arrow electronics _presentation 2008 4th

Fourth Quarter and Year- End 2008 Earnings Call

February 10, 2009

WELCOME

Greer Aviv

Financial Analyst,Investor Relations

Fourth Quarter and Year-End EarningsFebruary 10, 2009

SAFE HARBOR STATEMENT

Some of the comments to be made on today’s call may include forward-looking statements, including statements addressing future financial results. These statements 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 global financial system and the company's planned 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.

BUSINESS OVERVIEW

Bill Mitchell

Chairman & CEO


OVERVIEW

Q4 revenue and EPS in line with expectations

Macro pressures intensified in Q4

Demand weakness continued into Q1

Limited visibility for at least the next few quarters

Managing business with discipline to stay ahead of the curve

Cost reduction efforts will allow us to navigate through difficult times

Emerge from downturn as a stronger company

Still selectively investing in the future of Arrow

Ready to take advantage of opportunities that may arise

Executing well in a challenging environment…


OVERVIEW

Continued to execute on strategic goals

Increased global footprint with strategic acquisitions

Achieved major ERP milestone

Successful transition of North American Sun group in April

Transitioned North American IBM group in early February

On track to transition additional businesses throughout 2009

Maintained financial strength

Grew sales faster than the market in 2008 to achieve record level revenue

8th consecutive year of cash flow generation with $620 million in cash flow from operations

Net debt to capital near historically low levels

2008 in review…

BUSINESS UNIT REVIEW

Mike Long

President & COO


TAKING ACTION TO ADJUST COST STRUCTURE

Taking action to offset intensified macro challengesMaintain financial strength and leadership position

Implemented a number of cost-saving initiatives Eliminated all discretionary spendingFacility closings/consolidationsHeadcount reductionsLower incentive structures and elimination of salary increasesFurloughs

Actions expected to reduce annual operating expenses by more than $175 million

Selectively investing in the business We will continue to evaluate cost structure to identify additional opportunities to improve our productivityRemain committed to ongoing efforts to improve efficiencies across our organization


GLOBAL ENTERPRISE COMPUTING SOLUTIONS

Sales in line with guidance Double-digit sequential increases in storage, software, services, and proprietary servers; weakness in industry standard servers

Value model remains strong even as overall IT spending continues to slow

Focused on high-growth enterprise markets like storage and software, and mid-range server business

Looking ahead, visibility continues to be extremely limited IT spending will remain soft as macro issues continue to impact customer behavior Q1 sales at the higher end of the seasonal sequential decline


GLOBAL COMPONENTS REGIONAL PERFORMANCE

Asia PacificSales growth negatively impacted by the global economic crisis Began to see deterioration in business conditions in mid-NovemberTaiwan outperformed expectations in December

EuropeSales decline accelerated in December Emerging markets continue to show growth, although at slower paceLighting market continues to show strength

North AmericaDemand slowdown accelerated in December

Customer shutdowns in response to downturnSome vertical markets have been more resilient


GLOBAL COMPONENTS LEADING INDICATORS

Pricing relatively stable

Lead times at low end of normal range

Book-to-bill slightly below parityIncreased Q/Q in EuropeNorth America and Asia Pac decreased as orders have slowed

Cancellation rates increased in all regions

Quarterly customer survey in North AmericaCustomers continue to be very cautiousOutlook for purchase requirements weakened sequentially

Expect cautious behavior to continue

FINANCIAL OVERVIEW

Paul Reilly

Senior Vice President & CFO


CONSOLIDATED SALES($ in millions)

Sales $4.1Bn

-7% Y/Y, -5% Q/Q

-9% Y/Y, -1% Q/Q pro forma* & excluding FX$2,960

$3,493

$4,419$4,090

Q4-05 Q4-06 Q4-07 Q4-08

* LOGIX S.A.


GLOBAL ENTERPRISE COMPUTING SOLUTIONS

$574

$761

$1,608 $1,640

Q4-05 Q4-06 Q4-07 Q4-08

($ in millions)

Sales $1.6Bn

+2% Y/Y, +26% Q/Q

20th consecutive quarter of Y/Y growth

-10% Y/Y, +29% Q/Q pro forma* & excluding FX

Operating income grew almost 2.5x sales Q/Q

ROWC increased strongly Y/Y and Q/Q

* LOGIX S.A.


GLOBAL COMPONENTS

$2,385

$2,728 $2,811

$2,450

Q4-05 Q4-06 Q4-07 Q4-08

($ in millions)

Sales $2.5Bn

-13% Y/Y, -18% Q/Q

-9% Y/Y, -14% Q/Q excluding FX

Despite macro challenges, gross margin increased 10 bps Q/Q

Operating margin pressured by lower demand and mix


P&L HIGHLIGHTS($ in millions, except per share data, may reflect rounding)

4Q08 Q/Q Change

Y/Y Change

Sales $4,090 -5% -7%

Gross Profit Margin 12.7% -40bps -120bps

Operating Exp*/Sales 9.6% -20bps +30bps

Operating Income* $126.6 -11% -38%

Operating Margin* 3.1% -20bps -150bps

Net Income* $72.0 -14% -40%

Diluted EPS* $0.60 -14% -38%

* Represents GAAP measure adjusted to exclude the impact of restructuring and integration and other items affecting comparability. Includes amortization of intangible assets of $.02. See “Earnings Reconciliation” for a reconciliation between GAAP and “Adjusted” results.


MAINTAINED FINANCIAL STRENGTH

Cash flow of more than $275MM in Q49th consecutive quarter of positive cash flow generation

Financial Stability Competitive advantage in today’s marketsStrong balance sheetConservative debt levelsDebt to capital near record low levelDebt to EBITDA less than 2x

No maturities coming due until Q4 2010

Access to $1.4 billion in committed liquidity facilitiesFlexibility to take advantage of opportunities that may arise

Focused management of working capitalAchieved record low level of working capital to sales

Continued to earn cost of capital despite macro challengesCommitted to creating shareholder value through all economic cycles

*ROIC = Annualized, tax effected op. income and equity in earnings of affiliates excluding restructuring and other charges - annualized minority interest /( Avg Debt + Avg Equity – Avg Cash over $150MM).

CLOSING COMMENTS

Bill Mitchell

Chairman & CEO


IN CLOSING…

Current macroeconomic environment impacting our financial results Continue to manage company prudently and focus on superior execution Stay ahead of the curve in uncertain times

Despite near-term challenges, we are well positioned to convert market challenges into future opportunities

Continue to invest in business for the long term, while committed to achieving identified cost reductions

Actions align cost structure and strategic investments with current market conditions Savings provide catalyst for long-term growth when market demand recovers

Remain focused on protecting financial performance, as well as investments that will lead to future growth and market share gains


FIRST QUARTER 2009 GUIDANCE

Consolidated Sales $3.0Bn to $3.6Bn

Global Components $2.0Bn to $2.4Bn

Global ECS $1.0Bn to $1.2Bn

Diluted EPS* $0.32 to $0.44

* Excluding charges, including $.02 estimated amortization of intangible assets.

QUESTIONS & ANSWERS


EARNINGS RECONCILIATION$ in thousands, except per share data

Q408 Q407 2008 2007

Operating income, as Reported $84,334 $193,583 $525,211 $686,905

Restructuring and integration charges 44,354 9,955 70,065 11,745Preference claim from 2001 (2,051) -- 10,890 --

Operating income, as Adjusted $126,637 $203,538 $606,166 $698,650

Net income, as Reported $43,204 $113,963 $301,360 $407,792Restructuring and integration charges 37,577 6,598 55,300 7,036Preference claim from 2001 (1,246) -- 6,576 --Impact of settlement of tax matters:

Income tax (8,450) -- (8,450) --Interest (net of taxes) 962 -- 962 --

Deferred tax adjustment -- -- -- (6,024)Net income, as Adjusted $72,047 $120,561 $355,748 $408,804

Diluted EPS, as Reported $.36 $.92 $2.48 $3.28Restructuring and integration charges .31 .05 .46 .06Preference claim from 2001 (.01) -- .05 --Impact of settlement of tax matters:

Income tax (.07) -- (.07) --Interest (net of taxes) .01 -- .01 --

Deferred tax adjustment -- -- -- (.05)Diluted EPS, as Adjusted $.60 $.97 $2.93 $3.29

The sum of the components for net income per share, as Adjusted, may not agree to totals, as presented, due to rounding.


EARNINGS RECONCILIATIONReferences to restructuring and other charges refer to the following incremental charges taken in the quarters indicated:

Q4-08 Restructuring and Integration Charges:

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 both a basic and diluted basis) primarily related to initiatives taken by the company to improve operating efficiencies.

Q4-08 Legal Settlement: 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 basis and diluted basis) related to a preference claim from 2001.

Q4-08 Settlement of Tax Matters: 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.

Q4-07 Restructuring and Integration Charges: 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.

2008 Restructuring and Integration Charges: During 2008, the company recorded 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 in the period to improve operating efficiencies.

2008 Legal Settlement: During 2008, the company recorded 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 basis and diluted basis).

2008 Settlement of Tax Matters: During 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.

2007 Restructuring and Integration Charges: During 2007, the company recorded a restructuring and integration charge 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.

2007 Deferred Tax Adjustment: During 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.

APPENDIX


NORTH AMERICAN COMPONENTS REVENUE

$1,106 $1,144 $1,158

$966

Q4-05 Q4-06 Q4-07 Q4-08

($ in millions)


EUROPE COMPONENTS REVENUE

$828$957 $998

$786

Q4-05 Q4-06 Q4-07 Q4-08

($ in millions)


ASIA PAC COMPONENTS REVENUE

$451

$627 $655 $698

Q4-05 Q4-06 Q4-07 Q4-08

($ in millions)

Fourth Quarter and Year- End 2008 Earnings Call

February 10, 2009

arrow electronics _presentation 2008 4th

Economy & Finance

forwardlooking statements

yearend earnings

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