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:

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.

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.

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

ARROW ELECTRONICS, INC. CONSOLIDATED BALANCE SHEETS (In thousands except par value)

	June 30,			December 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

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

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

ARROW ELECTRONICS, INC. SEGMENT INFORMATION (In thousands)

	Three Months Ended June 30,						Six Months Ended 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

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