687 Repurchases of common stock (98,240) (32,759) ----------- --------- Net cash provided by (used for) financing activities 30,933 (170,266) ----------- --------- Effect of exchange rate changes on cash (2,612) 2,423 ----------- --------- Net (decrease) increase in cash and cash equivalents (107,401) 137,584 Cash and cash equivalents at beginning of period 391,884 141,413 ----------- --------- Cash and cash equivalents at end of period $ 284,483 $ 278,997 ----------- --------- This interim report is subject to independent audit at year-end.

ARROW ELECTRONICS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) Six Months Ended June 30, ----------------------- 2008 2007 ----------- ---------- Cash flows from operating activities: Net income $ 182,086 $ 195,505 Adjustments to reconcile net income to net cash provided by operations: Depreciation and amortization 34,695 31,348 Amortization of stock-based compensation 9,674 11,772 Amortization of deferred financing costs and discount on notes 1,142 1,078 Equity in earnings of affiliated companies (3,286) (3,670) Minority interest 162 1,836 Excess tax benefits from stock-based compensation arrangements (231) (6,693) Deferred income taxes (2,756) 2,068 Restructuring and integration charge (credit) 10,088 (2,236) Preference claim from 2001 7,822 - Change in assets and liabilities, net of effects of acquired businesses: Accounts receivable 155,545 (131,491) Inventories (127,723) 176,664 Prepaid expenses and other assets (14,201) 1,761 Accounts payable (157,095) 144,579 Accrued expenses 59,227 31,906 Other (13,341) 4,443 ----------- ---------- Net cash provided by operating activities 141,808 458,870 ----------- ---------- Cash flows from investing activities: Acquisition of property, plant and equipment (69,371) (61,367) Cash consideration paid for acquired businesses (273,114) (496,067) Proceeds from sale of facilities - 12,996 Other (208) 218 ----------- ---------- Net cash used for investing activities (342,693) (544,220) ----------- ---------- Cash flows from financing activities: Change in short-term borrowings 8,284 (25,364) Repayment of long-term borrowings (1,424,650) (903,917) Proceeds from long-term borrowings 1,543,677 1,102,500 Repayment of senior notes - (169,136) Proceeds from exercise of stock options 2,834 46,427 Excess tax benefits from stock-based compensation arrangements 231 6,693 Repurchases of common stock (102,661) (32,759) ----------- ---------- Net cash provided by financing activities 27,715 24,444 ----------- ---------- Effect of exchange rate changes on cash 9,922 2,173 ----------- ---------- Net decrease in cash and cash equivalents (163,248) (58,733) Cash and cash equivalents at beginning of period 447,731 337,730 ----------- ---------- Cash and cash equivalents at end of period $ 284,483 $ 278,997 ----------- ---------- This interim report is subject to independent audit at year-end.

ARROW ELECTRONICS, INC.

SEGMENT INFORMATION (In thousands) Three Months Ended Six Months Ended June 30, June 30, ---------------------- ---------------------- 2008 2007 2008 2007 ---------- ---------- ---------- ---------- Sales: Global components $2,958,201 $2,768,670 $5,880,444 $5,553,927 Global ECS 1,389,276 1,269,413 2,495,524 1,981,720 ---------- ---------- ---------- ---------- Consolidated $4,347,477 $4,038,083 $8,375,968 $7,535,647 ---------- ---------- ---------- ---------- Operating income (loss): Global components $ 147,053 $ 152,144 $ 307,631 $ 306,725 Global ECS 61,111 50,529 91,784 80,009 Corporate (a) (43,206) (29,519) (90,314) (50,921) ---------- ---------- ---------- ---------- Consolidated $ 164,958 $ 173,154 $ 309,101 $ 335,813 ---------- ---------- ---------- ---------- (a) Includes restructuring and integration charges of $8.2 million and $14.7 million for the second quarter and first six months of 2008, respectively, and a restructuring and integration charge of $3.4 million and a restructuring and integration credit of $2.7 million for the second quarter and first six months of 2007, respectively. Also includes a charge of $12.9 million related to the preference claim from 2001 for the first six months of 2008.

This interim report is subject to independent audit at year-end.

SOURCE: Arrow Electronics, Inc.

CONTACT: Arrow Electronics, Inc.

Sabrina N. Weaver, 631-847-5359 Director, Investor Relations or Paul J. Reilly, 631-847-1872 Senior Vice President & Chief Financial Officer or Media: Jacqueline F. Strayer, 631-847-2101 Vice President, Corporate Communications Copyright Business Wire 2008 -0- KEYWORD: United States

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Finance SUBJECT CODE: Earnings