Arrow Electronics Second Quarter Earnings Exceed Expectations

Non-GAAP Earnings Per Share of $.84
MELVILLE, N.Y.--(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.

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*T
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
-------- -------- -------- --------
*T

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.

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*T
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
*T

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

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*T
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
---------- ----------
*T

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

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*T
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
----------- ---------
*T

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

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*T
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
----------- ----------
*T

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

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*T
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
---------- ---------- ---------- ----------
*T

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*T
(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.
*T

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

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