MELVILLE, N.Y.--(BUSINESS WIRE)--Feb. 10, 2009-- Arrow Electronics, Inc. (NYSE:ARW) today reported fourth quarter 2008 net income of $43.2 million ($.36 per share on both a basic and diluted basis) on sales of $4.09 billion, compared with net income of $114.0 million ($.93 and $.92 per share on a basic and diluted basis, respectively) on sales of $4.42 billion in the fourth quarter of 2007. Sales decreased 7 percent year over year. Pro forma to include the impact of the acquisition of LOGIX S.A. (“LOGIX”), sales decreased 12 percent year over year. The company's results for the fourth 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 December 31, 2008, would have been $72.0 million ($.60 per share on both a basic and diluted basis) and net income for the quarter ended December 31, 2007, would have been $120.6 million ($.98 and $.97 per share on a basic and diluted basis, respectively).

“We were able to achieve sales and earnings in line with our guidance range in the face of deteriorating market conditions during the fourth quarter. Macro pressures intensified through the quarter and demand has continued to weaken, impacting all markets and economies around the globe,” said William E. Mitchell, chairman and chief executive officer. “We expect the marketplace to continue to be unsettled and that visibility will remain limited most likely through 2009. While we cannot control external forces, we will continue to manage our business with the discipline necessary to maintain our financial strength, which we see as a competitive advantage in these difficult times.”

“The current economic conditions have forced Arrow to make difficult but necessary decisions to ensure that we maintain our leadership position,” added Michael J. Long, president and chief operating officer. “We have already implemented a number of cost-saving initiatives to reduce the severity of impact that the deteriorating economic conditions will have on our business and employees. We estimate that the total impact of these actions will reduce costs by more than $175 million annually. We believe the actions we have taken to align our cost structure with market realities have been a prudent response to the deteriorating environment, and we remain committed to ongoing efforts to improve efficiencies across our organization.”

Global enterprise computing solutions (“ECS”) sales of $1.64 billion increased 2 percent year over year. Pro forma to include the impact of the acquisition of LOGIX, sales decreased 11 percent year over year. “ECS sales were in line with our expectations, as strong double-digit sequential growth in storage, software, services, and proprietary servers was offset in part by weakness in industry-standard servers. Our outlook for the ECS business is decidedly mixed, as this business is sensitive to capital expenditures for IT systems – an area under intense scrutiny by companies as they look to adjust to declining market conditions. Still, our value model remains strong and is not tied to discretionary commodity products like laptops, printers and accessories, and customers should continue to use enterprise solutions to boost productivity through the downturn,” Mr. Long said.

Global components sales of $2.45 billion decreased 13 percent year over year. “In our global components business, sales were also in line with expectations. Overall, the components markets continue to exhibit a great deal of caution, which we would expect to persist,” Mr. Long said.

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

• During the fourth quarter of 2008, the company recorded a restructuring and integration charge of $44.4 million ($37.6 million net of related taxes or $.31 per share on a both basic and diluted basis) primarily related to initiatives taken by the company to improve operating efficiencies.
• During the fourth quarter of 2008, the company recorded a credit of $2.1 million ($1.2 million net of related taxes or $.01 per share on both a basic and diluted basis) related to a preference claim from 2001.
• During the fourth quarter of 2008, the company recorded a reduction of the provision for income taxes of $8.5 million ($.07 per share on both a basic and diluted basis) and an increase in interest expense of $1.0 million ($1.0 million net of related taxes or $.01 per share on both a basic and diluted basis) primarily related to the settlement of certain international income tax matters.
• During the fourth quarter of 2007, the company recorded a restructuring and integration charge of $10.0 million ($6.6 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.

FULL-YEAR RESULTS

Arrow’s net income for 2008 was $301.4 million ($2.50 and $2.48 per share on a basic and diluted basis, respectively) on sales of $16.76 billion, compared with net income of $407.8 million ($3.31 and $3.28 per share on a basic and diluted basis, respectively) on sales of $15.98 billion in 2007. Sales in 2008 increased 5 percent year over year. Pro forma to include the impact of the acquisitions of LOGIX and KeyLink Systems Group, and exclude KeyLink sales from the related long-term procurement agreement with Agilysys for the first quarter of 2008, sales were essentially flat year over year.

Net income for 2008 includes a restructuring and integration charge of $70.1 million ($55.3 million net of related taxes or $.46 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 $10.9 million ($6.6 million net of related taxes or $.05 per share on both a basic and diluted basis). Net income for 2008 also includes a reduction of the provision for income taxes of $8.5 million ($.07 per share on both a basic and diluted basis) and an increase in interest expense of $1.0 million ($1.0 million net of related taxes or $.01 per share on both a basic and diluted basis) primarily related to the settlement of certain international income tax matters. Excluding these items, net income would have been $355.7 million ($2.95 and $2.93 per share on a basic and diluted basis, respectively) for 2008.

Net income for 2007 includes restructuring and integration charges of $11.7 million ($7.0 million net of related taxes or $.06 per share on both a basic and diluted basis), 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 $408.8 million ($3.32 and $3.29 per share on a basic and diluted basis, respectively) for 2007.

GUIDANCE

“Looking ahead, we believe that total first quarter sales will be between $3.0 and $3.6 billion, with global component sales between $2.0 and $2.4 billion and global enterprise computing solutions sales between $1.0 and $1.2 billion. We expect earnings per share, on a diluted basis, excluding any charges, to be in the range of $.32 to $.44. Our guidance assumes that the average Euro to USD exchange rate for the first quarter is 1.3 to 1, compared with an average exchange rate of 1.49 to 1 in the first quarter of 2008,” said Paul J. Reilly, senior vice president and chief financial officer. “In accordance with generally accepted accounting principles we will continue to evaluate the recorded value of our intangible assets, including goodwill, through the filing of our Form 10-K with the SEC for the fiscal year ended December 31, 2008.”

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 800 suppliers and 130,000 original equipment manufacturers, contract manufacturers and commercial customers through a global network of more than 340 locations in 53 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.

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.

Source: Arrow Electronics, Inc.

Arrow Electronics, Inc.
Michael Taunton, 631-847-5680
Vice President & Treasurer
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Paul J. Reilly, 631-847-1872
Senior Vice President & Chief Financial Officer
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Media:
John Hourigan, 303-824-4586
Director, External Communications