3. 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 a
number of risks and uncertainties that 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, the
company’s ability to generate additional cash flow and the other risks described from time to
time in the company’s reports to the Securities and Exchange Commission (including the
company’s Annual Report on Form 10-K and Quarterly Reports on Form 10-Q). 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 quot;expects,quot;
quot;anticipates,quot; quot;intends,quot; quot;plans,quot; quot;may,quot; quot;will,quot; quot;believes,quot; quot;seeks,quot; quot;estimates,quot; 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.
Second Quarter Earnings
July 23, 2008
Page 3
5. OVERVIEW
Impressive results in a challenging environment…
Sales and EPS exceeded expectations
Strong performance in both Global Components and Global ECS
Near record levels of performance across the board
Macro conditions remain challenging, but we continue to run our
business for consistent performance
Global Enterprise Computing Solutions
Sales above expectations and operating margin at industry
leading level
Major ERP milestone achieved with successful transition of North
American Sun group
Second Quarter Earnings
July 23, 2008
Page 5
6. OVERVIEW
Impressive results in a challenging environment…
Global Components
Performance above expectations
+ Above-seasonal growth in Asia Pacific
- Significantly outgrew the market
+ North America stable
+ Europe soft
Market has continued to be relatively stable, yet cautious
Moving forward with efficiency initiatives and vertical market
objectives
Second Quarter Earnings
July 23, 2008
Page 6
7. IN SUMMARY…
Continue to invest in the long-term future of Arrow
Strategic priorities are clear
Pursue growth opportunities across products, markets and geographies
Leverage efficiencies of scale and build best-in-class capabilities
Build world class systems and processes to enable strategic initiatives
and change value proposition
Continue to manage the company in a prudent, fiscally disciplined manner
Increase profitability
Maintain positive cash flow
Continue to strengthen balance sheet
Second Quarter Earnings
July 23, 2008
Page 7
8. FINANCIAL
OVERVIEW
Paul Reilly
Senior Vice President
& CFO
9. CONSOLIDATED SALES
($ in millions)
Sales $4.3Bn
$4,347
+8% Y/Y and Q/Q
$4,038
+6%Y/Y and Q/Q excluding
$3,437
LOGIX
$2,768
+1% Y/Y and +5% Q/Q
excluding LOGIX and FX
Q2-05 Q2-06 Q2-07 Q2-08
Second Quarter Earnings
July 23, 2008
Page 9
10. GLOBAL ENTERPRISE COMPUTING SOLUTIONS
($ in millions)
Sales $1.4Bn
$1,389
+9% Y/Y, +26% Q/Q
$1,269
+4%Y/Y and +19% Q/Q
excluding LOGIX
18th consecutive quarter of
Y/Y growth
$625
$528
Increased operating margin
160 bps Q/Q to 4.4%
Grew earnings 4x faster
than sales Q/Q
Q2-05 Q2-06 Q2-07 Q2-08
ROWC increased more than
50% Q/Q
Second Quarter Earnings
July 23, 2008
Page 10
11. GLOBAL COMPONENTS
($ in millions)
Sales $3.0Bn
$2,958
$2,812 +7% Y/Y, +1% Q/Q
$2,769
+2% Y/Y, Flat Q/Q
$2,239
excluding FX
Decreased operating
expense/sales 40 bps Y/Y
Operating margin pressure
due to softness in Europe
and geographic mix
Q2-05 Q2-06 Q2-07 Q2-08
Second Quarter Earnings
July 23, 2008
Page 11
12. ASIA PAC COMPONENTS
($ in millions)
Sales $743MM
+32% Y/Y, 14% Q/Q
Increased operating income
$743
more than 40% Y/Y
$569 $562
Grew earnings 5x faster
than sales Q/Q
$325
Improved ROWC by almost
700 bps Q/Q
2x normal seasonal
increase
Q2-05 Q2-06 Q2-07 Q2-08
Second Quarter Earnings
July 23, 2008
Page 12
13. NORTH AMERICAN COMPONENTS
($ in millions)
Sales $1.1Bn
$1,255
-4% Y/Y, -3% Q/Q
$1,165 $1,125
$1,076
Continued focus on efficiency
initiatives
Increased operating
margin 30 bps Y/Y
Q2-05 Q2-06 Q2-07 Q2-08
Second Quarter Earnings
July 23, 2008
Page 13
14. EUROPE COMPONENTS
($ in millions)
Sales $1.1Bn
+5% Y/Y, -2% Q/Q
$1,090
$1,041
$988
-8% Y/Y, -5% Q/Q
$838
excluding FX
Market conditions remain
soft, in line with expectations
Focused on initiatives to drive
profitability
Q2-05 Q2-06 Q2-07 Q2-08
Second Quarter Earnings
July 23, 2008
Page 14
15. P&L HIGHLIGHTS
($ in millions, except per share data, may reflect rounding)
2Q08 Q/Q Y/Y
Change Change
Sales $4,347 +8% +8%
Gross Profit Margin 14.1% -50bps -30bps
Operating Exp*/Sales 10.1% -40bps +10bps
Operating Income* $173.2 +6% -2%
Operating Margin* 4.0% -10bps -40bps
Net Income* $102.1 +4% +1%
Diluted EPS* $0.84 +6% +4%
•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.
Second Quarter Earnings
July 23, 2008
Page 15
16. STRONG FINANCIAL POSITION
Cash flow of $101MM in Q2
7th consecutive quarter of positive cash flow generation
Financial Stability
Strong balance sheet
Conservative debt levels
Debt to capital near record low level
Focused management of working capital
Maintained near record low level of working capital to sales
ROIC* exceeded cost of capital for the 18th consecutive quarter
*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).
Second Quarter Earnings
July 23, 2008
Page 16
18. ENTERPRISE COMPUTING SOLUTIONS
Excellent results exceeding expectations…
Need for complex solutions remains strong
Double-digit Y/Y increases in storage, software, and services;
and growth in proprietary servers
Sequential growth in all segments
+ Significant gains in proprietary servers
Performance demonstrates leverage we have created in model
Grew earnings at almost 4x sales
> 90% of incremental gross profit dollars fell to bottom line
Second Quarter Earnings
July 23, 2008
Page 18
19. ENTERPRISE COMPUTING SOLUTIONS
Excellent results exceeding expectations…
We will continue to build scope and efficiency level in Europe
LOGIX acquisition closed on June 2
+ Almost doubles size of our European operations; now in the top 3
economies in Europe
+ Adds talented management and strong relationships with key
vendors
ERP implementation on track
Technology will create the infrastructure to provide best-in-class
services to our partners
Sun transition exceeded expectations
Second Quarter Earnings
July 23, 2008
Page 19
20. Arrow ECS Seasonality
Q/Q Revenue Growth Pre LOGIX* Q/Q Revenue Growth Post LOGIX*
Q1 vs. Q4 -30% to -35%
Q1 vs. Q4 -25% to -30%
Q2 vs. Q1 +15% to +20%
Q2 vs. Q1 +15% to +20%
Q3 vs. Q2 -5% to -10% Q3 vs. Q2 -5% to -15%
Q4 vs. Q3 +30% to +35% Q4 vs. Q3 +35% to +45%
*Based on historical seasonality pro forma for acquisitions and anticipated seasonality in 2008. Represents current mix of business, which could materially change
with future acquisitions or changes in customer or supplier mix.
Second Quarter Earnings
July 23, 2008
Page 20
21. GLOBAL COMPONENTS REGIONAL PERFORMANCE
Solid quarter with sales above expected range…
Asia Pacific
Stronger than seasonal growth driven by China, Taiwan, Australia/NZ,
and ASEAN region
Significantly outgrew the market
Investments paying off with consistent gains in profitability
Announced closing of Achieva acquisition on July 7th
North America
Stable market with book-to-bill higher than second quarter of last year
Y/Y weakness driven by transportation end market
Strong double-digit growth in defense and aerospace segment
Continued to focus on operational excellence
Europe
Performance in line with expectations
+ Weak macro conditions and less competitive export market
Broaden existing customer base and increase productivity
Second Quarter Earnings
July 23, 2008
Page 21
22. GLOBAL COMPONENTS LEADING INDICATORS
Lead times stable and within normal range of 8 to 12 weeks
Cancellation rates within normal levels
Book-to-bill near parity
Decreased Q/Q in line with normal seasonal trends
Europe flat
NA above one and stronger than Q207 despite macro weakness
Asia Pac declined slightly
Quarterly customer survey in North America
Inventory well positioned heading into Q3
Outlook for purchase requirements modestly softened for second
consecutive quarter
Market continues to be relatively stable, yet cautious
Second Quarter Earnings
July 23, 2008
Page 22
24. IN CLOSING…
Results exceeded our expectations
Strong performance in a cautious marketplace
Raising the bar at ECS; returned to industry-leading level
Continue to manage company conservatively and prudently
Maintain flexibility to take advantage of opportunities
Repositioned Arrow
Strong balance sheet
Stable earnings
Consistent cash flow generation
Diverse revenue stream
Numerous growth opportunities
Perform consistently regardless of market conditions
Second Quarter Earnings
July 23, 2008
Page 24
25. THIRD QUARTER 2008 GUIDANCE
Consolidated Sales $4.10Bn to $4.40Bn
Global Components $2.85Bn to $3.05Bn
Global ECS $1.25Bn to $1.35Bn
Diluted EPS* $0.73 to $0.78
*Excluding charges, including $.02 to $.03 estimated amortization of intangible assets.
Second Quarter Earnings
July 23, 2008
Page 25
26. ARROW’S VALUE PROPOSITION
Occupy a unique, value-added space in the supply chain with growth
opportunities across every customer segment, end market,
geography, and technology
Connect suppliers and customers with value-added services that
can't be done any other way
“Arrow puts together demand generation, leads, customer seminars,
education programs…to be able to go out and create that reach,
that's real value” - Key Supplier at Arrow Investor Day 2008
We will continue to create value for our business
partners and shareholders
Second Quarter Earnings
July 23, 2008
Page 26
28. EARNINGS RECONCILIATION
$ in thousands, except per share data
Q208 Q108 Q207
Operating income, as Reported $164,958 $144,143 $173,154
Restructuring and integration charges 8,196 6,478 3,425
Preference claim from 2001 -- 12,491 --
Operating income, as Adjusted $173,154 $163,562 $176,579
Net income, as Reported $96,215 $85,871 $99,211
Restructuring and integration charges 5,929 4,159 2,286
Preference claim from 2001 -- 7,822 --
Net income, as Adjusted $102,144 $97,852 $101,497
Diluted EPS, as Reported $.79 $.69 $.79
Restructuring and integration charges .05 .03 .02
Preference claim from 2001 -- .06 --
Diluted EPS, as Adjusted $.84 $.79 $.81
The sum of the components for net income per share, as Adjusted, may not agree to totals, as presented, due to rounding.
Second Quarter Earnings
July 23, 2008
Page 28
29. EARNINGS RECONCILIATION
References to restructuring and other charges refer to the following incremental charges
taken in the quarters indicated:
Q2-08 Restructuring and Integration Charges: During the second quarter of 2008, the company
recorded a restructuring and integration charge of $8.2 million ($5.9 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.
Q1-08 Restructuring and Integration Charges: During the first quarter of 2008, the company
recorded a restructuring and integration charge of $6.5 million ($4.2 million net of related taxes or
$.03 per share on both a basic and diluted basis) primarily related to initiatives taken by the
company to improve operating efficiencies.
Q1-08 Legal Settlement: As previously disclosed, during the first quarter of 2008, the company
recorded 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).
Q2-07 Restructuring and integration Charges: During the second quarter of 2007, the company
recorded a restructuring and integration charge of $3.4 million ($2.3 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.
Second Quarter Earnings
July 23, 2008
Page 29
