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Arrow Electronics Reports Third Quarter Earnings

[October 22, 2008]

Arrow Electronics Reports Third Quarter Earnings

MELVILLE, N.Y. --(Business Wire)-- Arrow Electronics, Inc. (NYSE:ARW) today reported third quarter 2008 net income of $76.1 million ($.64 and $.63 per share on a basic and diluted basis, respectively) on sales of $4.30 billion, compared with net income of $98.3 million ($.80 and $.79 per share on a basic and diluted basis, respectively) on sales of $4.03 billion in the third quarter of 2007. Sales increased 7 percent year over year. Pro forma to include the impact of the acquisition of LOGIX S.A. ("LOGIX"), sales increased 4 percent year over year. The company's results for the third 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 September 30, 2008, would have been $83.7 million ($.70 per share on both a basic and diluted basis) and net income for the quarter ended September 30, 2007, would have been $95.0 million ($.77 and $.76 per share on a basic and diluted basis, respectively).

"The volatility in the world's economies and the virtual shutdown of the credit markets made the third quarter especially difficult. We delivered on our sales guidance and generated over $200 million in cash flow from operations, an increase of $30 million year over year, but fell short of our EPS guidance due to a changing product mix and competitive pricing pressure," said William E. Mitchell, chairman and chief executive officer. "There is no doubt that market conditions will continue to be challenging, and in response to the rapidly changing environment, we will make the appropriate and necessary decisions and adjustments to our business model to ensure continuing and profitable success and long-term sustainability. We continue to believe our strategic foundation is correct, and we have the financial strength and flexibility to continue to pursue those strategies. At the same time, prudent management requires that we stay closely attuned to rapidly changing and volatile market conditions, and we will do so."

Global enterprise computing solutions ("ECS") sales of $1.31 billion increased 12 percent year over year. Pro forma to include the impact of the acquisition of LOGIX, sales increased 2 percent year over year. "ECS sales were in line with our guidance range, as double-digit year-over-year growth in storage, software and services was offset by weakness in servers. In North America, operating income margin increased nearly 9 percent year over year. As has been widely reported, the increasing uncertainty in the global macroeconomic environment has caused IT spending to soften and as a result, our customer base became more cautious in the latter part of the third quarter," added Michael J. Long, president and chief operating officer.

Global components sales of $2.99 billion increased 5 percent year over year. "In our global components business, while sales were in line with expectations, operating performance was impacted by a slowdown in the more profitable business in North America and Europe and the increased contribution of business from Asia Pacific. Overall, the market continues to be cautious, with the macroeconomic situation causing our customers and suppliers to carefully evaluate their business needs," Mr. Long said.

The company's results for the third quarter of 2008 and 2007 include the items outlined below that impact their comparability:

-- During the third quarter of 2008, the company recorded a restructuring and integration charge of $11.0 million ($7.6 million net of related taxes or $.06 per share on both a basic and diluted basis) primarily related to initiatives taken by the company to improve operating efficiencies.

-- During the third quarter of 2007, the company recorded a restructuring and integration charge of $4.5 million ($2.7 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.

-- During the third quarter of 2007, the company recorded an income tax benefit of $6.0 million, net, ($.05 per share on both a basic and diluted basis) principally due to a reduction in deferred income taxes as a result of the reduction in the statutory tax rate in Germany.

NINE-MONTH RESULTS

Arrow's net income for the first nine months of 2008 was $258.2 million ($2.13 and $2.11 per share on a basic and diluted basis, respectively) on sales of $12.67 billion, compared with net income of $293.8 million ($2.38 and $2.36 per share on a basic and diluted basis, respectively) on sales of $11.57 billion in the first nine months of 2007. Sales in the first nine months of 2008 increased 10 percent year over year. Pro forma to include the impact of the acquisitions of LOGIX and KeyLink Systems Group, sales increased 5 percent year over year.

Net income for the first nine months of 2008 includes a restructuring and integration charge of $25.7 million ($17.7 million net of related taxes or $.15 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 basic and diluted basis). Excluding these items, net income would have been $283.7 million ($2.34 and $2.32 per share on a basic and diluted basis, respectively) for the first nine months of 2008.

Net income for the first nine months of 2007 includes restructuring and integration charges of $1.8 million ($0.4 million net of related taxes), primarily related to initiatives taken by the company in the period to improve operating efficiencies and the acquisition of KeyLink, and an income tax benefit of $6.0 million, net, ($.05 per share on both a basic and diluted basis) principally due to a decrease in deferred income taxes as a result of a reduction in the statutory tax rate in Germany. Excluding these items, net income would have been $288.2 million ($2.34 and $2.31 per share on a basic and diluted basis, respectively) for the first nine months of 2007.

GUIDANCE

"Given the poor economic conditions and unprecedented volatility in the financial markets, our visibility is more limited than normal. Taking this into account, we believe it is prudent to provide a wider than normal guidance range to account for the greater degree of uncertainty. Looking ahead, we believe total fourth quarter sales will be between $4.05 and $4.45 billion, with global component sales between $2.45 and $2.75 billion and global enterprise computing solutions sales between $1.60 and $1.70 billion. We expect earnings per share, on a diluted basis, excluding any charges, to be in the range of $.60 to $.68," 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 and tax 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 Nine Months Ended
                 September 30,    September 30,
                ------------------ -----------------
                 2008   2007   2008   2007
                --------- -------- -------- --------
Operating income, as reported  $ 131,776 $157,509 $440,877 $493,322
 Restructuring and integration
 charges             11,037  4,512  25,711  1,790
 Preference claim from 2001      -    -  12,941    -
                --------- -------- -------- --------
Operating income, as adjusted  $ 142,813 $162,021 $479,529 $495,112
                ========= ======== ======== ========
Net income, as reported     $ 76,070 $ 98,324 $258,156 $293,829
 Restructuring and integration
 charges Restructuring
 charges             7,635  2,674  17,723   438
 Preference claim from 2001      -    -   7,822    -
 Deferred tax adjustment*       -  (6,024)    -  (6,024)
                --------- -------- -------- --------
Net income, as adjusted     $ 83,705 $ 94,974 $283,701 $288,243
                ========= ======== ======== ========
Net income per basic share, as
reported            $   .64 $  .80 $  2.13 $  2.38
 Restructuring and integration
 charges Restructuring
 charges              .06   .02    .15    -
 Preference claim from 2001      -    -    .06    -
 Deferred tax adjustment*       -   (.05)    -   (.05)
                --------- -------- -------- --------
Net income per basic share, as
adjusted            $   .70 $  .77 $  2.34 $  2.34
                ========= ======== ======== ========
Net income per diluted share,
as reported          $   .63 $  .79 $  2.11 $  2.36
 Restructuring and integration
 charges              .06   .02    .15    -
 Preference claim from 2001      -    -    .06    -
 Deferred tax adjustment*       -   (.05)    -   (.05)
                --------- -------- -------- --------
Net income per diluted share,
as adjusted          $   .70 $  .76 $  2.32 $  2.31
                ========= ======== ======== ========

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.


*During the third quarter and first nine months of 2007, the company
 recorded an income tax benefit of $6.0 million, net ($.05 per share
 on both a basic and diluted basis) principally due to a reduction in
 deferred income taxes as a result of the statutory tax rate change
 in Germany. These deferred income taxes primarily related to the
 amortization of intangible assets for income tax purposes, which are
 not amortized for accounting purposes.

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   Nine Months Ended
              September 30,     September 30,
            --------------------- -----------------------
              2008    2007    2008    2007
            ---------- ---------- ----------- -----------
Sales          $4,295,314 $4,030,363 $12,671,282 $11,566,010
            ---------- ---------- ----------- -----------
Costs and expenses:
 Cost of products sold  3,731,459 3,477,806 10,908,665  9,894,852
 Selling, general and
 administrative
 expenses         403,542  373,796  1,230,893  1,127,958
 Depreciation and
 amortization       17,500   16,740   52,195   48,088
 Restructuring and
 integration charge    11,037   4,512   25,711    1,790
 Preference claim from
 2001              -     -   12,941      -
            ---------- ---------- ----------- -----------
             4,163,538 3,872,854 12,230,405 11,072,688
            ---------- ---------- ----------- -----------
Operating income      131,776  157,509   440,877   493,322
Equity in earnings of
affiliated companies     2,073   2,172    5,359    5,842
Interest expense, net    24,809   24,273   74,010   75,376
            ---------- ---------- ----------- -----------
Income before income
taxes and minority
interest          109,040  135,408   372,226   423,788
Provision for income
taxes            32,863   36,554   113,801   127,593
            ---------- ---------- ----------- -----------
Income before minority
interest          76,177   98,854   258,425   296,195
Minority interest        107    530     269    2,366
            ---------- ---------- ----------- -----------
Net income        $  76,070 $  98,324 $  258,156 $  293,829
            ========== ========== =========== ===========
Net income per share:
 Basic         $   .64 $   .80 $   2.13 $   2.38
            ========== ========== =========== ===========
 Diluted        $   .63 $   .79 $   2.11 $   2.36
            ========== ========== =========== ===========
Average number of shares
outstanding:
 Basic           119,541  123,161   121,226   123,321
 Diluted          120,384  124,292   122,118   124,598