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Arrow Electronics Posts Record Revenues

MELVILLE, N.Y. — Arrow Electronics, Inc. (NYSE: ARW) today reported second quarter 2011 net income of $156.2 million ($1.35 and $1.33 per share on a basic and diluted basis, respectively) on sales of $5.54 billion, compared with net income of $116.2 million ($.97 and $.96 per share on a basic and diluted basis, respectively) on sales of $4.61 billion in the second quarter of 2010.

The company's results for the second quarters of 2011 and 2010 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 July 2, 2011 would have been $159.8 million ($1.38 and $1.36 per share on a basic and diluted basis, respectively) and net income for the quarter ended July 3, 2010 would have been $121.3 million ($1.02 and $1.01 per share on a basic and diluted basis, respectively). “The second quarter was strong, as we generated record sales and earnings per share of $5.54 billion and $1.36, respectively.

Consolidated sales for the second quarter increased by 20% year over year. Excluding the impact of foreign currency and pro forma for acquisitions, the company's consolidated sales increased by 3% for the second quarter of 2011. On a pro forma basis, gross and operating margins increased 30 and 40 basis points year over year, respectively” said Michael J. Long, chairman, president, and chief executive officer. “We remain focused on growing sales ahead of the market, increasing the markets we serve, growing profits faster than sales, and increasing return on invested capital.”

“Our cash flow generation has been strong. Cash flow from operations for the second quarter was $35 million and we have generated $290 million in cash from operations over the last 12 months, in a period where we were investing in the business,” said Paul J. Reilly, executive vice president, finance and operations and chief financial officer. “Just as important, we continue to achieve returns on invested capital well in excess of our weighted average cost of capital, which is a key driver in creating lasting shareholder value.”

“During the quarter, we completed our previously announced $50 million buyback authorization bringing the total amount returned to shareholders to $250 million over the past two years,” added Mr. Reilly. “Our board has approved an incremental $100 million repurchase authorization as we believe this is an effective method of returning capital to investors.”

Global components sales of $3.88 billion increased 19 percent year over year. “Sales growth was strong again, driven by excellent year-over-year increases across a wide number of product sets and vertical markets in our core components businesses around the globe. On a sequential basis, sales were in line with normal seasonality, though slightly below our expectations for another quarter of above seasonal growth,” Mr. Long said.

Global enterprise computing solutions (“ECS”) sales of $1.66 billion increased 23 percent year over year. “The ECS team posted record second-quarter revenue driven by impressive year-over-year growth in all of our product lines, with proprietary servers, industry-standard servers, and software all growing in excess of 25 percent,” said Mr. Long. “We continue to execute on our growth strategy as evidenced by the recent expansion into new markets such as unified communications and expanded supplier relationships.”

The company's results for the second quarters of 2011 and 2010 include the items outlined below that impact their comparability:

  • restructuring, integration, and other charges of $5.2 million ($3.6 million net of related taxes or $.03 per share on both a basic and diluted basis) in 2011 and $5.6 million ($4.1 million net of related taxes or $.03 per share on a both basic and diluted basis) in 2010.
  • loss on prepayment of debt of $1.6 million ($1.0 million net of related taxes or $.01 per share on both a basic and diluted basis) in 2010.

SIX-MONTH RESULTS
Arrow's net income for the first six months of 2011 was $292.5 million ($2.54 and $2.49 per share on a basic and diluted basis, respectively) on sales of $10.76 billion, compared with net income of $203.2 million ($1.70 and $1.68 per share on a basic and diluted basis, respectively) on sales of $8.85 billion in the first six months of 2010.

Net income for the first six months of 2011 includes restructuring, integration, and other charges of $14.8 million ($10.8 million net of related taxes or $.09 per share on both a basic and diluted basis) primarily related to initiatives taken by the company to improve operating efficiencies, a charge of $5.9 million ($3.6 million net of related taxes or $.03 per share on both a basic and diluted basis) in connection with the settlement of a legal matter, and a gain on bargain purchase of $1.8 million ($1.1 million net of related taxes or $.01 per share on both a basic and diluted basis) related to the acquisition of Nu Horizons Electronics Corp. Excluding these items, net income would have been $305.8 million ($2.65 and $2.60 per share on a basic and diluted basis, respectively) for the first six months of 2011.

Net income for the first six months of 2010 includes restructuring, integration, and other charges of $13.1 million ($9.6 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 loss on prepayment of debt of $1.6 million ($1.0 million net of taxes or $.01 per share on both a basic and diluted basis). Excluding these items, net income would have been $213.8 million ($1.79 and $1.76 per share on a basic and diluted basis, respectively) for the first six months of 2010.

GUIDANCE
“Looking ahead, we believe that total third quarter sales will be between $5.15 and $5.55 billion, with global components sales between $3.76 and $3.96 billion and global enterprise computing solutions sales between $1.39 and $1.59 billion. Earnings per share, on a diluted basis, excluding any charges, are expected to be in the range of $1.17 to $1.29,” said Mr. Reilly.

“In the third quarter, we would expect global ECS sales to be in line with the midpoint of normal seasonality. Sales in our core global components business are expected to be in line with the low end of normal seasonality, reflecting an oversupply of inventory in the supply chain at the end of the second quarter and weaker global macroeconomic conditions,” Mr. Reilly added.

Please refer to the CFO commentary as a supplement to the company's earnings release, which can be found at http://www.arrow.com/investor.

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