Form 10-K SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 (Mark One) X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 (FEE REQUIRED) For the fiscal year ended December 31, 1993 OR TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED) For the transition period from............to................. Commission file number 1-4482 ARROW ELECTRONICS, INC. (Exact name of registrant as specified in its charter) New York 11-1806155 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification Number) 25 Hub Drive Melville, New York 11747 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (516) 391-1300

Form 10-K
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

(Mark One)

[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE

ACT OF 1934

For the fiscal year ended December 31, 2002

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES

EXCHANGE ACT OF 1934

For the transition period fromto

Commission file number1-4482

ARROW ELECTRONICS, INC.

(Exact name of Registrant as specified in its charter)

New York			11-1806155
(State or other jurisdiction of			(I.R.S. Employer
incorporation or organization)			Identification Number)


50 Marcus Drive, Melville, New York			11747
(Address of principal executive			(Zip Code)
offices)


Registrant's telephone number, including area code			631-847-2000

Securities registered pursuant to Section 12(b) of the Act:

	Name of Each Exchange on Title of Each Class Which Registered Common Stock, $1 par value New York Stock Exchange Preferred Share Purchase Rights New York Stock Exchange 5-3/4% Convertible Subordinated Debentures due 2002 New York Stock Exchange on
Title of Each Class	Which Registered
Common Stock, $1 par value	New York Stock Exchange
Preferred Share Purchase Rights	New York Stock Exchange

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ]

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [ ]

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act). Yes [X] No [ ]

The aggregate market value of voting stock held by non-affiliates of the registrant as of February 28, 2003 was $1,409,874,920.

Indicate the number of shares outstanding of each of the registrant's classes of common stock, as of the latest practicable date.

Common Stock, $1 par value: 100,831,609 shares outstanding at February 28, 2003.

The following documents are incorporated herein by reference:

1. Proxy Statement to be filed in connection with Annual Meeting of Shareholders to be held May 22, 2003 (incorporated in Part III).

TABLE OF CONTENTS

PART I

Item 1.    Business
Item 2.    Properties
Item 3.    Legal Proceedings
Item 4.    Submission of Matters to a Vote of Security Holders

PART II

Item 5.    Market Price of the ~~Act: None Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d)~~Registrant's Common Equity and
Related Stockholders Matters
Item 6.    Selected Financial Data
Item 7.    Management's Discussion and Analysis of Financial Condition and
Results of Operations
Item 7A.   Quantitative and Qualitative Disclosure About Market Risk
Item 8.   Financial Statements
Item 9.    Changes in and Disagreement with Accountants on Accounting and
Financial Disclosures

PART III

Item 10.   Directors and Executive Officers of the ~~Securities Exchange Act~~Registrant
Item 11.   Executive Compensation
Item 12.   Security Ownership of ~~1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports),~~Certain Beneficial Owners and ~~(2) has been subject to such filing requirements for the past 90 days. Yes X No Indicate by check mark if disclosure~~Management
Item 13.   Certain Relationships and Related Transactions
Item 14.   Controls and Procedures

PART IV

Item 15. Exhibits, Financial Statement Schedules and Reports on Form 8-K

Signatures
Certification of ~~delinquent filers pursuant to Item 405~~Chief Executive Officer
Certification of Regulation S-K is not contained herein, and will not be contained to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [ X ] The aggregate market value of voting stock held by nonaffiliates of the registrant as of March 19, 1994 was $1,270,816,679. Indicate the number of shares outstanding of each of the registrant's classes of common stock, as of the latest practicable date. Common Stock, $1 par value: 31,417,574 shares outstanding at March 9, 1994. The following documents are incorporated herein by reference: 1. Proxy Statement filed in connection with Annual Meeting of Shareholders to be held May 10, 1994 (incorporated in Part III). Chief Financial Officer

TABLE OF CONTENTS

		Page
	PART I

Item 1.	Business	3
Item 2.	Properties	7
Item 3.	Legal Proceedings	7
Item 4.	Submission of Matters to a Vote of Security Holders	7

	PART II

Item 5.	Market Price of the Registrant's Common Equity and
	Related Stockholder Matters	8
Item 6.	Selected Financial Data	9
Item 7.	Management's Discussion and Analysis of Financial
	Condition and Results of Operations	10
Item 7A.	Quantitative and Qualitative Disclosure About Market Risk	23
Item 8.	Financial Statements	24
Item 9.	Changes in and Disagreements with Accountants on
	Accounting and Financial Disclosure	57

	PART III

Item 10.	Directors and Executive Officers of the Registrant	57
Item 11.	Executive Compensation	57
Item 12.	Security Ownership of Certain Beneficial Owners and
	Management	57
Item 13.	Certain Relationships and Related Transactions	57
Item 14.	Controls and Procedures	58

	PART IV

Item 15.	Exhibits, Financial Statement Schedules and Reports on
	Form 8-K	59

Signatures		68
Certification of Chief Executive Officer		69
Certification of Chief Financial Officer		70

PART I

Item 1. ~~Business.~~ Business.

Arrow Electronics, Inc. (the "company"), incorporated in New York in 1946, is one of the world's largest ~~distributor~~providers of electronic components and computer products to industrial and commercial ~~customers.~~ customers and a leading provider of services, including materials planning, programming and assembly services, inventory management, a comprehensive suite of online supply chain tools, and design services, to the electronics industry. As one of the electronics distribution industry's leaders in operating systems, employee productivity, value-added programs, and total quality assurance, the company is distributor of choice for over 600 suppliers.

The company's global distribution network spans the world's three largest electronics ~~distribution networks, spanning North America,~~markets - the Americas, Europe, and the Asia/Pacific ~~Rim, incorporate over 150 selling locations, ten primary distribution centers (four of which employ advanced automation), and 4,000 remote on-line terminals--all serving the needs of~~region. The company serves a diversified base of original equipment manufacturers (OEMs), contract manufacturers (CMs), and commercial customers worldwide. OEMs include manufacturers of computer and office products, industrial equipment (including machine tools, factory automation, and robotic equipment), telecommunications products, aircraft and aerospace equipment, and scientific and medical devices. Commercial customers are mainly value-added resellers (VARs) and OEMs of computer systems. ~~In 1993,~~The company maintains over 190 sales facilities and 21 distribution centers in 40 countries and territories. Through this network, the company ~~acquired an additional 15% share~~can offer one of the broadest product offerings in ~~Spoerle Electronic,~~ the ~~largest electronics~~industry and a wide range of value-added services to help customers reduce their time to market, lower their total cost of ownership, and enhance their overall competi tiveness.

The Americas Components group is comprised of operations in North America, South America, and Latin America. The North American group is comprised of targeted sales and marketing groups providing tailored solutions to eight distinct customer segments. Arrow's other operations in the Americas Components group are in Argentina, Brazil, and Mexico.

The North American Computer Products group ("NACP") is a leading distributor of enterprise and embedded computing systems to resellers and OEM customers in ~~Germany, increasing its holdings to a majority interest.~~ North America. NACP is comprised of four divisions that make up Enterprise Computing Solutions, which serves resellers, and Arrow OEM Computer Solutions, which serves industrial OEM customers.

The company also acquired Zeus Components, Inc. a distributor of high-reliability electronic components and value-added services, Microprocessor & Memory Distribution Limited, a focused U.K. distributor of high- technology semiconductor products, and Components Agent Limited,is one of the largest ~~distributors in Hong Kong.~~Pan-European electronic components distributors. In ~~addition, in 1993~~the Northern European region, the company ~~acquired Amitron S.A.~~serves Denmark, Estonia, Finland, Ireland, Norway, Sweden, and ~~ATD Electronica S.A., distributors serving~~ the ~~Spanish and Portuguese markets, and CCI Electronique, a distributor serving~~United Kingdom. In the ~~French marketplace. On February 28, 1992,~~Central European region, the company ~~acquired~~serves Austria, Belgium, the ~~electronics distribution businesses of Lex Service PLC ("Lex")~~Czech Republic, Germany, Hungary, the Netherlands, Poland, and Switzerland, and in the ~~U.K. and France (the "European businesses"), and Spoerle acquired the electronics distribution business of Lex in Germany. On September 27, 1991,~~Southern European region the company ~~acquired Lex Electronics Inc.~~serves France, Greece, Israel, Italy, Portugal, Slovenia, Spain, and Almac Electronics Corporation, the North American electronics distribution businesses of Lex (the "North American businesses"), the third largest electronics distribution business in the United States. Early in 1994, the company acquired an additional 15% interest in Spoerle, bringing its holdings to 70%, and increased its holdings in Silverstar, the company's Italian affiliate, to a majority share. Additionally, the company acquired the electronic component distribution business of Field Oy, the largest distributor of electronic components in Finland, and TH:s Elektronik, a leading distributor in Sweden and Norway. For information with respect to these acquisitions, the company's results of operations, and other matters, see Item 6 (Selected Financial Data), Item 7 (Management's Discussion and Analysis of Financial Condition and Results of Operations), and Item 8 (Financial Statements) appearing elsewhere in this Annual Report. In North America, theTurkey.

The company is ~~organized into four product- specific sales and marketing groups: The Arrow/Schweber Electronics Group is~~one of the largest dedicated semiconductor distributor in the -2- world. Zeus Electronics is the only specialist distributor serving the military and high-reliability markets. Capstone Electronics focuses exclusively on the distribution of connectors, electromechanical, and passive components. And Arrow's Commercial Systems Group distributes commercial computer products and systems. Through its wholly-owned subsidiary, Arrow Electronics Distribution Group - Europe B. V., Arrow is the largest pan-Europeanleading electronics distributor. The company's European strategy stresses two key elements: strong, locally-managed distributors to satisfy widely varying customer preferences and business practices; and an electronic backbone uniting Arrow's European partners with one another and with Arrow worldwide to leverage inventory investment and better meet the needs of customers in all of Europe's leading industrial electronics markets. In most of these markets, Arrow companies hold the number one position: Arrow Electronics (UK) Ltd. in Britain; Spoerle Electronic in Central Europe; Silverstar Ltd. S.p.A. in Italy; and Amitron-Arrow and ATD Electronica S.A. in Spain and Portugal. Arrow Electronique is the fourth largest electronics distributor in France, and Arrow's Nordic companies, Field Oy and TH:s Elektronik, are among the largest distributors in the ~~markets of Finland, Norway, and Sweden. Arrow is the first American electronics distributor to be present~~Asia/Pacific region. It has facilities in ~~the Pacific Rim market. Arrow's Components Agent Limited (C.A.L.), headquartered in~~Australia, Hong Kong, ~~is the region's leading multinational distributor, maintaining seven additional facilities in key cities in Singapore,~~India, Malaysia, New Zealand, the People's Republic of China, the Philippines, Singapore, South Korea, Taiwan, and South Korea; an additional Arrow company serves India. Within these dynamic markets, Arrow is benefiting from two important growth factors: the decision by many of Arrow's traditional North American customers to locate production facilities in the region and the surging demand for electronic products resulting from rising living standards and massive investments in infrastructure. Thailand.

The company distributes a broad range of electronic components, computer products, and related ~~equipment manufactured by others.~~equipment. About ~~66%~~58 percent of the company's consolidated sales are comprised of semiconductor ~~products; industrial~~products. Industrial and commercial computer products, including servers, workstations, storage products, microcomputer boards and systems, design systems, desktop computer systems, ~~terminals,~~software, monitors, printers, ~~disc drives,~~flat panel displays, system chassis and enclosures, controllers, and communication control equipment, account for about ~~24%; and the~~25 percent of sales. The remaining ~~10% of~~ sales are comprised of passive, electromechanical, and ~~connector~~interconnect products, principally capacitors, resistors, potentiometers, power supplies, relays, switches, and connectors. ~~Worldwide, the company maintains a $435 million inventory of more than 300,000 different electronic components and computer products at~~

The financial information about the company's ~~primary distribution centers.~~ reportable segments and foreign and domestic operations can be found in Note 17 of the Notes to Consolidated Financial Statements.

Most manufacturers of electronic components and computer products rely on ~~independent~~ authorized distributors, such as the company, to augment their ~~product~~sales and marketing operations. As a stocking, marketing, and financial intermediary, the distributor relieves ~~its~~ manufacturers of a portion of the costs and personnel associated with stocking and selling their products (including otherwise sizable investments in finished goods inventories, accounts receivable systems, and ~~-3- accounts receivable)~~distribution networks), while providing geographically dispersed selling, order processing, and delivery capabilities. At the same time, the distributor offers a broad range of customers the convenience of ~~diverse inventories~~accessing from a single source multiple products from multiple suppliers and rapid or scheduled ~~deliveries.~~deliveries, as well as other value-added services such as kitting and memory programming capabilities. The growth of the electronics distribution industry has been fostered by the many manufacturers who recognize their authorized distributors as essential extensions of their marketing organizations.

The company and its affiliates serve ~~approximately 125,000~~over 150,000 industrial and commercial ~~customers in North America, Europe, and the Pacific Rim.~~customers. Industrial customers range from major ~~original equipment manufacturers~~OEMs and CMs to small engineering firms, while commercial customers include ~~value-added resellers, small systems integrators,~~principally VARs and ~~large end-users.~~ OEMs. No single customer accounted for more than two percent of the company's 2002 sales.

Most of the company's customers require delivery of the products they have ordered on schedules that are generally not available on direct purchases from manufacturers, and frequently their orders are of insufficient size to be placed directly with manufacturers. ~~No single customer accounted for more than 2% of the company's 1993 sales.~~

The electronic components and other products offered by the company are sold by field sales representatives, who regularly call on customers in assigned market areas, and by telephone from the company's selling locations, ~~from which~~by inside sales personnel with access to pricing and stocking data provided by ~~computer display terminals~~computers which accept and process orders. Each of the company's North American selling locations, warehouses, and primary distribution centers is electronically linked to the ~~business'~~company's central computer system, which provides fully integrated, ~~on-line,~~online, real-time data with respect to nationwide inventory levels and facilitates control of purchasing, shipping, and billing. The company's ~~foreign~~international operations ~~utilize Arrow's~~have similar online, real-time computer systems and they can access the company's Worldwide Stock Check System, which ~~affords~~provides access to the company's ~~on-line,~~online, real-time inventory system. ~~Sales~~

There are ~~managed and coordinated by regional sales managers and by product managers principally located at the company's headquarters in Melville, New York. Of the approximately 200~~over 600 manufacturers whose products are sold by the company, the ten largest accounted for about 57% of the business' purchases during 1993. Intel Corporation accounted for approximately 18% of the business' purchases because of the market demand for microprocessors. No other supplier accounted for more than 9% of 1993 purchases.company. The company does not regard any one supplier of products to be essential to its operations and believes that many of the products presently sold by the company are available from other sources at competitive prices. Most of the company's purchases are pursuant to authorized distributor agreements which are typically cancelable by either party at any time or on short notice.

Approximately ~~62%~~67 percent of the company's inventory consists of semiconductors. It is the policy of most manufacturers to protect authorized distributors, such as the company, against the potential write-down of such inventories due to technological change or manufacturers' price reductions. Under the terms of the related distributor agreements, and assuming the distributor complies with ~~-4-~~ certain conditions, such suppliers are required to credit the distributor for inventory losses incurred through reductions in manufacturers' list prices of the items. In addition, under the terms of many such agreements, the distributor has the right to return to the manufacturer for credit a defined portion of those inventory items purchased within a designated period of time.

A manufacturer who elects to terminate a distributor agreement is generally required to purchase from the distributor the total amount of its products carried in inventory. While these industry practices do not wholly protect the company from inventory losses, ~~management~~the company believes that they currently provide substantial protection from such losses.

The company's business is extremely competitive, particularly with respect to prices, franchises, and, in certain instances, product availability. The company competes with several other large ~~multinational,~~multi-national, national, and numerous regional and local distributors. As one of the world's largest

electronics ~~distributor,~~distributors, the ~~company is greater in terms of~~company's financial resources and sales are greater than most of its competitors.

The company and its affiliates employ ~~approximately 4,600 people worldwide.~~ over 11,700 personnel worldwide as of December 31, 2002.

Available Information

The company makes the annual report on Form 10-K, quarterly reports on Form 10-Q, and any current reports on Form 8-K, and amendments to any of these reports available through its Internet site (http://www.arrow.com) as soon as reasonably practicable after the company files such material with the Securities and Exchange Commission ("SEC"). The information posted on the company's Internet site is not incorporated into this annual report on Form 10-K. In addition, the SEC maintains an Internet site (http://www.sec.gov) that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC.

Executive Officers

The following table sets forth the names and ages of, and the positions and offices with the company held by, each of the executive officers of the ~~company. Name Age Position or Office Held John C. Waddell 56 Chairman~~company as of the Board Stephen P. Kaufman 52 President and Chief Executive Officer Robert E. Klatell 48 Senior Vice President, Chief Financial Officer, General Counsel, Secretary, and Treasurer Carlo Giersch 56 President and Chief Executive Officer of Spoerle Electronic Robert J. McInerney 48 Vice President; President, Commercial Systems Group Steven W. Menefee 49 Vice President; President, Arrow/Schweber Electronics Group Wesley S. Sagawa 46 Vice President; President, Capstone Electronics Corp. Jan Salsgiver 37 Vice President; President, Zeus Electronics March 27, 2003:

Name	Age	Position or Office Held

Daniel W. Duval	66	Chairman
William E. Mitchell	59	President and Chief Executive Officer
Robert E. Klatell	57	Executive Vice President
Betty Jane Scheihing	54	Senior Vice President
Peter S. Brown	52	Senior Vice President and General Counsel
Michael J. Long	44	Vice President and President of North
		American Computer Products
Jan M. Salsgiver	46	Vice President and President of the Americas
		Components
Paul J. Reilly	46	Vice President and Chief Financial Officer
Mark F. Settle	52	Vice President and Chief Information Officer

Set forth below is a brief account of the business experience during the past five years of each executive officer of the company. ~~John C. Waddell has been~~

Daniel W. Duval was appointed Chairman in June 2002. He served as interim Chief Executive Officer from September 2002 to February 2003. Prior thereto, he served as a Director since 1987. In addition to the company, he also serves as Director of The Manitowoc Company, Inc., Miller-Valentine Group, and Gosiger, Inc. He also served as Vice Chairman of ~~the Board of the company~~Robbins & Myers, Inc. from January 1999 to December 1999 and President and Chief Executive Officer and Director for more than five ~~years. Stephen P. Kaufman has been~~years prior thereto.

William E. Mitchell was appointed President and Chief Executive Officer of the company ~~for more than five years. -5- Robert E. Klatell has been Senior~~in February 2003. Prior thereto, he served as Executive Vice President of Solectron Coroporation and ~~has~~President of Solectron Global Services, Inc. since March 1999 and previously served as General Counsel and Secretary of the company for more than five years. He has been Chief Financial Officer since January 1992 and Treasurer of the company since October 1990. Carlo Giersch has beenChairman, President and Chief Executive Officer of ~~Spoerle Electronic~~Sequel, Inc. since 1995.

Robert E. Klatell has been Executive Vice President of the company since July 1995.

Betty Jane Scheihing has been a Senior Vice President of the company since May 1996.

Peter S. Brown has been a Senior Vice President of the company and General Counsel since September 2001. Prior to joining the company, he served as the managing partner of the London office of the law firm of Pillsbury Winthrop LLP (formerly, Winthrop, Stimson, Putnam, & Roberts) for more than five years. ~~Robert~~

Michael J. ~~McInerney~~Long has been President and Chief Operating Officer of NACP since July 1999. In addition, he has been a Vice President of the company for more than ~~5 years and~~five years.

Jan M. Salsgiver has been President of the ~~company's Commercial Systems Group~~Americas Components group since ~~April 1989. Steven W. Menefee has been a Vice~~July 1999. Prior thereto, she served as President of the ~~company and President of the company's Arrow/Schweber Electronics~~Arrow Supplier Services Group since November 1990. For more than five years prior thereto, he was a Vice President of Avnet, Inc., principally an electronics distributor, and an executive of Avnet's Electronic Marketing Group. Wesley S. Sagawaits inception in January 1998. In addition, she has been a Vice President of the company for more than ~~5 years~~five years.

Paul J. Reilly has been Chief Financial Officer since October 2001 and has served as a Vice President of ~~Capstone Electronics Corp.,~~ the ~~company's subsidiary which markets passive, electromechanical, and connector products, since January 1990. Jan Salsgiver~~company more than five years.

Mark F. Settle has been a Vice President of the company and Chief Information Officer since ~~September 1993 and President of the company's Zeus Electronics since July 1993. For more than five years prior thereto, she held a variety of senior marketing positions in~~November 2001. Prior to joining the company, ~~the most recent of which was~~he served as Executive Vice President, ~~Semiconductor Marketing of the Arrow/Schweber Electronics Group.~~ Systems and Processing at Visa International since April 1999 and previously served as Chief Information Officer at Occidental Petroleum Corporation since February 1997.

Item 2. ~~Properties.~~Properties.

The company owns and leases sales offices, distribution centers, and administrative facilities worldwide. The company's executive office is located in Melville, New York ~~is owned by the company.~~and occupies a 163,000 square foot facility under a long-term lease. The company owns 20 locations throughout the Americas, Europe, and the Asia/Pacific region. The company occupies over 260 additional locations under leases due to expire on various dates to 2016. One additional facility is owned by the company, and another two facilities have been sold and leased back in connection with the financing thereof. Item 3. Legal Proceedings. Through a wholly-owned subsidiary, Schuylkill Metals Corporation, the company was previously engaged in the refining and selling of lead. In September 1988, the company sold its refining business. In mid-1986 the refining business ceased operations at its battery breaking facility in Plant City, Florida, which facility had been placed on the list of hazardous waste sites targeted for cleanup under the federal Super Fund Program. The Plant City site was not sold to the purchaser of the refining business, and the company remains subject to various environmental cleanup obligations at the site under federal and state law. During 1991, the company engaged in settlement negotiations with the EPA, resulting in the execution of a consent decree defining those obligations which was entered by a federal court in Florida and became effective on April 22, 1992. The consent decree requires the company to fund and implement remedial design and remedial action activity addressing environmental impacts to site soils and sediment, underlying ground -6- water, and wetland areas. The company, through its technical contractors, has begun implementation of these requirements. Between January 1, 1993 and the date of this report, a substantial amount of the work necessary to prepare the site for the planned remediation activities was completed, the plans for the treatment and discharge of ground water contemplated by the consent decree were finalized, the plans for the remediation and mitigation of the wetland areas were finalized and approved in principle by the relevant agencies, and the company began the bid process for certain of the contracts relating to the performance of the remediation activities (including a previously-agreed upon plan for treating soils and sediment). Such activities are expected to commence in mid-1994 and the company believes that a substantial part of such activities will be completed over the next three years. The extent of such remediation activities (including the estimated cost thereof and the time necessary to complete them) is subject to change based upon conditions actually encountered during remediation, and the EPA reserves the right to seek additional action if it subsequently finds further contamination or other conditions rendering the work insufficiently protective of human health or the environment.2053. The company believes its facilities are well maintained and suitable for company operations.

Item 3. Legal Proceedings.

The company and/or its subsidiaries are parties to various legal proceedings arising in the normal course of business. It is not anticipated that ~~the amount expected to be expended in~~ any ~~year to fund~~ such ~~activities~~matters will ~~not~~ have a material adverse impact, individually and in the aggregate, on the company's financial position, liquidity, ~~capital resources~~ or results of ~~operations.~~ operation.

Item 4. Submission of Matters to a Vote of Security ~~Holders.~~ Holders.

None.

PART II

Item 5. Market ~~for~~Price of the Registrant's Common Equity and Related
Stockholder ~~Matters.~~ Matters.

Market Information

The company's common stock is listed on the New York Stock Exchange (trading symbol: "ARW"). The high and low sales prices during each quarter of ~~1993~~2002 and ~~1992~~2001 were as follows: Year High Low 1993: Fourth Quarter $42-1/4 $33-5/8 Third Quarter 43-1/8 34-5/8 Second Quarter 36-1/4 29-3/4 First Quarter 34-3/8 26-1/2 1992: Fourth Quarter $30-1/2 $22-1/8 Third Quarter 22-3/4 18-1/2 Second Quarter 19-1/2 15-1/8 First Quarter 18-1/2 14-3/8

Year		High		Low

2002:
Fourth Quarter	$	16.78	$	8.60
Third Quarter		20.85		12.30
Second Quarter		28.56		18.61
First Quarter		32.97		26.08

2001:
Fourth Quarter	$	30.71	$	19.84
Third Quarter		29.50		18.00
Second Quarter		29.07		20.65
First Quarter		33.44		21.85

Holders

On ~~March 9, 1994,~~February 28, 2003, there were approximately ~~4,000~~3,000 shareholders of record of the company's common stock. ~~-7-~~

Dividend History ~~and Restrictions~~

The company ~~has~~did not ~~paid~~pay cash dividends on its common stock during 2002 or 2001. While the ~~past two years. While it is the intention~~board of ~~the Board of Directors to consider~~directors considers the payment of dividends on the common stock from time to time, the declaration of future dividends will be dependent upon the company's earnings, financial condition, and other relevant ~~factors. The terms of the company's U.S. credit agreement, senior notes, and certain foreign~~factors, including debt (see Note 4 of the Notes to Consolidated Financial Statements) restrict the payment of cash dividends, limit long-term debt and short-term borrowings, and require that the ratio of earnings to interest expense, ratio of operating cash flow to interest expense, working capital, and net worth be maintained at certain designated levels. -8- covenants.

Item 6. Selected Financial Data.

The following table sets forth certain selected consolidated financial data and should be read in conjunction with the company's consolidated financial statements and related notes appearing elsewhere in this ~~Annual Report.~~ ~~SELECTED FINANCIAL DATA (In~~annual report:
SELECTED FINANCIAL DATA (a)
(In thousands except per share data)
For the year ended:
2002(b)(c)

2001(d)

2000

1999(e)

1998
Sales
$
7,390,154
$
9,487,292
$
12,065,283
$
8,325,401
$
7,235,556
Operating income
$
167,530
$
152,670
$
773,193
$
326,169
$
328,156
Income (loss) from
  continuing operations
$
12,087
$
(75,587
)
$
351,934
$
115,379
$
135,024
Income (loss) per share
  from continuing
  operations:
    Basic
$
.12
$
(.77
)
$
3.64
$
1.21
$
1.42
    Diluted
$
.12
$
(.77
)
$
3.56
$
1.20
$
1.39
At year-end:

Accounts receivable

  and inventories

$
2,579,833

$
2,762,679

$
5,419,476

$
2,890,365

$
2,431,774
Total assets

4,667,605

5,358,984

7,604,541

4,483,255

3,839,871
Long-term debt

1,807,113

2,441,983

3,027,671

1,553,421

1,047,041
Shareholders' equity

1,235,249

1,766,461

1,913,748

1,550,529

1,487,319

~~For~~from continuing operations exclude the ~~year: 1993(a) 1992 1991(b) 1990 1989 Sales $2,535,584 $1,621,535 $1,043,654 $970,944 $925,207~~ impact of the company's adoption of FASB Statement No. 142, "Goodwill and Other Intangible Assets," on January 1, 2002. Statement No. 142, which requires that ratable amortization of goodwill be replaced with periodic tests for goodwill impairment, resulted in an impairment charge of $603.7 million or $6.05 and $5.97 per share on a basic and diluted basis, respectively.
(a)	The disposition of the Gates/Arrow operations in May 2002 represents a disposal of a "component of an entity" as defined in Financial Accounting Standards Board ("FASB") Statement No. 144. Accordingly, 1998 through 2001 have been restated to exclude Gates/Arrow.

(b)	Income from continuing operations and income per share ~~data)~~

(c)	Operating income ~~181,542 103,781 34,399(c) 32,682 27,557 Equity in earnings~~and income from continuing operations include a severance charge of affiliated companies 1,673 6,550 5,657 6,395 5,466 Interest expense 24,987 30,061 29,145 28,972 29,809 Earnings before extraordinary charges 81,559 50,244 8,685 10,105 3,214 Extraordinary charges,$5.4 million or $3.2 million net of related taxes. Excluding this charge, operating income, ~~taxes - 5,424 - - - Net~~ income $ 81,559 $ 44,820 $ 8,685 $ 10,105 $ 3,214 Per common share: Earnings (loss) before extraordinary charges(d) $ 2.62 $ 1.81 $ .28 $ .44 $ (.19) Extraordinary charges - (.21) - - - Netfrom continuing operations, and income ~~(loss)(d) $ 2.62 $ 1.60 $ .28 $ .44 $ (.19) At year-end: Accounts receivable~~per share from continuing operations on a basic and inventories $ 798,037 $ 539,476 $ 506,496 $ 322,916 $333,578 Total assets 1,191,304 780,893 745,379 478,045 483,528 Long-term debt, including current portion 159,024 101,146 218,787 104,937 109,017 Subordinated debentures, including current portion 125,000 125,000 105,965 107,300 108,326 Total long-term debtdiluted basis would have been $172.9 million, $15.3 million, and subordinated debentures 284,024 226,146 324,752 212,237 217,343 Shareholders' equity 457,015 351,220 225,836 151,172 149,977 (a) Includes results of Spoerle Electronic, which was accounted for under the equity method prior to January 1993 when Arrow increased its holdings to a majority interest (see Note 2 of the Notes to Consolidated Financial Statements). (b) Reflects the acquisition in September 1991 of the North American electronics distribution businesses of Lex Service PLC (see Note 2 of the Notes to Consolidated Financial Statements). (c) Includes$.15, respectively.

(d)	Operating income and loss from continuing operations include restructuring costs and other special charges of ~~$9.8~~$227.6 million ~~reflecting expenses~~(of which $174.6 million is in operating income) or $145.1 million net of related taxes, and an integration charge associated with the acquisition of Wyle Electronics and Wyle Systems of $9.4 million or $5.7 million net of related taxes. Excluding these charges, operating income, income from continuing operations, and income per share from continuing operations on a basic and diluted basis would have been $336.7 million, $75.2 million, $.76, and $.75, respectively.

(e)	Operating income and income from continuing operations include a special charge of $24.6 million or $16.5 million net of related taxes, associated with the acquisition and integration of Richey Electronics, Inc. and the ~~businesses acquired~~electronics distribution group of Bell Industries, Inc. Excluding this charge, operating income, income from ~~Lex Service PLC. (d) After preferred stock dividends of $.9~~continuing operations, and income per share from continuing operations on a basic and diluted basis would have been $350.7 million, ~~in 1993, $3.9~~$131.9 million, ~~in 1992, $4.6 million in 1991, $4.9 million in 1990,~~$1.39, and ~~$5.4 million in 1989.~~ $1.37, respectively.

~~-9-~~

Item 7. Management's Discussion and Analysis of Financial Condition and
Results of ~~Operations.~~ Operations.

For an understanding of the significant factors that influenced the company's performance during the past three years, the following discussion should be read in conjunction with the consolidated financial statements and other information appearing elsewhere in this annual report. ~~Included~~In May 2002, the company sold substantially all of the assets of Gates/Arrow, a business unit within the company's North American Computer Products group ("NACP") that sold commodity computer products such as printers, monitors, other peripherals, and software in North America. The disposition of the Gates/Arrow operations represents a disposal of a "component of an entity" as defined in Financial Accounting Standards Board ("FASB") Statement No. 144. Accordingly, the company's consolidated financial statements and related notes have been presented to reflect Gates/Arrow as a discontinued operation for all periods.

Sales

Consolidated sales for 2002 decreased 22.1 percent from $9.5 billion in 2001 to $7.4 billion. Sales of electronic components declined 25.6 percent, principally as a result of significantly lower demand from telecommunications and networking customers and the large contract manufacturers that serve them reflecting continued low levels of business activity in those industries. Since the beginning of the economic downturn in the ~~1993 consolidated results is Spoerle Electronic, which had been accounted for under~~industry early in 2001, the ~~equity method prior~~company's operating groups that service these customers have experienced the greatest absolute decline in sales levels. Sales declined by 54.1 percent to ~~January 1993 when~~such customers in 2002, compared with the company acquired an additional 15% share, increasing its holdings to a majority interest. The 1993 consolidated results also include the acquired businesses of Zeus Components, Inc., a distributor of high- reliability electronic components and value-added services, Microprocessor & Memory Distribution Limited, a focused U.K. distributor of high- technology semiconductor products, and Components Agent Limited, one of the largest distributors in Hong Kong.year-earlier period. In addition, contributing to the ~~1993 results include Amitron-Arrow S.A. and ATD Electronica S.A., distributors serving~~decline is lower demand in the ~~Spanish and Portuguese markets, and CCI Electronique, a distributor serving~~company's core OEM businesses due to the ~~French marketplace. On February 28, 1992, the company acquired~~weakened general economic conditions worldwide. Historically, in the electronics distribution ~~businesses~~industry, Europe has trailed the business cycles experienced in North America by six to nine months; however, the decline in acti vity levels in Europe are less than in North America due to the fact that in Europe sales to telecommunication and networking customers, and the contract manufacturers that serve them, is a lower percentage of ~~Lex Service PLC ("Lex")~~total business activity than it is in North America. Sales declined in Asia/Pacific principally due to the termination of a single large customer engagement during the middle of 2001, and a 60 percent decrease in the ~~U.K. and France (the "European businesses"), and Spoerle Electronic acquired the electronics distribution business~~sales of Lex in Germany. On September 27, 1991, the company acquired Lex Electronics Inc. and Almac Electronics Corporation, the North American electronics distribution businesses of Lex (the "North American businesses"), the third largest electronics distribution business in the United States. See Note 2microprocessors (a product segment not considered a part of the ~~Notes to Consolidated Financial Statements~~company's core business).

Computer products sales declined 11.4 percent for ~~information~~2002, compared with respect to the 1993 and 1992 acquisitions and the pro forma effect of these transactions on the company's statement of operations. Sales In 1993, consolidated sales of $2.5 billion were 56% ahead of the 1992 sales of $1.6 billion. Excluding Spoerle, sales were $2.2 billion, an advance of 34% over the year-earlier period. Beginning in mid-2001, the company's computer products businesses implemented a new strategy which focused less on sales volume and placed more emphasis on profitability. While sales of computer products declined compared with 2001, operating income increased by 33.2 percent, excluding goodwill amortization. Sales of North American mid-range computer products were relatively flat compared with 2001, while operating income increased by 38 percent, excluding goodwill amortization in 2001. Sales of low margin microprocessors in 2002 decreased by 27.9 percent compared with the year-earlier period. The OEM market continues to be impacted by reduced activity levels at large complex telecommunications and networking companies. As a result, OEM sales were down 23 percent compared with the year-earlier period. Lastly, translation of the financial statements of the company's international operations into U.S. dollars resulted in increased revenues of $118 million because of a weakening U.S. dollar in 2002 when compared with 2001.

In 2001, consolidated sales decreased by 21.4 percent from $12.1 billion in 2000 to $9.5 billion. This ~~sales growth~~decline was principally due to a 27.1 percent decrease in sales of electronic components as a result of severely depressed demand at telecommunications and networking customers and the contract manufacturers that serve them, and lower demand in the company's core OEM business due to weakened general economic conditions. In addition, the company terminated a single customer engagement in the Asia/Pacific region during 2001 which resulted in a sales decline of approximately $193 million versus 2000. Sales of computer products increased ~~activity levels~~by 3.5 percent in ~~each~~2001 when compared with 2000. In the fourth quarter of 2000, Hewlett Packard modified its agreements with its distributors transforming the previously existing relationship from

that of a distributor to that of an agent. Thus, the company modified its method of recognizing revenue to include only the payment from Hewlett Packard for the company's sales and marketing efforts. The modification resulted in a reduction of more than $300 million in revenue in 2001 compared with 2000. In 2001, sales of low margin microprocessors (a product segment not considered a part of the company's ~~distribution groups and, to~~core business) decreased by nearly $207 million. Lastly, translation of the financial statements of the company's international operations into U.S. dollars resulted in reduced revenues of $118 million because of a ~~lesser extent, acquisitions~~strengthened U.S. dollar in ~~North America, Europe, and the Pacific Rim,~~2001 when compared with 2000. Each of these factors was offset, in part, by ~~weaker currencies~~the acquisitions that occurred in ~~Europe.~~ 2000.

Consolidated sales of ~~$1.6~~$12.1 billion in ~~1992~~2000 were ~~55%~~44.9 percent higher than ~~1991~~1999 sales of $1$8.3 billion. This sales increase was driven by a 60.5 percent growth in the sales of electronic components and more than $850 million of sales from acquired companies and positive market conditions for computer products offset, in part, by foreign exchange rate differences and fewer sales of low margin microprocessors. Sales of computer products were flat in 2000 when compared with 1999. Translation of the financial statements of the company's international operations into U.S. dollars resulted in reduced revenues of $466 million when compared with 1999. Excluding the impact of acquisitions and foreign exchange rate differences, sales increased by 40.2 percent over the prior year.

Special Charges

Discontinued Operations

In May 2002, the company sold substantially all of the assets of Gates/Arrow. Total cash proceeds are estimated to be $44.7 million, subject to price adjustments, of which $41.1 million has been collected as of December 31, 2002. The assets sold consisted primarily of accounts receivable, inventories, and property and equipment. The buyer also assumed certain liabilities.

The company recorded a net loss of $6.1 million (net of related taxes of $4.1 million) on the disposal of Gates/Arrow. The loss consists of the following (in millions):

Personnel costs	$	1.3
Facilities		3.1
Professional fees		.6
Asset write-down		3.0
Other		2.2

	$	10.2

Personnel costs relate to the termination of 88 individuals employed by the Gates/Arrow business and 57 NACP warehouse personnel due to reduced activity levels as a result of the sale. Facilities costs are principally related to vacated warehouse space no longer required as a result of the sale. The write-down of assets adjusted the carrying value of the assets sold to the value agreed upon under the terms of the contract of sale.

Extraordinary Item

During 2002, the company repurchased senior notes due in the fourth quarter of 2003 with a principal amount of $398.2 million. The premium paid and the related deferred financing costs written-off upon the repurchase of this debt, aggregating $12.9 million, net of related taxes, is recognized as an extraordinary loss in the company's consolidated statement of operations. As a result of this transaction, net interest expense will be reduced by approximately $31.1 million from the date of the repurchase through the 2003 maturity dates should interest rates remain the same.

Change in Accounting Principle

In June 2001, the FASB issued Statement No. 142, "Goodwill and Other Intangible Assets." This Statement, among other things, eliminates the amortization of goodwill and requires annual tests for determining impairment of goodwill. On January 1, 2002, the company adopted Statement No. 142, and accordingly, discontinued the amortization of goodwill. If 2001 were restated

to reflect the elimination of goodwill amortization, earnings would have increased by approximately $41.6 million and $.42 per share on a basic and diluted basis, respectively.

As required under the accounting provisions of Statement No. 142, the company completed the two steps required to identify and measure goodwill impairment for each reporting unit as of January 1, 2002. The first step involved identifying all reporting units with carrying values (including goodwill) in excess of fair value determined by reference to comparable businesses using a weighted average EBIT multiple. The reporting units identified from the first step were then measured for impairment by comparing the units' fair value to their carrying value. Those reporting units having a carrying value substantially exceeding their fair value were identified as being fully impaired, and the company fully wrote down the related goodwill. For reporting units with potential impairment, the company determined the fair value of the assets and liabilities of the unit and wrote down the goodwill to its implied fair value accordingly. The majority of the reporting units' assets and liabilities were inve ntory, accounts receivable, accounts payable and accrued expenses, which are carried at fair value. No other impairment indicators have arisen since January 1, 2002.

In determining a reporting unit, the company looked to its current reporting structure at the date of adoption and allocated goodwill to the reporting units. In most cases, the goodwill was identifiable to specific acquisitions, so the allocation was direct. The following were determined to be the reporting units of the company: (i) North American Components, (ii) North American Computer Products, (iii) individual countries for Europe Components, (iv) Europe Computer Products, (v) South America, and (vi) individual countries for Asia.

As a result of the evaluation process discussed above, the company recorded an impairment charge of $603.7 million, which was recorded as a cumulative effect of change in accounting principle at January 1, 2002. The company does not have any other intangible assets subject to valuation under Statement No. 142.

Severance Charge

During 2002, the company's chief executive officer resigned. As a result, the company recorded a severance charge totaling $5.4 million ($3.2 million net of related taxes) principally based on the terms of his employment agreement. Included therein are provisions principally related to salary continuation, retirement benefits, and the vesting of restricted stock and options.

Restructuring Costs and Other Special Charges

In mid-2001, the company took a number of significant steps, including a reduction in its worldwide workforce, salary freezes and furloughs, cutbacks in discretionary spending, deferral of non-strategic projects, consolidation of facilities, and other major cost containment and cost reduction actions, to mitigate, in part, the impact of significantly reduced revenues. As a result of these actions, the company recorded restructuring costs and other special charges of $227.6 million or $145.1 million net of related taxes. The special charges include costs associated with headcount reductions, the consolidation or closing of facilities, valuation adjustments to inventory and Internet investments, the termination of certain customer engagements, and various other miscellaneous items. Of the total charge of $227.6 million, $174.6 million reduced operating income (including $97.5 million in cost of products sold) and $53 million was recorded as a loss on investments. There were no material revisions to these actions and their related costs. A summary of the special charges included in operating income is as follows (in millions):

Personnel	$	15.2
Facilities		10.0
Customer terminations		38.8
Inventory		97.5
IT systems and other		13.1

	$	174.6

The company recorded a charge of $15.2 million related to personnel costs. The total number of positions eliminated was nearly 1,200, out of the then existing worldwide total of 14,150, or approximately 9 percent. The actual number of employees terminated approximated original estimates. The reduction in headcount was principally due to reduced activity levels across all functions throughout the company. There was no single group of employees or business segment that was impacted by this restructuring. Instead, it impacted both exempt and non-exempt employees across a broad range of functions including sales and marketing, warehouse employees, employees working in value-added centers, finance personnel in credit/collections and accounts payable, human resources and IT. The company's approach was to reduce its headcount in the areas with reduced activities. Of the total positions eliminated, approximately 1,000 were completed by December 31, 2001 and the remaining positions were eliminated by March 31, 2002. The company also consolidated or closed 15 facilities and accordingly recorded a charge of $10 million related to vacated leases, including write-offs of related leasehold improvements.

The company also terminated certain customer programs principally related to services not traditionally provided by the company because they were not profitable. The $38.8 million provision included charges for inventory these customers no longer required, pricing disputes, and non-cancelable purchase commitments.

The company recorded an inventory provision of $97.5 million which was included in cost of products sold. The provision related to a substantial number of parts. In addition to North America, provisions were recorded in Europe and the Asia/Pacific region. The inventory charge was principally related to product purchased for single or limited customer engagements and in certain instances from non-traditional, non-franchised sources for which no contractual protections such as return rights, scrap allowance, or price protection exist. The inventory provision was principally for electronic components. The parts were written down to estimated realizable value; in many cases to estimated scrap value or zero. At December 31, 2002, approximately 60 percent of the inventory for which a provision was made had been scrapped and approximately 30 percent of this inventory was sold at its reduced carrying value with minimal impact on gross margins. The remaining inventory provision of approximately $7 million at December 31, 2002 relates to inventory which will primarily be disposed of or scrapped by the end of 2003.

Also included in the charge was $13.1 million for IT systems and other miscellaneous items related to logistics support and service commitments no longer being used, hardware and software not utilized by the company, professional fees related to contractual obligations of certain customer terminations, and the write-off of an investment in an IT-related service provider.

Internet Investments Write-Down

As a result of the significant decline in the Internet sector during 2001, the company assessed the value of its investments early in the third quarter of 2001. In order to assess the value of its investments, the company selected a pool of comparable publicly traded companies and obtained the stock price of each company at the date of the company's original investment and in the third quarter of 2001. The percentage change in the average stock price was applied to the related investment to determine the change in the value of the investment, modified to the extent that the entity had cash to repay the investors. The company determined that certain of these investments had experienced an other than temporary decline in their realizable values. Accordingly, in the third quarter of 2001, the company recorded a charge of $53 million to write various Internet investments down to their realizable values. At December 31, 2002, the remaining book value of these investments was $2.3 million.

impact of these actions, commencing in the second quarter of 2002, is reflected as a reduction in selling, general and administrative expenses. Such cost savings are approximately $70 million for 2002. These cost savings may not be permanent as increased activity levels resulting from, among other factors, increased revenues may require an increase in headcount and other increased spending. There have been no significant changes made to this charge and the actual cost savings achieved were not materially different than those expected. Approximately $30 million of the charge was expected to be spent in cash. Of this amount, approximately $23.5 million was spent as of December 31, 2002. Non-cash usage amounted to $129.2 million to date.

Integration charge

In 2001, the company recorded an integration charge of $9.4 million ($5.7 million net of related taxes) related to the acquisition of Wyle Electronics and Wyle Systems (collectively, "Wyle"). In connection with the integration of Wyle, approximately 240 positions, largely performing duplicate functions, were eliminated. A summary of the integration charge is as follows (in millions):

Personnel	$	4.1
Facilities		1.4
Leasehold improvements		1.2
IT and other		2.7

	$	9.4

Of the expected $8.2 million to be spent in cash, approximately $7.2 million was spent as of December 31, 2002. The remaining amount to be spent in cash will be paid from the company's cash flow from operations. Non-cash usage amounted to $1.2 million.

At December 31, 2002, the remaining restructuring costs and other special charges and various integration charges recorded in connection with the acquisition of Wyle, as well as previous acquisitions, totaling $50.7 million, of which $35.8 million is expected to be spent in cash, will be utilized as follows:

-	Personnel accruals of $3 million will be principally utilized to cover the extended costs associated with the termination of international personnel and are expected to be utilized over the next 18 months.

-	Facilities accruals totaling $23.7 million relate to terminated leases with expiration dates through 2010. Approximately $6.7 million will be paid in 2003. The minimum lease payments for these leases are approximately, $5.8 million in 2004, $4.2 million in 2005, $3.9 million in 2006, $1 million in 2007, and $2.1 million thereafter.

-	Customer terminations accruals of $5.4 million will be utilized before the end of 2003.

-	Asset and inventory write-downs of $7.4 million relate primarily to inventory write-downs, the majority of which will be disposed of or scrapped before the end of 2003.

-	IT and Other of $11.2 million relate to leases for hardware and software, consulting contracts for logistics services, and professional fees related to contractual obligations for certain customer terminations with expected utilization dates through 2005. Approximately $6.9 million will be utilized in 2003, $2.7 million in 2004, and $1.6 million in 2005.

Operating Income

The company recorded gross profit of $1.3 billion for 2002, compared with gross profit of $1.5 billion in the year-earlier period. Included in gross profit for 2001 are restructuring costs and other special charges of $97.5 million; excluding these charges gross profit would have been $1.6 billion. The decline in gross profit, exclusive of the aforementioned restructuring costs and other special charges, is principally due to the 22.1 percent decline in sales in 2002. The gross profit margins for 2002 improved by approximately 40 basis points when compared with the year-earlier period, excluding restructuring costs and other special charges. The increase in gross profit percentage is principally due to a change in the mix of sales, which in

2002 is more heavily concentrated on the businesses serving core OEM customers that typically have higher margins, and a corresponding smaller proportion of sales to large accounts that typically have a lower gross profit percentage. It also reflects the ~~acquisitions~~computer products businesses' increasing focus on higher margin business.

The company recorded operating income of $167.5 million in 2002 as compared with $152.7 million in 2001. Included in operating income for 2002 is the severance charge of $5.4 million associated with the resignation of the ~~North American~~company's chief executive officer. Excluding this charge, operating income for 2002 would have been $172.9 million. Included in operating income for 2001 are $174.6 million of restructuring costs and ~~European~~other special charges described above, the integration charge of $9.4 million associated with the acquisition of Wyle, and goodwill amortization of $48 million. Excluding these charges and goodwill amortization, operating income for 2001 would have been $384.6 million. The decrease in operating income of $211.7 million for 2002 compared with the year-earlier period, exclusive of the aforementioned special charges and goodwill amortization, is principally a result of the 22.1 percent decline in sales offset, in part, by a 9.1 percent reduction in expenses.

The company recorded gross profit of $1.5 billion for 2001, compared with gross profit of $2 billion in the year-earlier period. Included in gross profit for 2001 are the aforementioned restructuring costs and other special charges of $97.5 million; excluding these charges gross profit would have been $1.6 billion. The decline in gross profit, exclusive of the aforementioned restructuring costs and other special charges, is principally due to the decline in sales of 21.4 percent in 2001. Exclusive of the aforementioned special charges, gross profit margins for 2001 improved by approximately 20 basis points when compared with the year-earlier period. The increase in gross profit percentage is principally due to a change in the mix of sales, which is more heavily concentrated on the businesses serving core OEM customers that typically have higher margins, and fewer sales to large accounts that typically have a lower gross profit percentage. It also reflects the computer products businesse s' increasing focus on higher margin business.

The company's operating income decreased to $152.7 million in 2001 compared with $773.2 million in 2000. Excluding the aforementioned special charges, operating income for 2001 would have been $336.7 million. The decrease in operating income was due to the sudden and dramatic reduction in sales that began in the latter part of the first quarter of 2001, and accelerated thereafter.

The company recorded gross profit of $2 billion for 2000, compared with gross profit of $1.2 billion in the year-earlier period. The increase in gross profit is principally due to the increase in sales of 44.9 percent in 2000. The gross profit margins for 2000 improved by approximately 150 basis points when compared with the year-earlier period. The increase in gross profit percentage is driven by margin improvements in core component businesses in ~~September 1991~~North America and ~~February 1992, respectively,~~Europe.

Operating income increased to $773.2 million in 2000 compared with $326.2 million in 1999. Included in 1999 is an integration charge of $24.6 million associated with the acquisition and ~~increased North American sales. In 1991, consolidated sales~~integration of ~~$1 billion were 7.5% higher than 1990 sales~~Richey Electronics, Inc. ("Richey") and the electronics distribution group of ~~$971~~Bell Industries, Inc. ("EDG"). Excluding this charge, operating income for 1999 would have been $350.7 million. The increase in ~~sales primarily reflects the inclusion~~operating income, exclusive of the North American businesses during the fourth quarter of 1991, which more than offset the 5% decrease in sales for the nine months ended September 30, 1991 principally resulting from declining sales of commercial computer products and related systems owing to soft market conditions. -10- Operating Income In 1993, the company's consolidated operating income increased to $181.5 million, compared with 1992 operating income of $103.8 million. The significant improvement in operating income reflects the impactintegration charge, was a result of increased sales in the electronic components businesses around the world and increased gross profit margins, as well as the ~~consolidation~~full year impact of ~~Spoerle,~~cost savings resulting from the integration of Richey and EDG offset, in part, by lower ~~gross profit margins primarily reflecting proportionately higher~~ sales of ~~low-margin microprocessors. Excluding Spoerle,~~computer products and increased spending in the company's Internet business. The increase in operating income was ~~$146.2 million~~offset, in ~~1993, and~~part, by an increase in operating expenses, excluding the integration charge discussed above, of 36.3 percent in 2000, compared with the ye ar-earlier period due to the increase in sales. Despite this increase, operating expenses as a percentage of sales were ~~12.4%,~~9.2 percent, the lowest in the company's history. ~~The company's 1992 consolidated operating income increased to $103.8 million, compared with operating income~~

Interest Expense

Interest expense of ~~$34.4~~$152.6 million in ~~1991. Operating income in 1991 included the recognition of approximately $9.8~~2002 decreased from $210.6 million of costs associated with the integration of the North American businesses. The significant improvement in operating income in 1992 primarily reflected the impact of the company's acquisition of the North American businesses, improved gross profit margins reflecting a product mix now more heavily weighted to semiconductor products, and improved North American sales. The rapid and successful integration of the North American businesses resulted in the ~~realization~~year-earlier period as a result of ~~sizable economies of scale which, when combined with increased sales, enabled~~significantly lower debt balances. During the past twelve months, free cash flow, defined as cash flow from operations less capital expenditures, has totaled $616.1 million, thereby permitting the company to reduce ~~operating expenses as a percentage of~~debt by $385.8 million and increase cash by $137.2 million. The positive free cash flow reflects the decline in sales from 17.6% in 1991 to 14.7% in 1992, the then lowest level in the company's history. Such economies of scale principally resulted from reductions in personnel performing duplicative functions and the elimination of duplicative administrative facilities, selling and stocking locations, and computer and telecommunications equipment. coupled with improved working capital utilization.

In ~~1991, the company's consolidated operating income~~2001, interest expense increased to ~~$34.4~~$210.6 million ~~an advance of 5% over 1990. This improvement~~compared with $169.9 million in 2000. The increase in interest expense was ~~principally~~ the result of ~~increased sales and reduced operating expenses as a percentage~~the full year impact of ~~sales~~interest on $1.2 billion of additional borrowings incurred in the fourth quarter of 1991. The improved fourth quarter operating results, combined with lower operating expenses through September 1991, more than offset the special charge of $9.8 million reflecting integration expenses associated with the North American businesses, the effect of a 5% decrease in sales through September 1991, and a decrease in the company's gross profit margin as a result of competitive pricing pressures in the commercial computer products and related systems markets. Interest In 1993, interest expense decreased2000 to $25 million from $30.1 million in 1992. The decrease principally reflects the full-year effect of the retirement during 1992 of $46 million of the company's 13-3/4% subordinated debentures and the refinancing of the company's remaining high-yield debt with securities bearing lower interest rates,fund acquisitions offset, in part, by the ~~consolidation~~generation of ~~Spoerle~~$1.7 billion in cash flow from operations in 2001. The increase in cash flow from operations is due to the company's decreased working capital and ~~borrowings associated with acquisitions.~~ capital expenditure requirements. The cash generated from operations in 2001 was utilized to reduce debt by $1.1 billion and to increase cash on hand by $501.3 million.

Interest expense of ~~$30.1~~$169.9 million in ~~1992~~2000 increased by ~~$.9~~$63 million from ~~the 1991 level, reflecting~~1999 as a result of increases in borrowings to fund the company's ~~borrowings to finance~~acquisitions, working capital requirements, capital expenditures, and investments in Internet joint ventures.

Income Taxes

The company recorded an income tax provision from continuing operations at an effective tax rate of 35.1 percent in 2002, compared with a benefit for taxes at an effective tax rate of 31.4 percent in the ~~cash portion~~year-earlier period. Excluding the impact of the ~~purchase price of~~aforementioned charges and goodwill amortization, the ~~North American~~effective tax rate for 2002 and ~~European businesses, to pay fees~~2001 would have been 36.3 percent and expenses relating to the acquisitions, to refinance existing credit facilities of the company, and to provide the company with working capital. Such increased borrowings were partially -11- offset by the company's redemption in May of $46 million of its 13-3/4% subordinated debentures with the proceeds from the public offering of 4.7 million shares of common stock and lower effective interest rates. In 1991, interest expense of $29.1 million increased $.1 million from 1990's level as the financing expense for the purchase of the North American businesses offset lower interest rates and reduced borrowings resulting from operating cash flow and improvements in asset management. Income Taxes In 1993, the33.2 percent, respectively. The company's effective tax rate ~~was 40.7% compared with 37.4%~~is principally impacted by, among other factors, the statutory tax rates in ~~1992. The higher~~the countries in which it operates and the related level of income generated by these operations.

In 2001, the company recorded an income tax benefit at an effective tax rate ~~reflects increased U.S.~~of 31.4 percent, compared with a provision for taxes ~~as a result~~at an effective tax rate of ~~higher statutory rates and~~40.7 percent in 2000. Excluding the ~~consolidation~~impact of ~~Spoerle.~~ the aforementioned special charges, the effective tax rate would have been 40.8 percent for 2001.

The company recorded a provision for taxes at an effective tax rate of ~~37.4%~~40.7 percent in ~~1992~~2000 compared with ~~20.4%~~44.8 percent in ~~1991. The higher~~the year-earlier period. Excluding the integration charge, the effective tax rate ~~reflects the depletion of~~would have been 43.6 percent in 1999. The lower rate for 2000 was due to the company's ~~remaining $5.8 million U.S. net~~significantly increased operating ~~loss carryforwards in 1991. The~~income, which lowered the negative effect of non-deductible goodwill amortization on the company's effective tax ~~rate~~rate.

Net Income (Loss)

The company recorded a net loss of $610.5 million for 2002, compared with $73.8 million in ~~1991~~the year-earlier period. Included in the results for 2002 are the net loss associated with discontinued operations, an extraordinary charge associated with the prepayment of debt, a cumulative effect of change in accounting principle as mandated by FASB Statement No. 142, and the severance charge mentioned above. The net loss associated with the discontinued operations, the extraordinary charge, and the change in accounting principle are discussed in greater detail above. Included in the results for 2001 are restructuring costs and other special charges and an integration charge, also previously discussed.

The company recorded income from continuing operations of $12.1 million ($.12 per share on a basic and diluted basis) in 2002, compared with losses from continuing operations of $75.6 million in the year-earlier period. Excluding the aforementioned severance charge, income from continuing operations would have been $15.3 million ($.15 per share on a basic and diluted basis) in 2002. Included in net loss from continuing operations for 2001 are restructuring costs and other special charges of $227.6 million ($145.1 million net of

related taxes), integration charge of $9.4 million ($5.7 million net of related taxes) and goodwill amortization of $48 million ($41.6 million net of related taxes). Excluding these expenses, net income from continuing operations for 2001 would have been $116.8 million ($1.19 and $1.13 per share on a basic and diluted basis). The decrease in income from continuing operations for 2002 compared with the year-earlier period exclusive of the severance charge, restructuring and other special charges, integration charges and goodwill amortization, is due to the significant reduction in sales offset, in part, by an increase in gross profit margins, and a decrease in operating expenses and interest expense.

The company recorded a net loss of $73.8 million in 2001 compared with net income of $357.9 million in 2000. Excluding the aforementioned special charges, and income from discontinued operations, net income from continuing operations for 2001 and 2000 would have been $75.2 million and $351.9, respectively. The decrease in net income from continuing operations, excluding special charges, was ~~20.4%, principally~~due to lower gross profit, as a result of ~~the utilization~~lower sales, and higher levels of ~~the remaining $5.8 million of U.S. net operating loss carryforwards. Net Income~~ interest expense.

Net income in ~~1993~~2000 was ~~$81.6~~$357.9 million, an ~~advance~~increase from ~~$44.8~~$124.2 million in ~~1992 (after giving effect to extraordinary charges~~1999. Included in the results for 1999 was an integration charge of ~~5.4~~$24.6 million ~~reflecting the net unamortized discount and issuance expenses~~ associated with the ~~redemption~~acquisition and integration of ~~high-coupon subordinated debentures~~Richey and ~~other debt in 1992).~~EDG. Excluding this charge, net income from continuing operations for 2000 and 1999 would have been $351.9 million and $131.9 million, respectively. The increase in net income ~~is due principally to~~excluding the ~~increase in operating income~~integration charge, was a result of increased sales, improved gross profit margins, and ~~lower interest~~continued expense control offset, in part, by higher ~~taxes. The company recorded net income~~levels of $50.2 million in 1992, before extraordinary charges aggregating $5.4 million, compared with net income of $8.7 million in 1991. Including these charges, net income in 1992 was $44.8 million. Included in 1991's results was a special charge of $9.8 million ($6.5 million after taxes) associated with the integration of the acquired businesses. The improvement in net income was principally the result of the increase in operating income offset in part by the higher provision for income taxes. The company's net income in 1991 of $8.7 million decreased 14% from $10.1 million in 1990. The decrease in net income was principally the result of the $9.8 million special charge ($6.5 million after taxes) reflecting integration expenses associated with the North American businesses and the provision for income taxes. Excluding the special charge, net income was $15.2 million, an increase of 50% over 1990. Net income also included the company's equity in earnings of affiliated companies of $1.7 million in 1993, $6.6 million in 1992, and $5.7 million in 1991. The decrease in the company's equity in earnings of affiliated companies in 1993 was due to the consolidation of Spoerle. -12- In 1993, the earnings of Silverstar, the company's Italian affiliate, advanced as a result of significant sales growth offset in part by a weaker lira. The increase in the company's equity in earnings of affiliated companies in 1992 was the result of Silverstar's profitability. The decrease in 1991 was the result of lower earnings in Germany and a loss in Italy. interest expense.

Liquidity and Capital Resources

The company maintains a ~~high level of current assets, primarily~~significant investment in accounts receivable and inventories. ~~Consolidated current assets as~~As a percentage of total assets, accounts receivable and inventories were ~~73%~~approximately 55.3 percent and 51.6 percent in ~~1993~~2002 and ~~70%~~2001, respectively. At December 31, 2002, cash and short-term investments increased to $694.1 million from $556.9 million at December 31, 2001 and total debt decreased to $2.1 billion at December 31, 2002 from $2.5 billion compared with the year-earlier period.

One of the characteristics of the company's business is that in ~~1992. Working~~periods of revenue growth, investments in accounts receivable and inventories grow, and the company's need for financing may increase. In the periods in which revenue declines, investments in accounts receivable and inventories generally also decrease, and cash is generated. At December 31, 2002, working capital, ~~increased in 1993~~defined as accounts receivable and inventories net of payables, decreased by ~~$160~~$458.7 million, or ~~43%,~~21.6 percent, compared with ~~1992, as a result of increased~~December 31, 2001, due to decreased sales ~~the consolidation of Spoerle,~~ and acquisitions. Working capital increased by $42 million in 1992, as a result of the acquisition of the European businesses and increased sales. The net amount of cash provided by operations in 1993 was $41.7 million, the principal element of which was the cash flow resulting from higher net earnings offset by increased working capital needs to support sales growth. The net amount of cash used by the company for investing activities in 1993 amounted to $111.7 million, including $87.9 million for various acquisitions. Cash flows from financing activities were $100.3 million, principally resulting from increased borrowings to finance the 1993 acquisitions in the U.S., Europe, and the Pacific Rim (see Notes 2 and 4 of the Notes to Consolidated Financial Statements for additional information regarding these acquisitions). In September 1993, the company completed the conversion of all of its outstanding series B $19.375 convertible exchangeable preferred stock, into 1,009,086 shares of its common stock. This conversion eliminated the company's obligation to pay $1.3 million of annual dividends. improved asset utilization.

The net amount of cash provided by operating activities in ~~1992~~2002 was ~~$71.5~~$667.9 million, ~~attributable primarily~~principally reflecting lower working capital requirements. This generation of cash resulted in a reduction in net debt (defined as total debt less cash) from $1.9 billion to ~~the higher net earnings of the company.~~$1.4 billion. The net amount of cash used for investing activities was $79.8 million, including $111.9 million for consideration paid for acquired businesses and $51.7 million for various capital expenditures offset, in part, by the ~~company for investing activi- ties in 1992 amounted to $45.8~~cash proceeds of $41.1 million including $37.2 million for the acquisition of the European businesses. The aggregate cost of the company's acquisition of the electronics distribution businesses of Lex in the U.K. and France, and Spoerle's acquisition of the Lex electronics distribution business in Germany, was $52 million, of which $32 million was paid in cash and $20 million was paid in the form of a senior subordinated note due in June 1997. The company financed the cash portion of the purchase price throughfrom the sale of ~~66,196 shares of newly-created series B preferred stock and U.K. bank borrowings. In addition, a portion of the proceeds from the company's public offering of common stock~~Gates/Arrow and the ~~issuance~~partial repayment of ~~the 5-3/4% convertible subordinated debentures was used to repay the senior subordinated note. The German business was purchased by Spoerle for cash (see Notes 2, 4, and 6~~a note receivable of ~~the Notes to Consolidated Financial Statements for additional information regarding these acquisitions).~~$41.7 million resulting from a previous transaction. The net amount of cash used for financing activities ~~in 1992~~ was ~~$23.9~~$484.3 million, ~~principally~~primarily reflecting the ~~redemption~~early retirement of ~~high-yield -13- subordinated debentures,~~bonds due in the fourth quarter of 2003 and the repayment of short-term and long-term ~~debt,~~debt.

During 2002, the company repurchased senior notes with a principal amount of $398.2 million, due in the fourth quarter of 2003. The premium paid and the ~~payment~~related deferred financing costs written-off upon the repurchase of ~~preferred stock dividends~~this debt, aggregated $12.9 million, net of related taxes, and ~~financing fees,~~is recognized as an extraordinary loss in the company's consolidated statement of operations. As a result of this transaction, net interest expense will be reduced by approximately $31.1 million from the date of the repurchase through the 2003 maturity date should interest rates remain the same.

In August 2002, the company entered into a series of interest rate swaps (the "swaps") with third parties with an aggregate notional amount of $250 million in order to hedge the change in fair value of the company's 8.7% senior notes, due in 2005, as a result of fluctuations in interest rates. These contracts are classified as fair value hedges and mature in October 2005. The swaps modify the company's interest rate exposure by effectively converting the fixed 8.7% senior notes to a floating rate based on the six-month U.S. dollar LIBOR plus a spread (effective rate of 6.76% at December 31, 2002) through their maturities. The company accounts for these fair value hedges in accordance with FASB Statement No. 133, "Accounting for Derivative Instruments and Hedging Activities." The hedges were assessed as effective as the market value adjustments for the hedged notes and the swaps directly offset each other. The fair value of the swaps at December 31, 2002 was $9.5 millio n and is included in "Other assets" in the accompanying consolidated balance sheet. In addition, the fair value adjustment of $9.5 million is included in "Long-term debt."

A summary of contractual obligations as of December 31, 2002 is as follows (in thousands):

		Within		1-3		4-5		After
		1 Year		Years		Years		5 Years			Total
Long-term debt	$	286,348	$	260,661	$	200,238	$	1,346,214	(a)	$	2,093,461
Operating leases		54,937		72,235		39,079		63,703			229,954
Surplus properties		7,222		9,728		4,469		6,375			27,794

	$	348,507	$	342,624	$	243,786	$	1,416,292		$	2,351,209

(a)	Includes zero coupon convertible debentures which may be put to the company in 2006.

Under the terms of various joint venture agreements, the company would be required to pay its pro-rata share, based upon its ownership interests, of the debt of the joint ventures in the event that the joint ventures were unable to meet their obligations. The joint ventures had no debt outstanding at December 31, 2002.

In connection with certain acquisitions, the company may be required to make future payments. During 2002, the company made such payments aggregating $108.5 million in connection with three acquisitions, of which $95.7 million has been capitalized as cost in excess of net assets of companies acquired, and $12.8 million has been recorded as a reduction in capital in excess of par value.

In a limited number of instances the company is contractually required to purchase the shareholder interest held by others in its majority (but less than 100 percent), owned subsidiaries. Such payments, which are dependent upon the occurrence of certain events and the passage of time, are to be based upon a multiple of earnings (as defined in the relevant agreements) over a contractually determined period and, in certain instances, capital structure. In most instances the amount to be paid will not be less than the book value of the shares. Based upon the performance of these businesses through December 31, 2002, such payments would be approximately $13 million ($116 million at December 31, 2001), which would principally be capitalized as cost in excess of net assets of companies acquired offset by the ~~public offering~~carrying value of ~~4,703,500 shares~~the related minority interest. These amounts will change as the performance of ~~common stock~~these subsidiaries change.

million annually. The programs and positions to be affected have been identified and the ~~5-3/4% convertible subordinated debentures, the issuance~~vast majority of personnel have been notified. The majority of the impact of these initiatives will be seen beginning in the second quarter of 2003. The company will record a special restructuring charge ranging from $12 million to $15 million in the first quarter of 2003.

During the first quarter of 2003, the company repurchased an additional $69.3 million of its 8.2% senior ~~secured~~ notes, due in October 2003. The premium paid and ~~U.K. bank borrowings.~~ the deferred financing costs written-off upon the repurchase of this debt, aggregated approximately $2.5 million and will be expensed in the consolidated statement of operations in the first quarter of 2003. As a result of this transaction net interest expense will be reduced by approximately $2.8 million from the date of the repurchase through the original maturity date, if interest rates remain the same.

In ~~September 1992,~~February 2003, the company amended its three-year revolving credit facility to make certain changes to the terms of the facility, including amendments to covenants and a reduction in the size of the facility from $650 million to $450 million of available credit. The three-year revolving credit facility, as amended, bears interest at the applicable eurocurrency rate plus a margin which is based on facility utilization and other factors. The company pays the banks a facility fee of .20% per annum. At December 31, 2002 and 2001, the company had no outstanding borrowings under this facility.

In February 2003, the company renewed its asset securitization program (the "program") and made certain changes to the terms of the program, including amendments to covenants, elimination of a rating trigger that could have made the program unavailable for additional borrowings in the event that the company's senior unsecured credit rating fell below investment grade, and reduction in the size of the program from $750 million to $550 million. Under the program, the company can sell, on a revolving basis, an individual interest in a pool of certain North American trade accounts receivable and retains a subordinated interest and servicing rights to those receivables. At December 31, 2002 and 2001, respectively, there were no receivables sold to and held by third parties under the program, and, as such, the company had no obligations outstanding under this program. The company has not utilized this facility since June 2001.

During the first quarter of 2001, the company completed the sale of $1.5 billion principal amount at maturity of zero coupon convertible senior debentures (the "convertible debentures") due February 21, 2021. The convertible debentures were priced with a yield to maturity, including the accretion of discount, of 4% per annum and may be converted into the company's common stock at a conversion ratio of 11.972 common shares per $1,000 of principal amount at maturity. The company, at its option, may redeem all or part of the convertible debentures (at the issue price plus accrued original issue discount through the date of redemption) any time on or after February 21, 2006. Holders of the convertible debentures may require the company to repurchase the convertible debentures (at the issue price plus accrued original issue discount through the date of repurchase) on February 21, 2006, 2011, or 2016. The net proceeds resulting from this transaction of $671.8 million were used to repay a $400 million short-term credit facility with the remaining amount principally utilized to repay amounts outstanding under the company's then existing global multi-currency credit facility.

At December 31, 2001, working capital decreased by $1.8 billion, or 45.6 percent, compared with December 31, 2000, due to decreased sales and improved asset utilization.

The net amount of cash provided by operating activities in 2001 was $1.7 billion, principally reflecting lower working capital requirements. The net amount of cash used for investing activities was $107.1 million, including $64.3 million for various capital expenditures, $27.3 million for the acquisition of the remaining 10 percent of interest in Scientific and Business Minicomputers, Inc ("SBM") and $15.5 million for various investments. The net amount of cash used for financing activities was $1.1 billion, primarily reflecting the repayment of short-term and long-term debt.

In 2000, working capital increased by 75.6 percent, or $1.7 billion, compared with 1999. Excluding the impact of acquisitions, working capital increased by 31.2 percent, or $692 million, due to increased sales and higher working capital requirements.

The net amount of cash used for operating activities in 2000 was $336.4 million, principally resulting from increased accounts receivable and inventories offset, in part, by increased payables and earnings for the year. The net amount of cash used for investing activities was $1.4 billion, including $1.2 billion primarily for the acquisitions of Wyle, the open computing alliance subsidiary of Merisel, Inc., Jakob Hatteland Electronic AS, and Tekelec Europe, and $80.2 million for various capital expenditures. The net amount of cash provided by financing activities was $1.7 billion, primarily reflecting the issuance of senior debentures, borrowings under the company's commercial paper program, and various short-term borrowings.

Critical Accounting Policies and Estimates

The company's financial statements have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires the company to make significant estimates and judgments that affect the reported amounts of assets, liabilities, revenues, and expenses and related disclosure of contingent assets and liabilities. The company evaluates its estimates, including those related to uncollectible receivables, inventories, intangible assets, income taxes, restructuring and integration costs, and contingencies and litigation, on an ongoing basis. The company bases its estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions o r conditions.

The company believes the following critical accounting policies, among others, involve the more significant judgments and estimates used in the preparation of its consolidated financial statements:

-	The company recognizes revenue in accordance with SEC Staff Accounting Bulletin No. 101, "Revenue Recognition in Financial Statements" ("SAB 101"). Under SAB 101 revenue is recognized when the title and risk of loss have passed to the customer, there is persuasive evidence of an arrangement, delivery has occurred or services have been rendered, the sales price is determinable, and collectibility is reasonably assured. Revenue typically is recognized at time of shipment. Sales are recorded net of discounts, rebates, and returns.

	A portion of the company's business involves shipments directly from its suppliers to its customers. In these transactions, the company is responsible for negotiating price both with the supplier and customer, payment to the supplier, establishing payment terms with the customer, product returns, and has risk of loss if the customer does not make payment. As the principal with the customer, the company recognizes revenue when the company is notified by the supplier that the product is shipped.

	In addition, the company has certain business with select customers and suppliers that is accounted for on an agency basis in accordance with Emerging Issues Task Force ("EITF") No. 99-19 "Reporting Revenue Gross as a Principal versus Net as an Agent." In such cases, the terms of the transactions govern revenue recognition.

The company maintains allowances for doubtful accounts for estimated losses resulting from the inability of its customers to make required payments. If the financial condition of the company's customers were to deteriorate, resulting in an impairment of their ability to make payments, additional allowances would be required.

-
Inventories are recorded at the lower of cost or market. Write-downs of inventories to market value are based upon contractual provisions governing price protection, stock rotation, and obsolescence, as well as assumptions about future demand and market conditions. If assumptions about future demand change and/or actual market conditions are less favorable than those projected by the company, additional write-downs of inventories may be required. Because of the large number of transactions and the complexity of managing the process around price protections and stock rotations, estimates are made regarding adjustments to the book cost of inventories. Actual amounts could be different from those estimated.
-
The company assesses its investments accounted for as available-for-sale on a quarterly basis to determine whether declines in market value below cost are other than temporary. When the decline is determined to be other than temporary, the cost basis for the individual security is reduced and a loss is realized in the period in which it occurs. The company makes such determination based upon the quoted market price and operating results of the investment. In addition, the company evaluates its intent to retain the investment over a period of time which would be sufficient to allow for any recovery in market value.
-
The carrying value of the company's deferred tax assets is dependent upon the company's ability to generate sufficient future taxable income in certain tax jurisdictions. Should the company determine that it would not be able to realize all or part of its deferred tax assets in the future, a valuation allowance to the deferred tax assets would be established in the period such determination was made.
-
The company uses various financial instruments, including derivative financial instruments, for purposes other than trading. Derivatives used as part of the company's risk management strategy are designated at inception as hedges and measured for effectiveness both at inception and on an ongoing basis. The company has also entered into interest rate swap transactions that convert certain fixed rate debt to variable rate debt, effectively hedging the change in fair value of the fixed rate debt resulting from fluctuations in interest rates. The fair value hedges and the hedged debt are adjusted to current market values through interest expense.
-
The company is subject to proceedings, lawsuits, and other claims related to environmental, labor, product and other matters. The company assesses the likelihood of an adverse judgment or outcomes for these matters, as well as the range of potential losses. A determination of the reserves required, if any, is made after careful analysis. The required reserves may change in the future due to new developments.
-
The company has recorded special charges in connection with restructuring its businesses, as well as the integration of acquired businesses. These reserves principally include estimates related to employee separation costs, the consolidation of facilities, contractual obligations, and the valuation of certain assets including accounts receivable, inventories, and investments. Actual amounts could be different from those estimated.
-
In assessing the recoverability of the company's goodwill and other long-lived assets, significant assumptions regarding the estimated future cash flows and other factors to determine the fair value of the respective assets must be made, as well as the related estimated useful lives. If these estimates or their related assumptions change in the future as a result of changes in strategy and/or market conditions, the company may be required to record impairment charges for these assets. On January 1, 2002, the company adopted FASB Statement No. 142, "Goodwill and Other Intangible Assets," and accordingly, discontinued the amortization of goodwill.

Impact of Recently Issued Accounting Standards

In June 2001, the FASB issued Statement No. 143, "Accounting for Asset Retirement Obligations," which addresses the financial accounting and reporting for obligations associated with the retirement of tangible long-lived assets and the related asset retirement costs. Statement No. 143 requires that the fair value of a liability for an asset retirement obligation be recorded in the period incurred and the related asset retirement costs be capitalized as part of the carrying amount of the long-lived asset. The company is required to adopt this Statement in the first quarter of 2003. The adoption thereof is not expected to have a material impact on the company's consolidated financial position and results of operations.

In April 2002, the FASB issued Statement No. 145, "Recission of FASB Statements No. 4, 44, and 64, Amendment of FASB Statement No. 13, and Technical Corrections." For most companies, Statement No. 145 will require gains and losses on the extinguishment of debt to be classified as income or loss from continuing operations rather than as an extraordinary item as previously required. The company is required to adopt this Statement in the first quarter of 2003. All prior period financial statements will be restated to conform to the requirements of this Statement.

In June 2002, the FASB issued Statement No. 146, "Accounting for Costs Associated with Exit or Disposal Activities," which addresses financial accounting and reporting for costs associated with exit or disposal activities and nullifies EITF Issue No. 94-3, "Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity (including Certain Costs Incurred in a Restructuring)." Statement No. 146 requires that a liability for a cost associated with an exit or disposal activity be recognized when the liability is incurred. The company is required to adopt this Statement in the first quarter of 2003. The adoption thereof is not expected to have a material impact on the company's consolidated financial position and results of operations.

In November 2002, the FASB issued Interpretation No. 45, "Guarantor's Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others," ("FIN 45") which clarifies the required disclosures to be made by a guarantor in their interim and annual financial statements about its obligations under certain guarantees that it has issued. FIN 45 also requires a guarantor to recognize, at the inception of the guarantee, a liability for the fair value of the obligation undertaken. The company has adopted the disclosure requirements of FIN 45 for financial statements ending December 31, 2002 and will adopt prospectively the initial recognition and measurement provisions of this Interpretation for guarantees issued or modified after December 31, 2002. The adoption thereof is not expected to have a material impact on the company's consolidated financial position and results of operations.

In January 2003, the FASB issued Interpretation No. 46, "Consolidation of Variable Interest Entities," ("FIN 46") which provides guidance on identifying and assessing interests in variable interest entities to decide whether to consolidate that entity. FIN 46 requires consolidation of existing unconsolidated variable interest entities if the entities do not effectively disperse risk among parties involved. The company is required to adopt this Interpretation in the first quarter of 2003. The company has not yet completed its evaluation of the effect thereof, if any, on its consolidated financial positions and results of operations.

Information Relating to Forward-Looking Statements

This report includes forward-looking statements that are subject to certain 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, changes in product supply, pricing and customer demand, competition, other vagaries in the electronic components and computer products markets, and changes in relationships with key suppliers. 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 forward-looking statements.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk.

The company is exposed to market risk from changes in foreign currency exchange rates and interest rates.

The company, as a large international organization, faces exposure to adverse movements in foreign currency exchange rates. These exposures may change over time as business practices evolve and could have a material impact on the company's financial results in the future. The company's primary exposure relates to transactions in which the currency collected from customers is different from the currency utilized to purchase the product sold in Europe, the Asia/Pacific region, and Latin and South America. At the present time, the company hedges only those currency exposures for which natural hedges do not exist. Natural hedges exist when purchases and sales within a specific country are both denominated in the same currency and therefore no exposure exists to hedge with a foreign exchange contract. In Asia, for example, sales and purchases are primarily denominated in U.S. dollars, resulting in a "natural hedge." Natural hedges exist in most c ountries in which the company operates, although the percentage of natural offsets vs. offsets which need to be hedged by foreign exchange forward contracts ("forward contracts") will vary from country to country. The company does not enter into forward contracts for trading purposes. The risk of loss on a forward contract is the risk of nonperformance by the counterparties, which the company minimizes by limiting its counterparties to major financial institutions. The fair value of the contracts is estimated using market quotes. The notional amount of the contracts at December 31, 2002 and 2001 was $264,795,000 and $151,507,000, respectively. The carrying amounts, which are nominal, approximated fair value at December 31, 2002 and 2001. The translation of the financial statements of the non-North American operations is impacted by fluctuations in foreign currency exchange rates. Had the various average foreign currency exchange rates remained the same during 2002 as compared with 2001, 2002 sales and operat ing income would have been $118 million and $6 million lower, respectively, than the reported results for 2002. Sales and operating income would have fluctuated by approximately $25 million and $1 million, respectively, if average foreign exchange rates had changed by one percentage point in 2002. This amount was determined by considering the impact of a hypothetical foreign exchange rate on the sales and operating income of the company's international operations.

The company's interest expense, in part, is sensitive to the general level of interest rates in the Americas, Europe, and the Asia/Pacific region. The company historically has managed its exposure to interest rate risk through the proportion of fixed rate and variable rate debt in its total debt portfolio. In addition, the company has used interest rate swaps that convert certain fixed rate debt to variable rate debt, effectively hedging the change in fair value of the fixed rate debt resulting from fluctuations in interest rates. At December 31, 2002, as a result of significant generation of operating cash flow, the company had paid down nearly all of its ~~outstanding depositary shares, each representing one-tenth share~~variable rate debt. This reduction in variable rate debt was offset by the aforementioned swaps. As a result, approximately 87 percent of the company's debt was subject to fixed rates, and 13 percent of its ~~$19.375 convertible exchangeable preferred stock, into 3,615,056 shares~~debt was subject to variable rates. Interest expense, net of ~~its common stock.~~interest income, would have fluc tuated by approximately $6 million if average interest rates had changed by one percentage point in 2002. This ~~conversion eliminated~~amount was determined by considering the impact of a hypothetical interest rate on the company's ~~obligation~~average variable rate on investments and outstanding borrowings. This analysis does not consider the effect of the level of overall economic activity that could exist in such an environment. Further, in the event of a change of such magnitude, the company could likely take actions to ~~pay $4.6 million of annual dividends relating~~further mitigate any potential negative exposure to the ~~depositary shares. Early~~change. However, due to the uncertainty of the specific actions that would be taken and their possible effects, the sensitivity analysis assumes no changes in ~~1994,~~ the company purchased an additional 15% share in Spoerle for approximately $23 million in cash. The company financed the acquisition through its U.S. credit agreement and German bank borrowings. Additionally, the company increased its holdings in Silverstar to a majority share and acquired the electronic component distribution business of Field Oy, the largest distributor of electronic components in Finland, and TH:s Elektronik, a leading distributor in Sweden and Norway. -14- company's financial structure.

Item 8. Financial Statements.

REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS

The Board of Directors and Shareholders
Arrow Electronics, Inc.

We have audited the accompanying consolidated balance sheet of Arrow Electronics, Inc. as of December 31, ~~1993~~2002 and ~~1992,~~2001, and the related consolidated statements of operations, cash flows, and shareholders' equity for each of the three years in the period ended December 31, ~~1993.~~2002. Our audits also included the financial statement ~~schedules~~schedule listed in the Index at Item ~~14(a)~~15(a). These financial statements and ~~schedules~~the schedule are the responsibility of the company's management. Our responsibility is to express an opinion on these financial ~~state- ments~~statements and ~~schedules~~the schedule based on our audits.

We conducted our audits in accordance with auditing standards generally accepted ~~auditing standards.~~in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of Arrow Electronics, Inc. at December 31, ~~1993~~2002 and ~~1992,~~2001, and the consolidated results of its operations and its cash flows for each of the three years in the period ended December 31, ~~1993,~~2002, in conformity with accounting principles generally accepted ~~accounting princi- ples.~~in the United States. Also, in our opinion, the related financial statement ~~schedules,~~schedule, when considered in relation to the basic financial statements taken as a whole, ~~present~~presents fairly in all material respects the information set forth therein.

/s/ ERNST & YOUNG LLP

New York, New York
February 13, 2003

24 ~~1994 -15-~~ ~~ARROW ELECTRONICS, INC. CONSOLIDATED BALANCE SHEET (Dollars in thousands) ASSETS~~
Current assets: Cash and short-term investments................................... $ Accounts receivable, less allowance for doubtful accounts ($16,491 in 1993 and $8,268 in 1992)................... Inventories....................................................... Prepaid expenses and other assets................................. Total current assets................................................ Property, plant and equipment at cost Land.............................................................. Buildings and improvements........................................ Machinery and equipment........................................... Less accumulated depreciation and amortization.................... Investments in affiliated companies................................. Cost in excess of net assets of companies acquired, less accumulated amortization ($13,514 in 1993 and $8,421 in 1992)................................................... Other assets........................................................ LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable.................................................. Accrued expenses.................................................. Accrued interest.................................................. Short-term borrowings, including current maturities of long-term debt.................................................. Total current liabilities........................................... Long-term debt...................................................... Deferred income taxes and other liabilities......................... Subordinated debentures............................................. Minority interest................................................... Shareholders' equity: Preferred stock, par value $1: Authorized--2,000,000 shares Issued--66,196 shares in 1992, $19.375 convertible exchangeable preferred stock.............. Common stock, par value $1: Authorized--60,000,000 shares Issued--31,298,335 shares in 1993 and 29,296,457 shares in 1992 Capital in excess of par value.................................... Retained earnings................................................. Foreign currency translation adjustment........................... Less: Treasury shares (10,872 in 1993 and 14,222 in 1992) at cost Unamortized employee stock awards........................... Total shareholders' equity..........................................
December 31, 1993 1992 60,730 $ 3,393 363,084 240,740 434,953 298,736 10,841 5,890 869,608 548,759 5,700 4,634 33,709 27,745 55,148 35,353 94,557 67,732 38,606 31,950 55,951 35,782 13,371 64,893 199,383 97,695 52,991 33,764 $1,191,304 $780,893 $ 190,013 $120,995 104,146 56,730 5,421 1,253 40,965 713 340,545 179,691 153,828 100,433 43,457 24,549 125,000 125,000 71,459 - - 66 31,298 29,296 310,203 285,510 124,689 44,010 (7,492) (6,518) 458,698 352,364 12 19 1,671 1,125 457,015 351,220 $1,191,304 $780,893

MANAGEMENT'S RESPONSIBILITY FOR FINANCIAL REPORTING

The consolidated financial statements of Arrow Electronics, Inc. have been prepared by the company, which is responsible for their integrity and objectivity. These statements, prepared in accordance with generally accepted accounting principles, reflect our best use of judgment and estimates where appropriate. The company also prepared the other information in the annual report and is responsible for its accuracy and consistency with the consolidated financial statements.

The company's system of internal controls is designed to provide reasonable assurance that company assets are safeguarded from loss or unauthorized use or disposition and that transactions are executed in accordance with management's authorization and are properly recorded. In establishing the basis for reasonable assurance, management balances the costs of the internal controls with the benefits they provide. The system contains self-monitoring mechanisms, and compliance is tested through an extensive program of site visits and audits by the company's operating controls (internal audit) staff.

The audit committee of the board of directors, consisting entirely of independent directors, meets regularly with the company's management, operating controls (internal audit) staff, and independent auditors and reviews audit plans and results, as well as management's actions taken in discharging its responsibilities for accounting, financial reporting, and internal controls. Members of management, the operating controls (internal audit) staff, and the independent auditors have direct and confidential access to the audit committee at all times.

The company's independent auditors, Ernst & Young LLP, were engaged to audit the consolidated financial statements in accordance with auditing standards generally accepted in the United States. These standards include a study and evaluation of internal controls for the purpose of establishing a basis for reliance thereon relative to the scope of their audit of the consolidated financial statements.

/s/ William E. Mitchell
William E. Mitchell
President and Chief Executive Officer

/s/ Paul J. Reilly
Paul J. Reilly
Vice President and Chief Financial Officer

ARROW ELECTRONICS, INC.
CONSOLIDATED STATEMENT OF OPERATIONS
(In thousands except per share data)

		Years Ended December 31,

		2002			2001			2000

Sales	$	7,390,154		$	9,487,292		$	12,065,283


Costs and expenses:
Cost of products sold		6,130,581			8,004,657			10,078,800
Selling, general and administrative expenses		1,020,527			1,125,099			1,123,039
Depreciation and amortization		66,141			118,344			90,251
Severance charge		5,375			-			-
Restructuring costs and other special
charges		-			77,147			-
Integration charge		-			9,375			-

		7,222,624			9,334,622			11,292,090


Operating income		167,530			152,670			773,193

Equity in earnings (loss) of affiliated
companies		2,607			(1,203	)		(2,640	)

Loss on investments		-			53,000			-

Interest expense, net		152,590			210,561			169,881


Income (loss) before income taxes and
minority interest		17,547			(112,094	)		600,672

Provision for (benefit from) income taxes		6,166			(35,228	)		244,733


Income (loss) before minority interest		11,381			(76,866	)		355,939

Minority interest		(706	)		(1,279	)		4,005


Income (loss) from continuing operations		12,087			(75,587	)		351,934

Income (loss) from discontinued
operations, net of taxes (including
loss from disposal of $6,120, net of
tax benefit of $4,114, in 2002)		(5,911	)		1,761			5,997


Income (loss) before extraordinary item		6,176			(73,826	)		357,931

Extraordinary loss, net of taxes		(12,949	)		-			-


Income (loss) before cumulative effect
of change in accounting principle		(6,773	)		(73,826	)		357,931

Cumulative effect of change in accounting
principle		(603,709	)		-			-


Net income (loss)	$	(610,482	)	$	(73,826	)	$	357,931


Net income (loss) per basic share:

Income (loss) from continuing operations	$	.12		$	(.77	)	$	3.64
Income (loss) from discontinued operations		(.06	)		.02			.06
Loss from extraordinary item		(.13	)		-			-
Cumulative effect of change in accounting
principle		(6.05	)		-			-

Net income (loss) per basic share	$	(6.12	)	$	(.75	)	$	3.70


Net income (loss) per diluted share:

Income (loss) from continuing operations	$	.12		$	(.77	)		3.56
Income (loss) from discontinued operations		(.06	)		.02			.06
Loss from extraordinary item		(.13	)		-			-
Cumulative effect of change in accounting
principle		(5.97	)		-			-

Net income (loss) per diluted share	$	(6.04	)	$	(.75	)	$	3.62


Average number of shares outstanding:
Basic		99,786			98,384			96,707
Diluted		101,068			98,384			98,833

See accompanying notes. ~~-16-~~ ~~ARROW ELECTRONICS, INC. CONSOLIDATED STATEMENT OF OPERATIONS (In thousands except per share data)~~
~~Years Ended December 31, 1993 1992 1991~~ Sales..............................................$2,535,584 $1,621,535 $1,043,654 Costs and expenses: Cost of products sold............................ 2,022,253 1,279,646 825,709 Selling, general and administrative expenses..... 314,323 225,835 174,094 Depreciation and amortization.................... 17,466 12,273 9,452 2,354,042 1,517,754 1,009,255 Operating income................................... 181,542 103,781 34,399 Equity in earnings of affiliated companies......... 1,673 6,550 5,657 Interest expense................................... 24,987 30,061 29,145 Earnings before income taxes, minority interest and extraordinary charges....................... 158,228 80,270 10,911 Provision for income taxes......................... 64,448 30,026 2,226 Earnings before minority interest and extraordinary charges........................ 93,780 50,244 8,685 Minority interest.................................. 12,221 - - Extraordinary charges.............................. - 5,424 - Net income.........................................$ 81,559 $ 44,820 $ 8,685 Net income used in per common share calculation (reflecting deduction of preferred stock dividends).......................$ 80,679 $ 40,917 $ 4,089 Per common share: Primary: Earnings before extraordinary charges..........$ 2.62 $ 1.81 $ .28 Extraordinary charges.......................... - (.21) - Net income.....................................$ 2.62 $ 1.60 $ .28 Fully diluted: Earnings before extraordinary charges..........$ 2.43 $ 1.73 $ .28 Extraordinary charges.......................... - (.19) - Net income.....................................$ 2.43 $ 1.54 $ .28 Average number of common shares and common share equivalents outstanding: Primary........................................ 30,766 25,547 14,484 Fully diluted.................................. 35,305 29,378 14,484

ARROW ELECTRONICS, INC.
CONSOLIDATED BALANCE SHEET
(In thousands except share data)

		December 31,

		2002			2001
ASSETS

Current assets:
Cash and short-term investments	$	694,092		$	556,861
Accounts receivable, net		1,378,562			1,389,882
Inventories		1,201,271			1,372,797
Prepaid expenses and other assets		59,810			52,892
Assets of discontinued operations		-			98,954


Total current assets		3,333,735			3,471,386


Property, plant and equipment at cost:
Land		42,805			42,288
Buildings and improvements		186,427			164,111
Machinery and equipment		384,689			347,170

		613,921			553,569
Less accumulated depreciation and amortization		(314,403	)		(252,374	)

		299,518			301,195


Investments in affiliated companies		32,527			32,917
Cost in excess of net assets of companies acquired,
net of amortization ($190,940 in 2001)		748,368			1,224,283
Other assets		253,457			326,024
Assets of discontinued operations		-			3,179


	$	4,667,605		$	5,358,984


LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities:
Accounts payable	$	917,271		$	641,454
Accrued expenses		258,774			342,670
Short-term borrowings, including current
portion of long-term debt		286,348			37,289
Liabilities of discontinued operations		-			25,572


Total current liabilities		1,462,393			1,046,985


Long-term debt		1,807,113			2,441,983
Other liabilities		162,850			103,555

Shareholders' equity:
Common stock, par value $1:
Authorized - 160,000,000 shares
Issued - 103,878,000 and 103,856,000 shares
in 2002 and 2001, respectively		103,878			103,856
Capital in excess of par value		510,446			524,299
Retained earnings		912,602			1,523,084
Foreign currency translation adjustment		(145,231	)		(259,694	)


		1,381,695			1,891,545
Less: Treasury stock (3,431,000 and 3,998,000
shares in 2002 and 2001, respectively),
at cost		(91,775	)		(106,921	)
Unamortized employee stock awards		(9,377	)		(12,363	)
Other		(45,294	)		(5,800	)


Total shareholders' equity		1,235,249			1,766,461


	$	4,667,605		$	5,358,984

See accompanying notes. ~~-17-~~ ~~ARROW ELECTRONICS, INC. CONSOLIDATED STATEMENT OF CASH FLOWS (In thousands)~~
~~Years Ended December 31, 1993 1992 1991~~ Cash flows from operating activities: Net income.......................................$ 81,559 $ 44,820 $ 8,685 Adjustments to reconcile net income to net cash provided by (used for) operations: Minority interest in earnings................ 12,221 - - Extraordinary charges........................ - 5,424 - Special integration charge................... - - 9,850 Depreciation and amortization................ 19,898 14,692 12,690 Equity in undistributed earnings of affiliated companies....................... (1,673) 2,551 14 Deferred taxes............................... 4,722 14,100 1,305 Prepaid income taxes......................... - - (3,974) Change in assets and liabilities, net of effects of acquired businesses: Accounts receivable...................... (56,437) (3,276) (3,604) Inventories.............................. (53,079) 8,552 (60) Prepaid expenses and other assets........ 439 137 (159) Accounts payable......................... 28,827 8,133 2,002 Accrued expenses......................... (3,983) (15,737) (11,086) Accrued interest......................... 4,036 (4,594) 174 Other.................................... 5,158 (3,254) (1,719) Net cash provided by operating activities........ 41,688 71,548 14,118 Cash flows from investing activities: Acquisition of property, plant and equipment, net (16,817) (3,451) (3,781) Cash consideration paid for acquired businesses.. (87,875) (37,183) (111,706) Investment in and loans to affiliate............. (7,000) (9,949) - Proceeds from sale of property................... - 4,757 - Net cash used for investing activities...........(111,692) (45,826) (115,487) Cash flows from financing activities: Change in short-term borrowings ................. 16,860 (1,520) (201) Proceeds from long-term debt..................... 61,781 85,533 184,756 Proceeds from common stock offering.............. 17,705 66,394 - Proceeds from issuance of subordinated debentures........................ - 125,000 - Proceeds from preferred stock offering........... - 15,721 - Proceeds from exercise of stock options.......... 3,560 5,737 1,069 Proceeds from minority partners.................. 2,993 - - Repayment of long-term debt and subordinated debentures..................................... (694) (311,656) (72,121) Dividends paid................................... (880) (4,609) (4,596) Financing fees paid.............................. (1,041) (4,467) (6,859) Net cash provided by (used for) financing activities........................... 100,284 (23,867) 102,048 Net increase in cash and short-term investments........................... 30,280 1,855 679 Cash and short-term investments at beginning of year................................ 3,393 1,538 859 Cash and short-term investments from affiliate at beginning of year............................. 27,057 - - Cash and short-term investments at end of year.....$ 60,730 $ 3,393 $ 1,538 Supplemental disclosures of cash flow information: Cash paid during the year for: Income taxes...................................$ 44,114 $ 7,809 $ 3,532 Interest....................................... 19,835 31,461 26,872

ARROW ELECTRONICS, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(In thousands)

		Year Ended December 31,

		2002			2001			2000
Cash flows from operating activities:
Net income (loss)		(610,482	)		(73,826	)		357,931
Income (loss) from discontinued operations, net		(5,911	)		1,761			5,997

Net income (loss) from continuing operations		(604,571	)		(75,587	)		351,934
Adjustments to reconcile net income (loss) from
continuing operations to net cash provided by
(used for) operations:
Minority interest		(706	)		(1,279	)		4,005
Depreciation and amortization		78,783			132,157			99,478
Accretion of discount on convertible debentures		28,840			23,781			-
Equity in (earnings) loss of affiliated
companies		(2,607	)		1,203			2,640
Deferred income taxes		(7,935	)		(21,619	)		(30,348	)
Severance charge, net of taxes		3,214			-			-
Extraordinary charge, net of taxes		12,949			-			-
Cumulative effect of change in accounting
principle		603,709			-			-
Restructuring costs and other special charges,
net of taxes		-			145,079			-
Integration charge, net of taxes		-			5,719			-
Change in assets and liabilities, net of effects
of acquired businesses and dispositions:
Accounts receivable		135,329			1,116,898			(326,371	)
Inventories		240,986			1,435,804			(958,622	)
Prepaid expenses and other assets		(3,986	)		26,334			(43,168	)
Accounts payable		251,153			(890,161	)		490,009
Accrued expenses		(57,781	)		(197,160	)		107,064
Other		(9,505	)		(23,417	)		(33,068	)

Net cash provided by (used for) operating activities		667,872			1,677,752			(336,447	)


Cash flows from investing activities:
Acquisition of property, plant and equipment, net		(51,747	)		(64,355	)		(80,164	)
Proceeds from sale of discontinued operations		41,081			-			-
Cash consideration paid for acquired businesses		(111,876	)		(27,268	)		(1,221,261	)
Investments		(5,832	)		(15,509	)		(36,182	)
Proceeds from sale of investments		6,953			-			-
Proceeds from note receivable		41,667			-			-
Issuance of note receivable		-			-			(50,000	)

Net cash used for investing activities		(79,754	)		(107,132	)		(1,387,607	)


Cash flows from financing activities:
Change in short-term borrowings		(81,321	)		(423,185	)		1,263,561
Change in credit facilities		(178	)		(392,396	)		(421,081	)
Change in long-term debt		(6,019	)		(945,310	)		-
Repurchase of senior notes		(405,192	)		-			-
Proceeds from long-term debt		-			-			868,923
Proceeds from convertible debentures, net		-			668,457			-
Proceeds from exercise of stock options		8,408			21,972			27,989
Sale of accounts receivable under securitization
program		-			251,737			-
Repayments under securitization program		-			(252,865	)		-
Purchase of common stock		-			-			(321	)

Net cash provided for (used by) financing activities		(484,302	)		(1,071,590	)		1,739,071


Effect of exchange rate changes on cash		33,415			2,285			(4,356	)


Net increase in cash and short-term investments		137,231			501,315			10,661

Cash and short-term investments at beginning of year		556,861			55,546			44,885

Cash and short-term investments at end of year	$	694,092		$	556,861		$	55,546


Supplemental disclosures of cash flow information:
Cash paid during the year for:
Income taxes	$	58,443		$	116,153		$	138,686
Interest		143,305			195,778			148,076

See accompanying notes. ~~-18-~~ ~~ARROW ELECTRONICS,INC. CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY (In thousands)~~
Preferred Common Capital Foreign Unamortized Stock Stock in Excess Retained Currency Employee at Par at Par of Par Earnings Translation Treasury Stock Value Value Value (Deficit) Adjustment Shares Awards Total Balance at December 31, 1990 $237 $11,962 $136,624 $ (290) $ 3,614 $ (81) $ (894) $151,172 Issuance of common stock for acquisitions - 7,765 62,116 - - - - 69,881 Exercise of stock options - 182 821 - - 66 - 1,069 Restricted stock awards, net - 11 119 - - (3) (127) - Amortization of employee stock awards - - - - - - 388 388 Net income - - - 8,685 - - - 8,685 Preferred stock cash dividends - - - (4,596) - - - (4,596) Translation adjustments - - - - (763) - - (763) Balance at December 31, 1991 237 19,920 199,680 3,799 2,851 (18) (633) 225,836 Issuance of common stock - 4,704 61,690 - - - - 66,394 Issuance of preferred stock 66 - 15,655 - - - - 15,721 Conversion of preferred stock (237) 3,615 (3,698) - - - - (320) Exercise of stock options - 973 4,753 - - 11 - 5,737 Tax benefits related to exercise of stock options - - 6,615 - - - - 6,615 Restricted stock awards, net - 84 920 - - (12) (992) - Amortization of employee stock awards - - - - - - 500 500 Net income - - - 44,820 - - - 44,820 Preferred stock cash dividends - - - (4,609) - - - (4,609) Translation adjustments - - - - (9,369) - - (9,369) Other - - (105) - - - - (105) Balance at December 31, 1992 66 29,296 285,510 44,010 (6,518) (19) (1,125) 351,220 Issuance of common stock - 562 17,143 - - - - 17,705 Conversion of preferred stock (66) 1,009 (991) - - - - (48) Exercise of stock options - 383 3,164 - - 13 - 3,560 Tax benefits related to exercise of stock options - - 4,142 - - - - 4,142 Restricted stock awards, net - 48 1,235 - - (6) (1,277) - Amortization of employee stock awards - - - - - - 731 731 Net income - - - 81,559 - - - 81,559 Preferred stock cash dividends - - - (880) - - - (880) Translation adjustments - - - - (974) - - (974) Balance at December 31, 1993 $ - $31,298 $310,203 $124,689 $(7,492) $(12) $(1,671) $457,015

ARROW ELECTRONICS, INC.
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
(In thousands)

		Common								Foreign							Unamortized
		Stock	Capital in							Currency							Employee
		At Par	Excess of					Retained		Translation					Treasury		Stock Awards
		Value	Par Value					Earnings		Adjustment					Stock		And Other					Total


Balance at December 31, 1999	$	102,950		$	501,379		$	1,238,979			$	(95,295	)	$	(187,269	)		$	(10,215	)	$	1,550,529

Net income		-			-			357,931				-			-				-			357,931
Translation adjustments		-			-			-				(65,619	)		-				-			(65,619	)

Comprehensive income																						292,312


Exercise of stock options		-			(7,387	)		-				-			35,376				-			27,989
Tax benefits related to
exercise of stock options		-			7,212			-				-			-				-			7,212
Restricted stock awards, net		17			(743	)		-				-			7,645				(6,919	)		-
Amortization of employee
stock awards		-			-			-				-			-				6,262			6,262
Issuance of common stock		850			28,836			-				-			-				-			29,686
Other		-			79			-				-			(321	)			-			(242	)


Balance at December 31, 2000		103,817			529,376			1,596,910				(160,914	)		(144,569	)			(10,872	)		1,913,748

Net loss		-			-			(73,826	)			-			-				-			(73,826	)
Translation adjustments		-			-			-				(98,780	)		-				-			(98,780	)
Unrealized loss on securities		-			-			-				-			-				(5,800	)		(5,800	)

Comprehensive loss																						(178,406	)


Exercise of stock options		-			(9,420	)		-				-			31,392				-			21,972
Tax benefits related to
exercise of stock options		-			3,456			-				-			-				-			3,456
Restricted stock awards, net		39			802			-				-			6,256				(7,097	)		-
Amortization of employee
stock awards		-			-			-				-			-				5,606			5,606
Other		-			85			-				-			-				-			85


Balance at December 31, 2001	$	103,856		$	524,299		$	1,523,084			$	(259,694	)	$	(106,921	)		$	(18,163	)	$	1,766,461

ARROW ELECTRONICS, INC.
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY (continued)
(In thousands)

		Common									Foreign							Unamortized
		Stock		Capital in							Currency							Employee
		At Par		Excess of					Retained		Translation					Treasury		Stock Awards
		Value		Par Value					Earnings		Adjustment					Stock		And Other					Total


Balance at December 31, 2001	$	103,856			$	524,299		$	1,523,084			$	(259,694	)	$	(106,921	)		$	(18,163	)	$	1,766,461

Net loss		-				-			(610,482	)			-			-				-			(610,482	)
Translation adjustments		-				7			-				114,463			-				-			114,470
Unrealized loss on securities		-				-			-				-			-				(2,356	)		(2,356	)
Minimum pension liability
adjustments		-				-			-				-			-				(37,138	)		(37,138	)

Comprehensive loss																							(535,506	)


Exercise of stock options		-				(3,158	)		-				-			11,566				-			8,408
Tax benefits related to
exercise of stock options		-				1,470			-				-			-				-			1,470
Restricted stock awards, net		(2	)			98			-				-			3,640				(3,736	)		-
Amortization of employee
stock awards		-				-			-				-			-				5,714			5,714
Other		24				(12,270	)		-				-			(60	)			1,008			(11,298	)


Balance at December 31, 2002	$	103,878			$	510,446		$	912,602			$	(145,231	)	$	(91,775	)		$	(54,671	)	$	1,235,249

See accompanying notes. ~~-19-~~

ARROW ELECTRONICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 1993, 1992, AND 1991

1. Summary of Significant Accounting Policies

Principles of Consolidation

The consolidated financial statements include the accounts of the company and its ~~consolidated~~majority-owned subsidiaries. ~~The company's investments in its affiliated companies which are not majority-owned are accounted for using the equity method.~~ All significant intercompany transactions are ~~eliminat- ed. Basis~~eliminated.

Use of ~~Presentation Certain prior year~~Estimates

The preparation of financial statements in conformity with generally accepted accounting principles requires the company to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Actual results could differ from those estimates.

Cash and Short-term Investments

Short-term investments which have ~~been reclassified~~a maturity of ninety days or less at time of purchase are considered cash equivalents in the consolidated statement of cash flows. The carrying amount reported in the consolidated balance sheet for short-term investments approximates fair value.

Financial Instruments

The company uses various financial instruments, including derivative financial instruments, for purposes other than trading. Derivatives used as part of the company's risk management strategy are designated at inception as hedges and measured for effectiveness both at inception and on an ongoing basis. The company has also entered into interest rate swap transactions that convert certain fixed rate debt to ~~conform~~variable rate debt, effectively hedging the change in fair value of the fixed rate debt resulting from fluctuations in interest rates. The fair value hedges and the hedged debt are adjusted to ~~the~~ current ~~year's presentation.~~ market values through interest expense.

Inventories

Inventories are stated at the lower of cost or market. Cost is ~~deter- mined~~determined on the first-in, first-out (FIFO) method.

Property, Plant and ~~Depreciation~~Equipment

Property, plant and equipment are stated at cost. Depreciation is computed on the straight-line method for financial reporting purposes and on accelerated methods for tax reporting ~~purpos- es.~~purposes. Leasehold improvements are amortized over the shorter of the term of the related lease or the life of the improvement. Long-lived assets are reviewed for impairment whenever changes in circumstances or events may indicate that the carrying amounts may not be recoverable. If the fair value is less than the carrying amount of the asset, a loss is recognized for the difference.

Investments

Investments are accounted for using the equity method of accounting if the investment provides the company the ability to exercise significant influence, but not control, over an investee. Significant influence is generally deemed to exist if the company has an ownership interest in the voting stock of the investee of between 20 percent and 50 percent, although other factors, such as representation on the investee's Board of Directors, are considered in determining whether the equity method of accounting is appropriate. The company records its investments in equity method investees meeting these characteristics as "Investments in affiliated companies" in the accompanying consolidated balance sheet.

All other equity investments, which consist of investments for which the company does not have the ability to exercise significant influence, are accounted for under the cost method, if private, or as available-for-sale, if

ARROW ELECTRONICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

public. Under the cost method of accounting, investments are carried at cost and are adjusted only for other than temporary declines in realizable value, distributions of earnings, and additional investments. If classified as available-for-sale, the company evaluates the investee's operating performance trend and the publicly quoted market prices of comparable publicly traded companies in order to determine if a decrease in the value of the investment has occurred. Unrealized losses deemed temporary declines in investments classified as available-for-sale are included in the shareholders' equity section in the accompanying consolidated balance sheet in "Other". Equity investments meeting these characteristics are included in "Other assets" in the accompanying consolidated balance sheet.

Cost in Excess of Net Assets of Companies Acquired

The cost in excess of net assets of companies acquired iswas being ~~amor- tized~~amortized on a straight-line basis ~~principally~~ over periods of 20 to 40 ~~years.~~ years through December 31, 2001. The company adopted Financial Accounting Standards Board ("FASB") Statement No. 142, "Goodwill and Other Intangible Assets," effective January 1, 2002. Statement No. 142, among other things, eliminates the amortization of goodwill and requires periodic tests for goodwill impairment. In addition, Statement No. 141, "Business Combinations," requires that all business combinations initiated after June 30, 2001 be accounted for under the purchase method and that certain identifiable intangible assets be recognized as assets apart from goodwill. The company adopted Statement No. 141 as of January 1, 2002. The company has no identifiable intangible assets other than goodwill.

Foreign Currency Translation

The assets and liabilities of foreign operations are translated at the exchange rates in effect at the balance sheet date, with the related translation gains or losses reported as a separate component of ~~share- holders'~~shareholders' equity. The results of foreign operations are translated at the ~~weighted~~monthly average exchange ~~rates~~rates.

Income Taxes

Income taxes are accounted for the year. Gains or losses resulting from foreign currency transactions, other than transactions used to hedge the value of foreign investments, are included in the statement of operations. -20- ARROW ELECTRONICS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CONTINUED Income Taxes Effective January 1, 1991, the company adopted Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes" ("SFAS 109"), which requires that the accounting for income taxes be onunder the liability method. Deferred taxes reflect the tax consequences on future years of differences between the tax bases of assets and liabilities and their financial reporting amounts. ~~Net~~

Income (Loss) Per ~~Common~~ Share ~~Net~~

Basic income (loss) per ~~common~~ share is computed ~~after deducting preferred stock dividends and is based upon~~by dividing income (loss) available to common shareholders by the weighted average number of common shares ofoutstanding for the period. Diluted earnings per share reflects the potential dilution that would occur if securities or other contracts to issue common stock and common stock equivalents outstanding. The average number of common stock equivalents was 631,973, 885,137, and 552,128 for 1993, 1992, and 1991, respectively. Net income per common share on a fully diluted basis assumes that the convertible exchangeable preferred shares and the convertible subordi- nated debentures were ~~converted to common stock at either the beginning of each period~~exercised or the date of issuance. The dividends related to the convertible exchangeable preferred stock and the interest expense on the 5-3/4% convertible subordinated debentures, net of taxes, are eliminat- ed. The 9% convertible subordinated debentures are not assumed to be converted into common ~~stock~~stock.

Comprehensive Income (Loss)

Comprehensive income (loss) is defined as the aggregate change in ~~1992~~shareholders' equity excluding changes in ownership interests. Comprehensive income (loss) consists of foreign currency translation adjustments, unrealized loss on securities, and adjustments to minimum pension liabilities. The foreign currency translation adjustments included in comprehensive income (loss) have not been tax effected as ~~they would~~investments in foreign affiliates are deemed to be permanent.

Stock-Based Compensation

The Company accounts for stock-based compensation using the intrinsic value method prescribed in Accounting Principles Board ("APB") Opinion No. 25 whereby the options are granted at market price, and therefore no compensation costs are recognized. FASB Statement No. 123, "Accounting for Stock-Based Compensation," established accounting and disclosure requirements using a fair-value based method of accounting for stock-based employee

ARROW ELECTRONICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

compensation plans. The company has elected to retain its current method of accounting as described above.

Segment Reporting

Operating segments are defined as components of an enterprise for which separate financial information is available that is evaluated regularly by the chief operating decision makers in deciding how to allocate resources and in assessing performance. The company's operations are classified into two reportable business segments, the distribution of electronic components and the distribution of computer products.

Revenue Recognition

The company recognizes revenue in accordance with SEC Staff Accounting Bulletin No. 101, "Revenue Recognition in Financial Statements" ("SAB 101"). Under SAB 101 revenue is recognized when the title and risk of loss have passed to the customer, there is persuasive evidence of an arrangement, delivery has occurred or services have been ~~antidilutive. For 1991,~~rendered, the ~~aforementioned adjustments were not required as they would have been antidilutive. Cash~~sales price is determinable, and ~~Short-term Investments Short-term investments which have a maturity of ninety days or less~~collectibility is reasonably assured. Revenue typically is recognized at time of ~~purchase~~shipment. Sales are ~~considered cash equivalents~~recorded net of discounts, rebates, and returns.

A portion of the company's business involves shipments directly from its suppliers to its customers. In these transactions, the company is responsible for negotiating price both with the supplier and customer, payment to the supplier, establishing payment terms with the customer, product returns, and has risk of loss if the customer does not make payment. As the principal with the customer the company recognizes revenue when the company is notified by the supplier that the product is shipped.

In addition, the company has certain business with select customers and suppliers that is accounted for on an agency basis in accordance with Emerging Issues Task Force ("EITF") No. 99-19 "Reporting Revenue Gross as a Principal versus Net as an Agent." In such cases, the terms of the transactions govern revenue recognition.

Software Development Costs

The company capitalizes qualifying costs under FASB Statement of Position 98-1 "Accounting for the Costs to Develop or Obtain Software for Internal Use" including certain costs incurred in connection with developing or obtaining software for internal use. Capitalized software costs are amortized on a straight-line basis over the estimated useful life of the software, which is generally three to five years.

Impact of Recently Issued Accounting Standards

In June 2001, the FASB issued Statement No. 143, "Accounting for Asset Retirement Obligations," which addresses the financial accounting and reporting for obligations associated with the retirement of tangible long-lived assets and the related asset retirement costs. Statement No. 143 requires that the fair value of a liability for an asset retirement obligation be recorded in the period incurred and the related asset retirement costs be capitalized as part of the carrying amount of the long-lived asset. The company is required to adopt this Statement in the first quarter of 2003. The adoption thereof is not expected to have a material impact in the company's consolidated financial position and results of operations.

In April 2002, the FASB issued Statement No. 145, "Recission of FASB Statements No. 4, 44, and 64, Amendment of FASB Statement No. 13, and Technical Corrections." For most companies, Statement No. 145 will require gains and losses on the extinguishment of debt to be classified as income or loss from continuing operations rather than as an extraordinary item as previously required. During 2002, the company repurchased certain senior

ARROW ELECTRONICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

notes. The premium paid and the related deferred financing costs written-off upon the repurchase of this debt, aggregating $12,949,000, net of related taxes, is recognized as an extraordinary loss in the company's accompanying consolidated statement of ~~cash flows.~~operations. The ~~carrying amount reported~~company is required to adopt this Statement in the ~~balance sheet~~first quarter of 2003. All prior period financial statements will be restated to conform to the requirements of this Statement.

In June 2002, the FASB issued Statement No. 146, "Accounting for ~~cash~~Costs Associated with Exit or Disposal Activities," which addresses financial accounting and ~~short-term investments approximates~~reporting for costs associated with exit or disposal activities and nullifies EITF Issue No. 94-3, "Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity (including Certain Costs Incurred in a Restructuring)." Statement No. 146 requires that a liability for a cost associated with an exit or disposal activity be recognized when the liability is incurred. The company is required to adopt this Statement in the first quarter of 2003. The adoption thereof is not expected to have a material impact on the company's consolidated financial position and results of operations.

In November 2002, the FASB issued Interpretation No. 45, "Guarantor's Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others," ("FIN 45") which clarifies the required disclosures to be made by a guarantor in their interim and annual financial statements about its obligations under certain guarantees that it has issued. FIN 45 also requires a guarantor to recognize, at the inception of the guarantee, a liability for the fair ~~value. 2. Acquisitions~~value of ~~Electronics Distribution Businesses~~ the obligation undertaken. The company has adopted the disclosure requirements of FIN 45 for financial statements ending December 31, 2002 and will adopt prospectively the initial recognition and measurement provisions of this Interpretation for guarantees issued or modified after December 31, 2002. The adoption thereof is not expected to have a material impact on the company's consolidated financial position and results of operations.

In January ~~1993,~~2003, the FASB issued Interpretation No. 46, "Consolidation of Variable Interest Entities," ("FIN 46") which provides guidance on identifying and assessing interests in variable interest entities to decide whether to consolidate that entity. FIN 46 requires consolidation of existing unconsolidated variable interest entities if the entities do not effectively disperse risk among parties involved. The company is required to adopt this Interpretation in the first quarter of 2003. The company has not yet completed its evaluation of the effect thereof, if any, on its consolidated financial positions and results of operations.

Reclassification

Certain prior year amounts have been reclassified to conform with current year presentation.

2. Acquisitions

During 2002, the company purchased 100 percent of a division of Adecom Srl and acquired a 51 percent interest in Adecom Services Srl, companies located in Italy. The company also purchased an additional ~~15% share, for approximately $25,145,000, in Spoerle Electronic Handelsgessellschaft mbH~~24 percent of Ally, Inc., a Taiwanese company, increasing the company's ownership to 97.4 percent, and ~~Co. and its general partner, Spoerle GmbH (collectively, "Spoerle") the largest distributor of electronic components in Germany, increasing~~increased its holdings in IR Electronic, a distributor in Slovenia, to a 55% majority interest. In May 1993, the company acquired the high-reliability electronic component distribution and value-added service businesses of Zeus Components, Inc. ("Zeus"). In June 1993, the company acquired Microprocessor & Memory Distribution Limited ("MMD"), a U.K.-based electronics distributor which focuses on the distribution of high-technology semiconductor products. In August 1993, the company acquired Components Agent Limited, one of the largest electronics distributors in Hong Kong. During the third quarter of 1993 the company acquired a majority interest in Amitron S.A. and the ATD Group, electronics distributors serving the Spanish and Portuguese markets. In November 1993, the company augmented its French operations by acquiring CCI Electronique.100 percent. The aggregate cost of ~~the~~these acquisitions was $87,875,000, including $4,757,000 for non-competition agreements. Each acquisition was accounted for as a purchase transaction beginning in the month of acquisition. -21- ARROW ELECTRONICS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CONTINUED The following summarizes the allocation of the aggregate consider- ation paid for the aforementionedapproximately $4,104,000.

In connection with certain acquisitions, ~~except Spoerle, to the fair market value of the assets acquired and liabilities assumed by~~ the company (in thousands): Current assets: Accounts receivable ..................$48,010 Inventories........................... 31,726 Other................................. 2,972 $ 82,708 Property, plant and equipment........... 3,876 Costmay be required to make future payments. During 2002, the company made such payments aggregating $108,470,000 in connection with three acquisitions, of which $95,659,000 has been capitalized as cost in excess of net assets of companies acquired, businesses................... 50,797 Other assets............................ 9,113 146,494 Current liabilities: Accounts payable.....................$(30,412) Accrued expenses..................... (35,374) Other................................ (16,789) (82,575) Net consideration paid................. $ 63,919 and $12,811,000 has been recorded as a reduction of capital in excess of par value.

ARROW ELECTRONICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

In ~~February 1992,~~a limited number of instances the company ~~acquired~~is contractually required to purchase the ~~electronics distribution businesses~~shareholder interest held by others in its majority (but less than 100 percent), owned subsidiaries. Such payments, which are dependent upon the occurrence of ~~Lex Service PLC ("Lex")~~certain events and the passage of time, are to be based upon a multiple of earnings (as defined in the ~~U.K.~~relevant agreements) over a contractually determined period and, ~~France, and Spoerle acquired~~in certain instances, capital structure. In most instances the ~~electronics distribution business of Lex in Germany. The aggregate cost of~~amount to be paid will not be less than the acquisitions was $51,983,000, of which $31,983,000 was paid in cash and $20,000,000 was paid in the form of a 12% senior subordinated note due June 1997. The company financed the cash portion of the purchase price through the sale of 66,196 shares of newly-created series B preferred stock and bank borrowings in the U.K. The German business of Lex was purchased by Spoerle for cash of $14,800,000. The acquisitions of the European businesses of Lex are being accounted for as purchase transactions effective February 28, 1992. The following summarizes the allocation of the consideration paid for the electronics distribution businesses in the U.K. and France to the fair marketbook value of the ~~assets acquired and liabilities assumed by~~shares. Based upon the company (in thousands): Current assets: Accounts receivable.................$ 27,479 Inventories......................... 17,947 Other............................... 1,662 $ 47,088 Property, plant and equipment......... 2,975 Costperformance of these businesses through December 31, 2002, such payments would be approximately $13,000,000 ($116,000,000 at December 31, 2001), which would principally be capitalized as cost in excess of net assets of companies acquired businesses.................. 21,065 Other assets......................... 3,150 74,278 Current liabilities: Accounts payable.....................$(10,397) Accrued expenses..................... (26,698) (37,095) Net consideration paid............... $ 37,183 -22- offset by the carrying value of the related minority interest. These amounts will change as the performance of these subsidiaries change.

During 2001, the company acquired the remaining 10 percent interest in Scientific and Business Minicomputers, Inc. The cost of this acquisition was $27,268,000.

3. Investments

The company has a 50 percent interest in Marubun/Arrow, a joint venture with Marubun Corporation, and a 50 percent interest in Altech Industries (Pty.) Ltd., a joint venture with Allied Technologies Limited, a South African electronics distributor. These investments are accounted for using the equity method and are included in "Investments in affiliated companies" in the accompanying consolidated balance sheet.

During 2002, the company paid $6,295,000 to increase its ownership interest in Marubun Corporation, the largest non-affiliated franchised distributor of electronic components and supply chain services in Japan, from 5.4 percent to 8.4 percent. This investment is accounted for as an available-for-sale security using the fair value method and is included in "Other assets" in the accompanying consolidated balance sheet.

The company assesses its investments accounted for as available-for-sale on a quarterly basis to determine whether declines in market value below cost are other than temporary. When the decline is determined to be other than temporary, the cost basis for the individual security is reduced and a loss is realized in the period in which it occurs. The company makes such determination based upon the quoted market price and operating results of the investment. In addition, the company evaluates its intent to retain the investment over a period of time which would be sufficient to allow for any recovery in market value. At December 31, 2002 and 2001, the cost basis, gross unrealized holding losses, and fair value of investments accounted for as available-for-sale were as follows (in thousands):

		2002			2001

Cost basis	$	23,065		$	19,268
Gross unrealized holding losses		(13,195	)		(9,655	)

Fair value	$	9,870		$	9,613

These investments are included in long-term "Other assets" and the related unrealized loss is shown in the shareholders' equity section in the accompanying consolidated balance sheet in "Other".

ARROW ELECTRONICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CONTINUED In September 1991,

Accordingly, the company ~~acquired~~wrote these investments down to their realizable values. In addition, during 2002 the company sold its investments in Mediagrif Interactive Technologies, Inc. and VCE Virtual Chip Exchange, Inc. for $6,964,000. The company's remaining investment in these companies at December 31, 2002 is approximately $2,300,000.

In October 2000, QuestLink Technology, Inc. and ChipCenter LLC, two e-commerce companies in which the company had previously invested, agreed to be merged to form eChips, a sales and marketing channel that serves the global electronics engineering and purchasing communities. The eChips investment, which commenced operations in the first quarter of 2001, was accounted for using the equity method. During 2001, the merged businesses went into liquidation. Prior to liquidation the company's share of eChips' loss was $654,000.

The summarized 2001 financial information below represents the results of operations of eChips from its inception through its liquidation date in the third quarter of 2001 (in thousands):

Net sales	$	22,600
Gross profit		6,000
Loss from continuing operations		(900	)

In addition, eChips had assets of approximately $8,800,000 prior to its liquidation.

4. Discontinued Operations

In May 2002, the company sold substantially all of the assets of Gates/Arrow, a business unit within the company's North American ~~electronics distribution businesses~~Computer Products Group ("NACP") that sold commodity computer products such as printers, monitors, other peripherals, and software in North America. Total cash proceeds are estimated to be $44,700,000, subject to price adjustments, of ~~Lex, consisting~~which $41,081,000 has been collected as of ~~Lex Electron- ics Inc.~~December 31, 2002. The assets sold consisted primarily of accounts receivable, inventories, and ~~Almac Electronics Corporation (collectively the "North American businesses").~~property and equipment. The ~~aggregate cost~~buyer also assumed certain liabilities.

The disposition of the ~~acquisition was $173,257,000, including $7,292,000~~Gates/Arrow operations represents a disposal of a "component of an entity" as defined in FASB Statement No. 144. Accordingly, the company's consolidated financial statements and related notes have been presented to reflect Gates/Arrow as a discontinued operation for all periods.

The company recorded a ~~five-year non-competition agreement, and payment consisted~~loss of ~~$111,706,000~~$6,120,000 (net of ~~cash and 6,839,000 shares~~related taxes of $4,114,000) on the disposal of Gates/Arrow. The loss consists of the ~~company's common stock valued at $61,551,000. The cash portion~~following (in thousands):

Personnel	$	1,250
Facilities		3,144
Professional fees		599
Asset write-down		3,000
Other		2,241

	$	10,234

Personnel costs relate to the termination of 88 individuals employed by the Gates/Arrow business and 57 NACP warehouse personnel due to reduced activity levels as a result of the ~~purchase price was financed~~sale. Facilities costs are principally related to vacated warehouse space no longer required as a result of the sale. The write-down of assets adjusted the carrying value of the assets sold to the agreed value under the ~~company's U.S. credit agreement. The acquisition~~terms of the contract of sale.

ARROW ELECTRONICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The utilization of these charges as of December 31, 2002 is as follows (in thousands):

	Personnel								Professional						Asset
			Costs		Facilities						Fees		Write-down					Other			Total


Original accrual		$	1,250			$	3,144			$	599			$	3,000		$	2,241		$	10,234
2002 payments			(1,052	)			(227	)			(355	)			-			(168	)		(1,802	)
2002 non-cash			-				(904	)			-				(3,000	)		-			(3,904	)

December 31, 2002		$	198			$	2,013			$	244			$	-		$	2,073		$	4,528

Approximately $3,550,000 of the remaining balance will be spent before the end of 2003.

Operating results of Gates/Arrow for the five months ended May 2002 and the years ended December 31, 2001 and 2000 are as follows (in thousands):

		2002			2001		2000


Net sales	$	180,534		$	640,312	$	893,967

Income (loss) from discontinued
operations, net of taxes	$	(5,911	)	$	1,761	$	5,997

The following is a summary of the net assets of Gates/Arrow at December 31, 2001 (in thousands):

Accounts receivable	$	68,676
Inventories		30,278
Property, plant and equipment, net		3,179

Assets of discontinued operations	$	102,133


Accounts payable	$	23,909
Accrued expenses		1,663

Liabilities of discontinued operations	$	25,572

5. Accounts Receivable

In February 2003, the company renewed its asset securitization program (the "program") and made certain changes to the terms of the program, including amendments to covenants, elimination of a rating trigger that could have made the program unavailable for additional borrowing in the event that the company's senior unsecured credit rating fell below investment grade, and reduction in the size of the program from $650,000,000 to $550,000,000. Under the program, the company can sell, on a revolving basis, an individual interest in a pool of certain North American trade accounts receivable and retain a subordinated interest and servicing rights to those receivables. At December 31, 2002 and 2001, respectively, there were no receivables sold to and held by third parties under the program, and, as such, the company had no obligations outstanding under the program. The company has not utilized this facility since June 2001. The key assumptions used in measuring fair value of the retained interests upon the initial sale in early 2001 were as follows:

          Coupon rate of 5.19%
          Estimated future uncollectible accounts of 6.3%
          Coverage life of trade accounts receivable of 48 days

Accounts receivable consists of the following at December 31 (in thousands):

		2002			2001

Accounts receivable	$	738,792		$	737,235
Beneficial interest in receivable
trust		692,375			725,988
Allowance for doubtful accounts		(52,605	)		(73,341	)

	$	1,378,562		$	1,389,882

ARROW ELECTRONICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

6. Cost in Excess of Net Assets of Companies Acquired

As required under the accounting provisions of Statement No. 142, the company completed the two steps required to identify and measure goodwill impairment for each reporting unit as of January 1, 2002. The first step involved identifying all reporting units with carrying values (including goodwill) in excess of fair value determined by reference to comparable businesses ~~has been accounted~~using a weighted average EBIT multiple. The reporting units identified from the first step were then measured for impairment by comparing the units' fair value to their carrying value. Those reporting units having a carrying value substantially exceeding their fair value were identified as being fully impaired, and the company fully wrote down the related goodwill. For reporting units with potential impairment, the company determined the fair value of the assets and liabilities of the unit and wrote down the goodwill to its implied fair value accordingly. The majority of the reporting units' assets and liabilities were inventory, accounts receivable, accounts payable, and accrued expenses, which are carried at fair value. No other impairment indicators have arisen since January 1, 2002.

As a result of the evaluation process the company recorded an impairment charge of $603,709,000, which was recorded as a ~~purchase transaction effective September 27, 1991. In October 1991,~~cumulative effect of change in accounting principle at January 1, 2002. The following table presents the carrying amount of cost in excess of net assets of companies acquired, allocated to reportable segments (in thousands):

	Electronic					Computer
	Components					Products			Total


Carrying value at December 31, 2001		$	902,093		$	322,190		$	1,224,283
Cumulative effect of change in
accounting principle			(281,519	)		(322,190	)		(603,709	)
Additions			88,615			-			88,615
Other (principally foreign currency
translation)			39,179			-			39,179

Carrying value at December 31, 2002		$	748,368		$	-		$	748,368

The company ~~acquired~~does not have any other intangible assets subject to valuation under Statement No. 142.

The following table provides a ~~50% interest in Silverstar Ltd. S.p.A. ("Silverstar") in exchange for 926,000 shares~~reconciliation of ~~common stock valued at $8,330,000. Set forth below is~~reported income (loss) before extraordinary item, net income (loss), and income (loss) per share to the ~~unaudited pro forma combined summary~~adjusted income (loss) before extraordinary items, net income (loss), and income (loss) per share, which reflects the exclusion of ~~operations~~goodwill amortization, net of related taxes for the years ended December 31 ~~1993 and 1992 as though each of the acquisitions had been made on January 1, 1992. 1993 1992 (In~~(in thousands except per share data) Sales..................................$2,658,000 $2,182,000 Operating income....................... 185,000 140,000 Earnings before extraordinary charges.. 83,000 51,000 Net income............................. 83,000 45,000 Per common share: Primary: Earnings before extraordinary charges............ 2.63 1.78 Net income......................... 2.63 1.57 Fully diluted: Earnings before extraordinary charges............ 2.44 1.70 Net income......................... 2.44 1.52 Average number of common shares and common share equivalents outstanding: Primary.............................. 30,994 26,109 Fully diluted........................ 35,533 30,045 The unaudited pro forma combined summary of operations has been prepared utilizing the historical financial statements of Arrow and the acquired businesses. The unaudited pro forma combined summary of operations does not reflect all sales attrition which may result from the combination of Zeus and MMD with Arrow's businesses or the sales attrition which may have resulted from the combination of the European businesses. It also does not reflect the full cost savings the company expects to achieve from the combination of the Zeus and MMD businesses with its own. -23- :

ARROW ELECTRONICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CONTINUED The 1992 unaudited pro forma combined summary of operations does not reflect the cost savings achieved from the combination of the U.K. business of Lex with its own or any sales attrition which may have resulted from the combination. The cost savings achieved result principally from reductions in personnel performing duplicative functions and the elimination of duplicative administrative facilities, selling and stocking locations, and computer and telecommunications equipment. The unaudited pro forma combined summary of operations does not purport to be indicative of the results which actually would have been obtained if the acquisitions had been made at the beginning of 1992. The unaudited pro forma combined summary of operations includes the effects of the purchase price allocation adjustments, the additional interest expense on debt incurred in connection with the acquisitions as if the debt had been outstanding from the beginning of the periods presented, and the issuance of additional shares of the company's preferred stock. The purchase price allocation adjustments include the adjustment of the net assets acquired to fair market value and the estimated costs associated with the integration of the businesses. Such estimated costs include professional fees as well as real estate lease termination costs, costs associated with the elimination of certain redundant franchised lines, and severance and other expenses related to personnel performing duplicative functions, all of which are associated with facilities and personnel of the acquired businesses. Early in 1994, the company acquired an additional 15% interest in Spoerle, bringing its holdings to 70%, and increased its holdings in Silverstar to a majority share. Silverstar will be consolidated into the company's results in 1994. Additionally, the company acquired the electronic component distribution business of Field Oy, the largest distributor of electronic components in Finland, and TH:s Elektronik, a leading distributor in Sweden and Norway. 3. Investments in Affiliated Companies At December 31, 1993, the company had a 50% interest in Silverstar, the largest distributor of electronic components in Italy. Prior to 1993 when it increased its holdings to a 55% majority interest, the company had a 40% interest in Spoerle. The investment in Silverstar is account- ed for using the equity method as was the investment in Spoerle prior to 1993. For the year ended December 31, 1993, Silverstar recorded net sales of $158,546,000, gross profit of $46,111,000, income before taxes of $8,959,000 and net income of $4,000,000. For the year ended December 31, 1992, Spoerle and Silverstar recorded net sales of $487,179,000, gross profit of $135,200,000, income before income taxes of $32,185,000, and net income of $26,082,000. For the year ended December 31, 1991, Spoerle recorded net sales of $226,890,000, gross profit of $66,038,000, -24-

		2002			2001			2000
Income (loss) from continuing operations,
as reported	$	12,087		$	(75,587	)	$	351,934
Add: Goodwill amortization, net of taxes		-			41,601			31,253


Adjusted income (loss) from continuing
operations	$	12,087		$	(33,986	)	$	383,187


Income (loss) before extraordinary item,
as reported	$	6,176		$	(73,826	)	$	357,931
Add: Goodwill amortization, net of taxes		-			41,601			31,253


Adjusted income (loss) before extraordinary item	$	6,176		$	(32,225	)	$	389,184


Net income (loss), as reported	$	(610,482	)	$	(73,826	)	$	357,931
Add: Goodwill amortization, net of taxes		-			41,601			31,253


Adjusted net income (loss)	$	(610,482	)	$	(32,225	)	$	389,184


Basic income (loss) per share:
Income (loss) per share from continuing
operations, as reported	$	.12		$	(.77	)	$	3.64
Add: Goodwill amortization, net of taxes		-			.42			.32


Adjusted income (loss) per basic share from
continuing operations	$	.12		$	(.35	)	$	3.96


Income (loss) per share before extraordinary
item, as reported	$	.06		$	(.75	)	$	3.70
Add: Goodwill amortization, net of taxes		-			.42			.32


Adjusted income (loss) per basic share before
extraordinary item	$	.06		$	(.33	)	$	4.02


Net income (loss) per share, as reported	$	(6.12	)	$	(.75	)	$	3.70
Add: Goodwill amortization, net of taxes		-			.42			.32


Adjusted income (loss) per basic share	$	(6.12	)	$	(.33	)	$	4.02


Diluted income (loss) per share:
Income (loss) per share from continuing
operations, as reported	$	.12		$	(.77	)	$	3.56
Add: Goodwill amortization, net of taxes		-			.42			.32


Adjusted income (loss) per diluted share from
continuing operations	$	.12		$	(.35	)	$	3.88


Income (loss) per share before extraordinary
item, as reported	$	.06		$	(.75	)	$	3.62
Add: Goodwill amortization, net of taxes		-			.42			.32


Adjusted income (loss) per diluted share before
extraordinary item	$	.06		$	(.33	)	$	3.94


Net income (loss) per share, as reported	$	(6.04	)	$	(.75	)	$	3.62
Add: Goodwill amortization, net of taxes		-			.42			.32


Adjusted income (loss) per diluted share	$	(6.04	)	$	(.33	)	$	3.94

ARROW ELECTRONICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CONTINUED income before income

7. Debt

During 2002, the company repurchased senior notes due in the fourth quarter of 2003 with a principal amount of $398,170,000. The premium paid and the related deferred financing costs written-off upon the repurchase of this debt, aggregating $12,949,000, net of related taxes, is recognized as an extraordinary loss in the company's consolidated statement of ~~$26,748,000, and~~operations. As a result of this transaction, net ~~income~~interest expense will be reduced by approximately $31,080,000 from the date of ~~$20,466,000. Such results are exclusive~~repurchase through the 2003 maturity date should interest rates remain the same.

In August 2002, the company entered into a series of interest ~~expense associated~~rate swaps (the "swaps"), with ~~financing~~third parties, with an aggregate notional amount of $250,000,000 in order to hedge the investment and purchase accounting adjustments (including amortization of costs assigned to identifiable assets, principally franchise agreements which are being amortized over 30 years, amortization over 40 years of costschange in ~~excess~~fair value of the company's 8.7% senior notes, due in 2005, as a result of fluctuations in interest rates. These contracts are classified as fair value hedges and mature in ~~net assets acquired, and related income taxes). A summary~~October 2005. The swaps modify the company's interest rate exposure by effectively converting the fixed 8.7% senior notes to a floating rate based on the six-month U.S. dollar LIBOR plus a spread (effective rate of ~~Silverstar's balance sheet~~6.76% at December 31, ~~1993~~2002) through their maturities. The company accounts for these fair value hedges in accordance with FASB Statement No. 133, "Accounting for Derivative Instruments and ~~both affiliates' balance sheets~~Hedging Activities." The hedges were assessed as effective as the market value adjustments for the hedged notes and the swaps directly offset each other. The fair value of the swaps at December 31, ~~1992, exclusive~~2002 was $9,519,000 and is included in "Other assets" in the accompanying consolidated balance sheet. In addition, the fair value adjustment of $9,519,000 is included in "Long-term debt."

In February 2003, the company amended its three-year revolving credit facility to make certain changes to the terms of the aforementioned adjustments, follows: 1993 1992 (In thousands) Current assets........................... $ 94,624 $194,232 Noncurrent assets........................ 4,854 25,946 Total assets ....................... $ 99,478 $220,178 Current liabilities..................... $ 78,836 $106,912 Noncurrent liabilities.................. 7,822 17,603 Equity.................................. 12,820 95,663 Total liabilitiesfacility, including amendments to covenants and ~~equity....... $ 99,478 $220,178~~a reduction in the size of the facility from $650,000,000 to $450,000,000 of available credit. The ~~above amounts have been translated from deutsche marks and lira into U.S. dollars~~three-year revolving credit facility, as amended, bears interest at the applicable eurocurrency rate plus a margin which is based on ~~exchange rates in effect at the end of the respective year or during such year. 4. Long-Term Debt~~facility utilization and Subordinated Debentures Long-term debt at December 31, 1993 and 1992 consisted of the following: 1993 1992 (In thousands) 8.29% senior notes due 2000.................... $ 75,000 $ 75,000 U.S. credit agreement due 1998................. 35,000 - Deutsche mark term loan due 2000............... 28,794 15,442 Pound sterling term loan due 1998.............. 18,596 7,573 Other obligations with various interest rates.. 1,634 3,131 159,024 101,146 Less installments due within one year......... 5,196 713 $ 153,828 $100,433 -25- ARROW ELECTRONICS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CONTINUED The senior notes are payable in three equal annual installments commenc- ing in 1998. The senior notes restrict the payment of cash dividends, limit long-term debt and short-term borrowings, and require net worth and the ratio of operating cash flow to interest expense be maintained at certain designated levels. The company's credit agreement with a group of banks (the "U.S. credit agreement") was amended in January 1994 to release all collater- al, to increase to $175,000,000 the amount of loans available, to reduce the borrowing rate, and to extend the maturity date to January 1998. At February 24, 1994, the company had outstanding borrowings of $30,500,000 under the U.S. credit agreement and unused borrowing capacity of $144,500,000. At the company's option, the interest rate for loans under the U.S. credit agreement is at the agent bank's prevailing prime rate (6% at December 31, 1993) or the U.S. dollar London Interbank Offered Rate ("LIBOR") (3.25% at December 31, 1993) plus .75%.other factors. The company pays the banks a ~~commitment~~facility fee of ~~.25%~~.20% per annum. At December 31, 2002 and 2001, the company had no outstanding borrowings under this facility.

During the first quarter of 2001, the company completed the sale of $1,523,750,000 principal amount at maturity of zero coupon convertible senior debentures (the "convertible debentures") due February 21, 2021. The convertible debentures were priced with a yield to maturity, including the accretion of discount, of 4% per annum ~~on the aggregate unused portion of the U.S. credit agreement. The U.S. credit agreement restricts the payment of cash dividends, limits long-term debt~~ and ~~short-term borrowings, and requires that working capital, net worth, and the ratio of earnings to interest expense~~may be maintained at certain designated levels. The company's wholly-owned German subsidiary has a 50,000,000 deutsche mark term loan from a group of German banks. The loan is payable in installments and bears interest at deutsche mark LIBOR (5.9375% at December 31, 1993) plus .75%. The loan is secured by an assignment of the subsidiary's interest in profit distributions from Spoerle and is guaranteed by the company. The obligations of the company under the guarantee are subordinated to the company's obliga- tions under the U.S. credit agreement and the senior notes. In January 1994, in connection with the acquisition of an addi- tional 15% interest in Spoerle, the company borrowed 25,000,000 deutsche marks from the German banks thereby increasing the loan balance to 75,000,000 deutsche marks. The company's wholly-owned U.K. subsidiary has a loan agreement with a British bank which, as amended in June 1993, includes a L8,000,000 term loan, payable in semi-annual installments from 1994 through 1998, and a revolving credit facility which provides for loans of up to L5,000,000. Borrowings under the loan agreement bear interest at sterling LIBOR (5.5% at December 31, 1993) plus 1.5% and are secured by the assets and common stock of the subsidiary. The loan agreement also requires that operating cash flow, as defined, and the ratio of earnings to interest expense be maintained by the subsidiary at certain designated levels. -26- ARROW ELECTRONICS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CONTINUED In April 1992, the company used the net proceeds of its common stock offering to redeem $46,000,000 of its 13-3/4% subordinated debentures and to repay approximately $13,000,000 of the company's 12% senior subordinated note issued to Lex in connection with the acquisi- tion of the European businesses. The redemption of the subordinated debentures resulted in an extraordinary charge of $4,039,000 ($2,424,000 after taxes), reflecting the net unamortized discount and issuance expenses of the subordinated debentures. In November 1992, the company issued $125,000,000 of 5-3/4% convertible subordinated debentures due in 2002. The debentures are convertible at any time prior to maturity, unless previously redeemed,converted into ~~shares of~~ the company's common stock at a conversion ratio of 11.972 common shares per $1,000 of principal amount at maturity. The company, at its option, may redeem all or part of the convertible debentures (at the issue price plus accrued original issue discount through the date of ~~$33.125.~~redemption) any time on or after February 21, 2006. Holders of the convertible debentures may require the company to repurchase the convertible debentures (at the issue price plus accrued original issue discount through the date of repurchase) on February 21, 2006, 2011, or 2016. The net proceeds resulting from this transac tion of $671,839,000 were used to repay a $400,000,000 short-term credit facility with the remaining amount principally utilized to repay amounts outstanding under the company's then existing global multi-currency credit facility.

At December 31 short-term debt consists of the following (in thousands):

		2002		2001
Current maturities of 8.2%
senior notes, due 2003	$	276,773	$	-
Other short-term borrowings		9,575		37,289

	$	286,348	$	37,289

Other short-term borrowings are principally utilized to support the working capital requirements of certain foreign operations. The weighted average interest rates on these borrowings at December 31, 2002 and 2001 were 3.4 percent and 4.8 percent, respectively.

ARROW ELECTRONICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Long-term debt consists of the following at December 31 (in thousands):

		2002		2001

6.45% senior notes, due 2003	$	-	$	249,945
8.2% senior notes, due 2003		276,773		424,870
8.7% senior notes, due 2005		249,997		249,996
7% senior notes, due 2007		198,978		198,728
9.15% senior debentures, due 2010		199,974		199,970
6 7/8% senior debentures, due 2018		196,776		196,567
7 1/2% senior debentures, due 2027		196,631		196,491
Zero coupon convertible debentures, due 2021		742,712		713,871
Interest rate swaps		9,519		-
Other obligations with various
interest rates and due dates		12,526		11,545

		2,083,886		2,441,983
Less current maturities of long-term debt		276,773		-

	$	1,807,113	$	2,441,983

The 7% senior notes and the 7 1/2% senior debentures are not redeemable prior to their maturity. The 8.2% senior notes, 8.7% senior notes, 9.15% senior debentures, and 6 7/8% senior debentures may be prepaid at the option of the company ~~prior~~subject to October 1995. The net proceeds from the issuance of the debentures together with the proceeds from the private placement of the senior notes were used to redeem the balance of the 13-3/4% subordinated debentures, the 12% subordinated debentures, and the 9% convertible subordinated debentures, to repay the balance of the 12% senior subordi- nated note issued to Lex, to repay the then existing term loan under the U.S. credit agreement, and to provide the company with general working capital. The redemption of the subordinated debentures and repayment of the term loan resulted in an extraordinary charge of $4,925,000 ($3,000,000 after taxes). The charge resulted from the amortization of the net unamortized discount and issuance expenses. The aggregate annual maturities of long-term debt and subordinated debentures for each of the five years in the period ending December 31, 1998 are: 1994--$5,196,000; 1995--$5,053,000; 1996--$5,056,000; 1997-- $6,943,000; and 1998--$74,151,000. The carrying amounts of the company's U.S. credit agreement and foreign borrowings approximate their fair value. "make whole" clauses.

At December 31, ~~1993,~~2002, the ~~closing price of the 5-3/4% convertible subordinated debentures on the New York Stock Exchange was 140% of par. The~~ estimated fair market value of the ~~8.29%~~8.2% senior notes ~~at December 31, 1993~~ was ~~106%~~104 percent of par, the 8.7% senior notes was 101 percent of par, the 7% senior notes was 98 percent of par, the 9.15% senior debentures was 102 percent of par, the 6 7/8% senior debentures was 88 percent of par, the 7 1/2% senior debentures was 83 percent of par, and the convertible debentures was 45 percent of par. 5.The balance of the company's borrowings approximates their fair value.

Annual payments of borrowings during each of the years 2003 through 2007 are $286,348,000, $601,000, $260,060,000, $599,000, and $199,639,000, respectively, and $1,346,214,000 for all years thereafter. Included in borrowings with maturities of greater than five years are zero coupon convertible debentures which may be put to the company in 2006.

The three-year revolving credit facility and the asset securitization program, as amended, limit the incurrence of additional borrowings and require that working capital, net worth, and certain other financial ratios be maintained at designated levels.

8. Income Taxes

The provision for (benefit from) income taxes for ~~1993, 1992, and 1991 consisted~~the years ended December 31 consists of the ~~following: 1993 1992 1991 (In~~following (in thousands) Current Federal..................... $39,106 $14,080 $ 5,200 State....................... 9,432 3,744 1,000 Foreign..................... 9,376 - - 57,914 17,824 6,200 Deferred Federal..................... 2,760 9,869 (3,974) State....................... 552 2,333 - Foreign..................... 3,222 - - 6,534 12,202 (3,974) $64,448 $30,026 $ 2,226 -27- :

		2002			2001			2000

Current
Federal	$	(58,879	)	$	(61,033	)	$	101,421
State		(17,030	)		(13,494	)		24,370
Foreign		9,460			44,840			144,892

	$	(66,449	)	$	(29,687	)	$	270,683


Deferred
Federal	$	57,004		$	(10,209	)	$	(4,160	)
State		9,790			(2,536	)		(1,033	)
Foreign		5,821			7,204			(20,757	)

		72,615			(5,541	)		(25,950	)

	$	6,166		$	(35,228	)	$	244,783

ARROW ELECTRONICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CONTINUED

The principal causes of the difference between the U.S. statutory and effective income tax rates for ~~1993, 1992, and 1991~~the years ended December 31 are as ~~follows: 1993 1992 1991 (In~~follows (in thousands) Provision at statutory rate... $55,380 $27,292 $ 3,710 State taxes, net of federal benefit..................... 6,490 4,011 660 Minority interest............. (4,277) - - Foreign tax rate differential 3,448 - - Effect of equity income and foreign loss................ (385) (1,199) (716) Amortization of goodwill...... 1,124 775 513 Other differences............. 2,960 176 208 Tax benefit of loss and credit carryforwards............... (292) (1,029) (2,149) Income tax provision.......... $64,448 $30,026 $ 2,226 :

		2002			2001			2000

Provision (benefit) at statutory rate	$	6,142		$	(39,233	)	$	210,236
State taxes, net of federal benefit		(4,706	)		(10,420	)		15,169
Foreign tax rate differential		(23,980	)		1,709			5,044
Non-deductible goodwill		-			11,639			8,434
Valuation allowance		17,600			-			-
Other non-deductible expenses		7,516			1,690			1,574
Other		3,594			(613	)		4,276

	$	6,166		$	(35,228	)	$	244,733

For financial reporting purposes, ~~in 1993,~~ income (loss) before income taxes attributable to the United States was $(94,325,000) in 2002, $(230,128,000) in 2001, and $267,990,000 in 2000, and income before income taxes attributable to foreign operations was ~~$120,112,000~~$111,872,000 in 2002, $118,034,000 in 2001, and ~~$38,116,000, respectively.~~ $332,682,000 in 2000.

The significant components of the company's deferred tax assets are as follows: 1993 1992 (In thousands) Inventory reserves............ $ 4,913 $ 8,082 Acquired net operating loss carryforwards............... 2,931 3,662 Other......................... 1,927 1,192 $ 9,771 $12,936 At December 31, 1993, the company had approximately $7,000,000 of acquired U.S. net operating loss carryforwards available for tax return purposes which expire in the years 2001 through 2006. Such carry- forwards are subject to certain annual restrictions on the amount that can be utilized for tax return purposes. In France, the company had approximately $9,500,000 of net operating loss carryforwards, of which approximately $8,900,000 was acquired, which expire through 1997. In accordance with SFAS 109, the cost in excess of net assets of companies acquired has been adjusted by $24,600,000 in conjunction with various acquisitions to reflect the tax benefits of these net operating loss carryforwards and other differences in the tax and book bases of the assets and liabilities acquired. Included in other liabilities are deferred tax liabilities of $11,954,000 and $11,436,000 at December 31, ~~1993~~which are included in "Other assets" in the accompanying consolidated balance sheet consist, consist of the following (in thousands):

		2002			2001

Inventory adjustments	$	15,724		$	41,461
Allowance for doubtful accounts		12,991			26,287
Accrued expenses		10,291			10,214
Integration reserves		55,822			62,724
Restructuring reserves		16,179			27,711
Other		4,368			7,415

		115,375			175,812
Valuation allowance		(17,600	)		-

	$	97,775		$	175,812

Deferred tax liabilities, which are included in "Other liabilities" in the accompanying consolidated balance sheet, were $42,436,000 and ~~1992,~~$39,956,000 at December 31, 2002 and 2001, respectively. The deferred tax liabilities are ~~princi- pally~~principally the result of the differences in the bases of the company's German assets and liabilities for tax and financial reporting purposes. ~~-28-~~

At December 31, 2002, the company had a capital loss carryforward of approximately $43,800,000. This loss will expire in 2006. A full valuation allowance of $17,600,000 has been provided against the deferred tax asset relating to the capital loss carryforward.

ARROW ELECTRONICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CONTINUED 6.

9. Shareholders' Equity

The activity in the number of shares outstanding is as follows (in thousands):

	Common
	Stock		Treasury			Common Stock
	Issued		Stock			Outstanding

Common stock outstanding at December 31, 1999	102,950			7,004			95,946
Restricted stock awards, net of forfeitures	-			(286	)		286
Exercise of stock options	-			(1,323	)		1,323
Shares issues in connection with acquisitions	850			-			850
Other	17			11			6


Common stock outstanding at December 31, 2000	103,817			5,406			98,411
Restricted stock awards, net of forfeitures	-			(234	)		234
Exercise of stock options	-			(1,174	)		1,174
Other	39			-			39


Common stock outstanding at December 31, 2001	103,856			3,998			99,858
Restricted stock awards, net of forfeitures	(2	)		(136	)		134
Exercise of stock options	-			(433	)		433
Other	24			2			22


Common stock outstanding at December 31, 2002	103,878			3,431			100,447

The company has 2,000,000 authorized shares of serial preferred stock with a par value of $1. In February 1992, the company issued 66,196 shares of newly-created series B $19.375 convertible exchangeable preferred stock (the "series B preferred stock") for approximately $15,721,000 to provide partial funding for the acquisition of the European electronics distribution businesses of Lex. In September 1993, the company completed the conversion of all of its outstanding series B preferred stock into 1,009,086 shares of its common stock. This conversion eliminated $1.3 million of annual dividends.

In 1988, the company paid a dividend of one preferred share purchase right on each outstanding share of common stock. Each right, as amended, entitles a shareholder to purchase one one-hundredth of a share of a new series of preferred stock at an exercise price of $50 (the "exercise price"). The rights are exercisable only if a person or group ~~acquired 20%~~acquires 20 percent or more of the company's common stock or announces a tender or exchange offer that will result in such person or group acquiring ~~30%~~30 percent or more of the company's common stock. Rights owned by the person acquiring such stock or transferees thereof will ~~automatical- ly~~automatically be void. Each other right will become a right to buy, at the exercise price, that number of shares of common stock having a market value of twice the exercise price. The rights, which do not have voting rights, ~~expire on March 2, 1998 and~~ may be redeemed by the company at a price of $.01 per right at any time until ten days after a ~~20%~~20 percent ownership position has been acquired. In the event that the company merges with, or transfers ~~50%~~50 percent or more of its consolidated assets or ~~earning~~earnings power to, any person or group after the rights become exercisable, holders of the rights may purchase, at the exercise price, a number of shares of common stock of the acquiring entity having a market value equal to twice the exercise price. 7.The rights, as amended, expire on March 1, 2008.

10. Special Charges

Severance Charge

During 2002, the company's chief executive officer resigned. As a result, the company recorded a severance charge totaling $5,375,000 ($3,214,000 net of related taxes) principally based on the terms of his employment agreement. Included therein are provisions principally related to salary continuation, retirement benefits, and the vesting of restricted stock and options.

Restructuring Costs and Other Special Charges

ARROW ELECTRONICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

charges include costs associated with headcount reductions, the consolidation or closing of facilities, valuation adjustments to inventory and Internet investments, the termination of certain customer engagements, and various other miscellaneous items. Of the total charge of $227,622,000, $174,622,000 reduced operating income (including $97,475,000 in cost of products sold) and $53,000,000 was recorded as a loss on investments. There were no material revisions to these actions and their related costs.

The total restructuring costs and other special charges, excluding Internet investment write-down, are comprised of the following as of December 31, 2002 (in thousands):

	Personnel									Customer			Inventory						IT
			Costs		Facilities				Terminations				Write-down				and other					Total


December 2000		$	-			$	2,052			$	-			$	-			$	-		$	2,052
Additions (a)			15,200				10,063				38,800				97,475				13,084			174,622
Payments			(10,279	)			(1,008	)			-				-				(1,352	)		(12,639	)
Non-cash usage			-				(578	)			(14,600	)			(26,320	)			(5,976	)		(47,474	)

December 2001			4,921				10,529				24,200				71,155				5,756			116,561
Reclassification			1,028				-				(2,097	)			-				1,069			-
Payments			(5,949	)			(1,945	)			-				-				(2,982	)		(10,876	)
Non-cash usage			-				-				(16,738	)			(64,158	)			(864	)		(81,760	)

December 2002		$	-			$	8,584			$	5,365			$	6,997			$	2,979		$	23,925

(a)	Represents costs associated with the restructuring costs and other special charges recorded in the third quarter of 2001.

The company recorded a charge of $15,200,000 related to personnel costs. The total number of positions eliminated was nearly 1,200, out of the then existing worldwide total of 14,150, or approximately 9 percent. The actual number of employees terminated approximated original estimates. The reduction in headcount was principally due to reduced activity levels across all functions throughout the company. There was no single group of employees or business segment that was impacted by this restructuring. Instead, it impacted both exempt and non-exempt employees across a broad range of functions including sales and marketing, warehouse employees, employees working in value-added centers, finance personnel in credit/collections and accounts payable, human resources, and IT. The company's approach was to reduce its headcount in the areas with reduced activities. Of the total positions eliminated, approximately 1,000 were completed by December 31, 2001 and the remaining positions were elimi nated by March 31, 2002. The company also consolidated or closed fifteen facilities and accordingly recorded a charge of $10,063,000 related to vacated leases, including write-offs of related leasehold improvements.

The company also terminated certain customer programs principally related to services not traditionally provided by the company because they were not profitable. The $38,800,000 provision included charges for inventory these customers no longer required, pricing disputes, and non-cancelable purchase commitments.

The company recorded an inventory provision of $97,475,000 which was included in cost of products sold. The provision related to a substantial number of parts. In addition to North America, provisions were recorded in Europe and the Asia/Pacific region. The inventory charge was principally related to product purchased for single or limited customer engagements and in certain instances from non-traditional, non-franchised sources for which no contractual protections such as return rights, scrap allowance, or price protection exist. The inventory provision was principally for electronic components. The parts were written down to estimated realizable value; in many cases to estimated scrap value or zero. At December 31, 2002, approximately 60 percent of the inventory for which a provision was made had been scrapped and approximately 30 percent of this inventory was sold at its reduced carrying value with minimal impact on gross margins. The remaining inventory provision of approximately $ 7,000,000 at December 31, 2002 relates

ARROW ELECTRONICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

to inventory which will primarily be disposed of or scrapped by the end of 2003.

Also included in the charge was $13,084,000 for IT systems and other miscellaneous items related to logistics support and service commitments no longer being used, hardware and software not utilized by the company, professional fees related to contractual obligations of certain customer terminations, and the write-off of an investment in an IT-related service provider.

Internet Investments Write-Down

As a result of the significant decline in the Internet sector during 2001, the company assessed the value of its investments early in the third quarter of 2001. In order to assess the value of its investments, the company selected a pool of comparable publicly traded companies and obtained the stock price of each company at the date of the company's original investment and in the third quarter of 2001. The percentage change in the average stock price was applied to the related investment to determine the change in the value of the investment, modified to the extent that the entity had cash to repay the investors. The company determined that certain of these investments had experienced an other than temporary decline in their realizable values. Accordingly, in the third quarter of 2001, the company recorded a charge of $53,000,000 to write various Internet investments down to their realizable values.

The following is an analysis of the special charge recorded in 2001 and the percentage of ownership related to the Internet investments at December 31, 2002 ($ in thousands):

		%
	Charge	Ownership
eChips
ChipCenter investment	$ 8,378	-
Loans, included in other current assets	9,212	-
Econnections	19,500	-
Buckaroo	9,000	-
VCE	2,400	-
Viacore	4,510	5.6

	$53,000

At December 31, 2002, the remaining book value of these investments was $2,293,000.

In connection with the restructuring costs and other special charges discussed above, operating expenses declined, in part, as a result of the reduction in workforce, cutbacks in discretionary spending, deferral of non-strategic projects, and consolidation of facilities initiated in mid-2001 as a result of the significant reduction in sales and related activities. The full financial impact of these actions, commencing in the second quarter of 2002, is reflected as a reduction in selling, general and administrative expenses. These cost savings may not be permanent as increased activity levels resulting from, among other factors, increased revenues may require an increase in headcount and other increased spending. There have been no significant changes made to this charge and the actual cost savings achieved were not materially different than those expected.

Integration Charges

In 2001, the company recorded an integration charge of $9,375,000 ($5,719,000 net of related taxes) related to the acquisition of Wyle Electronics and Wyle Systems (collectively, "Wyle"). Of the total amount recorded, $1,433,000 represented costs associated with the closing of various overlapping office facilities and distribution and value-added centers, $4,052,000 represented costs associated with the termination of approximately 240 personnel largely performing duplicate functions, $2,703,000 represented costs associated with

ARROW ELECTRONICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

outside services related to the conversion of systems and certain other costs of the integration of Wyle into the company, and $1,187,000 represented the write-down of property, plant and equipment to estimated fair value.

Total integration charges, comprised of the integration charge recorded in connection with the acquisition of Wyle together with various previous acquisitions, are as follows at December 31, 2002 (in thousands):

	Personnel										Asset				IT
			Costs		Facilities				Write-down				and other					Total


December 2000		$	16,922			$	38,988			$	8,134			$	19,290		$	83,334
Additions (a)			4,789				(314	)			1,217				10,009			15,701
Reversals			-				(11,814	)			-				(500	)		(12,314	)
Payments			(16,036	)			(7,721	)			(898	)			(13,184	)		(37,839	)
Foreign currency
translation			50				282				101				(378	)		55
Non-cash usage			-				-				(6,132	)			-			(6,132	)

December 2001			5,725				19,421				2,422				15,237			42,805
Payments			(2,972	)			(3,079	)			(189	)			(5,308	)		(11,548	)
Reversals			-				(7	)			-				(407	)		(414	)
Foreign currency
translation			259				(1,153	)			(223	)			1,108			(9	)
Non-cash usage			-				(30	)			(1,573	)			(2,406	)		(4,009	)

December 2002		$	3,012			$	15,152			$	437			$	8,224		$	26,825

(a)	Represents costs associated with the acquisition and integration of Wyle, the open computing alliance subsidiary of Merisel, Inc., and Jakob Hatteland.

In aggregate, at December 31, 2002, the remaining restructuring costs and other special charges and integration charges of $50,750,000, of which $35,850,000 is expected to be spent in cash, as of December 31, 2002 will be utilized as follows:

-	The personnel accrual of $3,012,000 will be principally utilized to cover the extended costs associated with the termination of international personnel and is expected to be utilized over the next 18 months.

-	The facilities accruals totaling $23,736,000 relate to terminated leases with expiration dates through 2010. Approximately $6,745,000 will be paid in 2003. The minimum lease payments for these leases are approximately, $5,782,000 in 2004, $4,163,000 in 2005, $3,966,000 in 2006, $1,027,000 in 2007, and $2,053,000 thereafter.

-	The customer terminations accrual of $5,365,000 will be utilized before the end of 2003.

-	Asset and inventory write-downs of $7,434,000 relate primarily to inventory write-downs, the majority of which will be disposed of or scrapped before the end of 2003.

-	IT and Other of $11,203,000 primarily represents leases for hardware and software, consulting contracts for logistics services, and professional fees related to contractual obligations for certain customer terminations with expected utilization dates through 2005. Approximately $6,888,000 will be utilized in 2003, $2,690,000 in 2004, and $1,625,000 in 2005.

ARROW ELECTRONICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

11. Income (Loss) Per Share

The following table sets forth the calculation of basic and diluted income (loss) per share ("EPS") for the years ended December 31 (in thousands except per share data):

		2002(a)			2001(b)			2000
Income (loss) from continuing operations used for
basic EPS	$	12,087		$	(75,587	)	$	351,934
Income (loss) from discontinued operations,
net of taxes		(5,911	)		1,761			5,997


Income (loss) before extraordinary item		6,176			(73,826	)		357,931

Extraordinary loss, net of taxes		(12,949	)		-			-


Income (loss) before cumulative effect of change
in accounting principle		(6,773	)		(73,826	)		357,931

Cumulative effect of change in accounting principle		(603,709	)		-			-


Net income (loss)	$	(610,482	)	$	(73,826	)	$	357,931


Weighted average shares outstanding for basic EPS		99,786			98,384			96,707

Net effect of dilutive stock options and restricted
stock awards		1,282			-			2,126


Weighted average shares outstanding for diluted EPS		101,068			98,384			98,833


Net income (loss) per basic share:

Income (loss) from continuing operations	$	.12		$	(.77	)	$	3.64
Income (loss) from discontinued operations		(.06	)		.02			.06
Loss from extraordinary item		(.13	)		-			-
Cumulative effect of change in accounting
principle		(6.05	)		-			-


Net income (loss) per basic share	$	(6.12	)	$	(.75	)	$	3.70


Net income (loss) per diluted share:

Income (loss) from continuing operations	$	.12		$	(.77	)	$	3.56
Income (loss) from discontinued operations		(.06	)		.02			.06
Loss from extraordinary item		(.13	)		-			-
Cumulative effect of change in accounting
principle		(5.97	)		-			-


Net income (loss) per diluted share (c)	$	(6.04	)	$	(.75	)	$	3.62

(a)	Excluding the severance charge of $5,375,000 ($3,214,000 net of related taxes), net income and income per share from continuing operations on a basic and diluted basis would have been $15,301,000 and $.15, respectively, for the year ended December 31, 2002.

(b)	Excluding the restructuring costs and other special charges of $227,622,000 ($145,079,000 net of related taxes) and the integration charge of $9,375,000 ($5,719,000 net of related taxes), net income and income per share from continuing operations on a basic and diluted basis would have been $75,211,000, $.76, and $.75, respectively, for the year ended December 31, 2001.

(c)	Net income (loss) per diluted share for the years ended December 31, 2002 and 2001 exclude the effect of 18,242,000 and 15,587,000 shares, respectively, related to convertible debentures. In addition, the effect of options to purchase 6,817,730, 1,136,000, and 1,032,740 shares for the years ended December 31, 2002, 2001, and 2000, were excluded from the computation. The impact of such common stock equivalents are excluded from the calculation of net income (loss) per share on a diluted basis as their effect is anti-dilutive.

ARROW ELECTRONICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

12. Employee Stock Plans

Restricted Stock Plan

Under the terms of the Arrow Electronics, Inc. Restricted Stock Plan (the "Plan"), a maximum of ~~1,330,000~~4,760,000 shares of common stock may be awarded at the discretion of the ~~Board~~board of ~~Directors~~directors to key employees of the company. ~~The company believes that as many as 50 employees may be considered for awards under the Plan.~~

Shares awarded under the Plan may not be sold, assigned, ~~trans- ferred,~~transferred, pledged, hypothecated, or otherwise disposed of, except as provided in the Plan. Shares awarded become free of ~~such~~forfeiture restrictions (i.e., vest) generally over a four-year period. The company awarded ~~40,000 shares of common stock in early 1994 to 35 key employees in respect of 1993, 49,250~~378,250 shares of common stock to ~~35 key employees during 1993 (including 39,750 shares of common stock in early 1993 to 31 key~~145 employees in respect of ~~-29- ARROW ELECTRONICS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CONTINUED 1992), 84,000~~2002, 243,615 shares of common stock to ~~32 key employees during 1992 (including 63,000 shares awarded in early 1992 to 30 key~~145 employees in respect of ~~1991),~~2001, and ~~11,000~~345,984 shares of common stock to ~~five key employ- ees during 1991.~~ 158 employees in respect of 2000.

Forfeitures of shares awarded under the Plan were ~~7,625, 11,875,~~81,229 during 2002, 45,679 during 2001, and ~~2,875~~31,624 during ~~1993, 1992, and 1991,~~2000, respectively. The aggregate market value of outstanding awards under the Plan at the respective dates of award is being amortized over ~~a four-year~~the vesting period, and the unamortized balance is included in shareholders' equity as ~~unamor- tized~~unamortized employee stock awards.

Stock Option ~~Plan~~ Plans

Under the terms of ~~the~~various Arrow Electronics, Inc. Stock Option ~~Plan~~Plans (the "Option ~~Plan"~~Plans"), both nonqualified and incentive stock options for an aggregate of 23,900,000 shares of common stock were authorized for grant to ~~key~~directors, employees, and eligible non-employees. Incentive stock options may only be granted to employees. The nonqualified stock options to employees are granted at prices determined by the ~~Board~~board of ~~Directors in~~directors at its discretion, ~~or, in~~provided, however that the ~~case~~purchase price may not be less than the fair market value of the shares at the dates of grant. The nonqualified stock options granted to directors and incentive stock options are granted at prices equal to the fair market value of the shares at the ~~dates~~date of grant. Options granted under the Option Plans after May 1997 become exercisable in equal installments over a four-year period. Previously, options became exercisable over a two- or three-year period. Options currently outstanding have terms of ten years and become exercisable in equal annual installments over two or three- year periods from date of grant. In 1993, the shareholders of the company approved an increase in the number of shares of common stock authorized for stock options to an aggregate of 4,500,000 shares. years.

The following information relates to the Option ~~Plan: Year~~Plans for the years ended December ~~31, 1993 1992 1991 Options~~31:

			Average			Average			Average
			Exercise			Exercise			Exercise
	2002		Price	2001		Price	2000		Price


Options outstanding
at beginning	9,925,622		$23.94	10,405,615		$23.22	9,846,680		$21.90
of year
Granted	1,605,300		16.05	1,149,250		25.00	2,327,764		27.55
Exercised	(435,289	)	19.47	(1,173,868	)	18.72	(1,324,321	)	21.09
Forfeited	(526,537	)	23.53	(455,375	)	23.72	(444,508	)	22.96

Options outstanding
at end of year	10,569,096		$22.94	9,925,622		$23.94	10,405,615		$23.22

Prices per share of
options outstanding	$11.94-41.25			$11.94-41.25			$5.94-41.25

Options available for future grant:

Beginning of year	2,929,069			3,622,944			5,533,128
End of year	4,250,306			2,929,069			3,622,944

ARROW ELECTRONICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The following table summarizes information about stock options outstanding at ~~beginning~~December 31, 2002:

	Options Outstanding			Options Exercisable


		Weighted	Weighted		Weighted
Maximum		Average	Average		Average
Exercise	Number	Remaining	Exercise	Number	Exercise
Price	Outstanding	Contractual Life	Price	Exercisable	Price

$20	2,463,847	86 months	$15.12	1,022,614	$16.55
25	2,848,892	58 months	21.22	2,477,777	21.26
30	4,082,010	84 months	26.17	1,766,285	26.15
35+	1,174,347	65 months	32.31	1,140,449	32.29

All	10,569,096	76 months	22.94	6,407,125	23.82

The company applies APB Opinion No. 25, "Accounting for Stock Issued to Employees," and related interpretations in accounting for the Option Plans. If compensation expense for the company's various stock option plans had been determined based upon fair value at the grant dates for awards under those plans in accordance with FASB Statement No. 123, "Accounting for Stock-Based Compensation," then the company's pro forma net earnings (loss), basic and diluted earnings (loss) per common share would have been as follows for the years ended December 31:

		2002			2001			2000

Net income (loss), as reported	$	(610,482	)	$	(73,826	)	$	357,931
Deduct: Total stock-based employee compensation
expense determined under fair value based
method for all awards, net of related taxes		(10,131	)		(9,139	)		(6,144	)

Pro forma net income (loss)	$	(620,613	)	$	(82,965	)	$	351,787


Earnings (loss) per share:
Basic-as reported	$	(6.12	)	$	(.75	)	$	3.70

Basic-pro forma	$	(6.22	)	$	(.84	)	$	3.64


Diluted-as reported	$	(6.04	)	$	(.75	)	$	3.62

Diluted-pro forma	$	(6.14	)	$	(.84	)	$	3.54

The estimated weighted average fair value, utilizing the Black-Scholes option-pricing model, at the date of year...... 989,755 1,532,504 1,503,780 Granted.................. 367,250 473,900 268,550 Exercised................ (392,934) (978,446) (202,225) Forfeited................ (36,337) (38,203) (37,601) Options outstanding at end of year............ 927,734 989,755 1,532,504 Pricesoption grant, during 2002, 2001, and 2000 was $7.77, $12.30, and $12.25 per share, of options outstanding....$3.63-39.75 $3.63-28.25 $3.63-14.63 Average price per share of options exercised... $9.06 $5.86 $5.29 Average price per share of options outstanding. $17.02 $9.73 $6.21 Exercisable options...... 715,170 665,821 1,145,599 Options available for future grant: Beginning of year.... 748,959 1,184,656 165,605 End of year.......... 1,918,046 748,959 1,184,656 respectively. The weighted average fair value was estimated using the following assumptions:

	2002	2001	2000
Expected life (months)	48	48	48
Risk-free interest rate (percent)	2.7	3.6	5.5
Expected volatility (percent)	60	55	50

There is no expected dividend yield.

Stock Ownership Plan

The company maintains a noncontributory employee stock ownership plan which enables most North American employees to acquire shares of the company's common stock. Contributions, which are determined by the ~~Board~~board of ~~Directors,~~directors, are in the form of ~~company~~ common stock or cash which is used to purchase the company's common stock for the benefit of participating employees. Contributions to the plan for ~~1993, 1992,~~2002, 2001, and ~~1991 aggregated $2,525,000, $2,360,000,~~2000 amounted to $10,388,000, $10,040,000, and ~~$1,550,000,~~$8,128,000, respectively. ~~-30-~~

ARROW ELECTRONICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CONTINUED 8. Retirement

13. Employee Benefit Plans

Defined Contribution Plan

The company has a defined contribution plan for eligible ~~employ- ees,~~employees which qualifies under Section 401(k) of the Internal Revenue Code. The company's contribution to the plan, which is based on a specified percentage of employee contributions, amounted to ~~$2,286,000, $2,131,000,~~$8,577,000, $9,026,000, and ~~$1,302,000~~$7,279,000 in ~~1993, 1992,~~2002, 2001, and ~~1991,~~2000, respectively. 9.Certain domestic and foreign subsidiaries maintain separate defined contribution plans for their employees and made contributions thereunder which amounted to $2,205,000, $1,863,000, and $2,510,000 in 2002, 2001, and 2000, respectively.

Supplemental Executive Retirement Plans

The company maintains an unfunded Supplemental Executive Retirement Plan (the "SERP") under which the company will pay supplemental pension benefits to certain employees upon retirement. There are 21 current and former corporate officers participating in this plan. The board of directors determines those employees who are eligible to participate in the SERP.

In 2002, the company amended the plan to provide for the pension benefits to be based on a percentage of average final compensation, based on years of participation in the SERP, rather than following the prior practice of a fixed dollar amount per year of service or in certain instances the board of directors determining the annual benefit. As amended, the SERP permits early retirement, with payments at a reduced rate, based on age and years of service subject to a minimum retirement age of 55 (formerly 50). Participants whose accrued rights under the SERP prior to this amendment would have been adversely affected by the amendment will continue to be entitled to such greater rights. In addition, if there is a change of control of the company within 24 months after such change and the employment of a participant, who is at least age 50, is involuntarily terminated other than for cause or disability, or such participant terminates employment for good reason, the participant will receive the annual pension accrued through the date of termination commencing at age 60. Previously this would have resulted in the payment of the full pension amount commencing immediately.

The benefit obligation at December 31, 2002 and 2001 was $32,376,000 and $22,313,000, respectively. The assumptions utilized in determining this amount include a discount rate of 5.5% in 2002 and 2001.

Wyle also sponsored a supplemental executive retirement plan ("Wyle SERP plan") for certain of its executives. Benefit accruals for the Wyle SERP plan were frozen as of December 31, 2000. As of December 31, 2002 and 2001, the benefit obligation was $6,965,000and $6,738,000, respectively. The assumptions utilized in determining this amount include a discount rate of 6.75% and 7.25% in 2002 and 2001, respectively.

Expenses relating to the plans were$4,972,000, $3,548,000, and $4,597,000 for the years ended December 31, 2002, 2001, and 2000, respectively.

Defined Benefit Plan

Wyle provided retirement benefits for certain employees under a defined benefit plan. Benefits under this plan were frozen as of December 31, 2000 and former participants may now participate in the company's employee stock ownership plan. Pension information for the years ended December 31 is as follows (in thousands):

ARROW ELECTRONICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

		2002			2001
Changes in benefit obligation:
Benefit obligation at beginning of year	$	75,866		$	75,321
Interest cost		5,423			5,402
Actuarial (gain) loss		5,988			(739	)
Benefits paid		(4,717	)		(4,118	)

Benefits obligation at end of year	$	82,560		$	75,866


Changes in plan assets:
Fair value of plan assets at beginning of year	$	76,564		$	80,219
Actual return on plan assets		(7,674	)		112
Company contributions		847			351
Benefits paid		(4,717	)		(4,118	)

Fair value of plan assets at end of year	$	65,020		$	76,564


Funded status of the plan:
Funded status	$	(17,540	)	$	698
Unamortized net loss		27,392			7,446

Net amount recognized	$	9,852		$	8,144


Weighted average assumptions:
Discount rate		6.75%			7.25%
Expected return on assets		8.50%			8.50%

At December 31, 2002, the company had minimum pension liabilities of $37,138,000 related to the SERP plan, Wyle SERP plan, and the defined benefit plan, which are recorded in the shareholders' equity section in "Other", with an offset to "Other liabilities" in the accompanying consolidated balance sheet. Minimum pension liability adjustments were required to recognize a liability equal to the unfunded accumulated benefit obligation based principally on the market value of the plan assets that decreased due to asset performance.

14. Lease Commitments

The company leases certain office, ~~warehouse,~~distribution, and other property under ~~noncancellable~~noncancelable operating leases expiring at various dates through ~~2016.~~2053. Rental ~~expenses of noncancellable~~expense under noncancelable operating leases, net of sublease income of $3,089,000, $3,212,000, and $3,151,000 in 2002, 2001, and 2000, respectively, amounted to ~~$16,375,000~~$61,206,000 in ~~1993, $12,943,000~~2002, $59,753,000 in ~~1992,~~2001, and ~~$11,588,000~~$47,863,000 in ~~1991.~~2000. Aggregate minimum rental commitments under all ~~noncancellable~~noncancelable operating leases, ~~approximate $69,922,000,~~ exclusive of real estate taxes, ~~insur- ance,~~insurance, and leases related to facilities closed ~~in connection with~~as a result of the integration of acquired businesses and the ~~acquired businesses. Such~~restructuring of the company, are $54,937,000 in 2003, $43,595,000 in 2004, $28,640,000 in 2005, $20,867,000 in 2006, $18,212,000 in 2007, and $63,703,000 thereafter. Minimum rental commitments ~~on an annual basis are: 1994-$15,012,000; 1995-$12,145,000; 1996-$9,858,000; 1997- $6,859,000; 1998-$5,539,000 and $20,509,000 thereafter. The company's obligations under capitalized~~for leases ~~are reflected~~related to facilities closed as a ~~component~~result of the integration of acquired businesses and the restructuring of the company are $7,222,000 in 2003, $6,102,00 0 in 2004, $3,626,000 in 2005, $3,412,000 in 2006, $1,057,000 in 2007, and $6,375,000 thereafter.

15. Contingencies

From time to time in the normal course of business the company may become liable with respect to pending and threatened litigation, environmental, and tax matters. It is not anticipated that any such matters will have a material adverse impact on the company's financial position, liquidity or results of operations.

ARROW ELECTRONICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

16. Financial Instruments

The company enters into foreign exchange forward contracts (the "contracts") to mitigate the impact of changes in foreign currency exchange rates, principally the Euro and Swedish krona. These contracts are executed to facilitate the netting of offsetting foreign currency exposures resulting from inventory purchases and sales and generally have terms of no more than three months. Gains or losses on these contracts are deferred ~~income taxes~~ and ~~other liabilities. 10.~~recognized when the underlying future purchase or sale is recognized. The company does not enter into forward contracts for trading purposes. The risk of loss on a forward contract is the risk of nonperformance by the counterparties, which the company minimizes by limiting its counterparties to major financial institutions. The fair value of the contracts is estimated using market quotes. The notional amount of the contracts at December 31, 2002 and 2001 was $264,795,000 and $151,507,000, respectively. The carrying amounts, which are nominal, approximat ed fair value at December 31, 2002 and 2001.

In August 2002, the company entered into a series of interest rate swaps, with third parties, in order to hedge the change in fair value of certain fixed rate notes as a result of fluctuations in interest rates. These contracts are classified as fair value hedges and mature in October 2005. The swaps modify the company's interest rate exposure by effectively converting the fixed 8.7% senior notes to a floating rate based on the six-month U.S. dollar LIBOR plus a spread through their maturities (effective rate of 6.76% at December 31, 2002). The company accounts for these fair value hedges in accordance with FASB Statement No. 133, "Accounting for Derivative Instruments and Hedging Activities." The hedges were assessed as effective as the market value adjustments for the hedged notes and the swaps directly offset each other.

17. Segment and Geographic Information

The company is engaged in ~~one business segment,~~ the distribution of electronic components ~~systems,~~to original equipment manufacturers ("OEMs") and computer products to value-added resellers and OEMs. As a result of the company's philosophy of maximizing operating efficiencies through the centralization of certain functions, selected fixed assets and related ~~products.~~ depreciation, as well as borrowings and goodwill amortization (prior to 2002), are not directly attributable to the individual operating segments. Computer products includes North American Computer Products together with UK Microtronica, Nordic Microtronica, ATD (in Iberia), and Arrow Computer Products (in France).

ARROW ELECTRONICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The ~~geographic distribution~~company has redefined certain of ~~consolidated sales,~~its reportable segments. The prior periods have been restated for comparative purposes. Revenue and operating income, ~~and identifiable assets for 1993 and 1992~~by segment, are as follows (in thousands): ~~Sales to Identifiable Unaffiliated Operating Assets at 1993 Customers Income (Loss)~~

		Electronic		Computer
		Components		Products		Corporate				Total

2002

Revenue from external
customers	$	5,322,196	$	2,067,958	$	-			$	7,390,154

Operating income (loss)		183,680		58,501		(74,651	)	(a)		167,530	(a)

Total assets		3,404,156		609,652		653,797				4,667,605

2001

Revenue from external
customers	$	7,153,171	$	2,334,121	$	-			$	9,487,292

Operating income (loss)		415,966		43,912		(307,208	)	(b)		152,670	(b)

Total assets		3,767,595		929,240		662,149				5,358,984

2000

Revenue from external
customers	$	9,809,234	$	2,256,049	$	-			$	12,065,283

Operating income (loss)		892,500		22,408		(141,715	)			773,193

Total assets		5,954,527		1,200,321		449,693				7,604,541

(a)	Includes a severance charge of $5,375,000 related to the resignation of the company's former chief executive officer.

(b)	Includes restructuring costs and other special charges of $174,622,000 and an integration charge of $9,375,000 related to the acquisition of Wyle.

Revenues, by geographic area, for the years ended December 31 North America.... $1,890,615 $156,014 $ 717,566 Europe........... 600,935 40,153 367,102 Pacific Rim...... 44,034 1,706 57,416 Eliminations and Corporate.. - (16,331) 35,849 $2,535,584 $181,542 1,177,933 Investment in affiliated company 13,371 are as follows (in thousands):

		2002		2001		2000

Americas	$	4,302,008	$	5,642,413	$	7,195,720
Europe		2,430,549		2,974,837		3,474,990
Asia/Pacific		657,597		870,042		1,394,573

	$	7,390,154	$	9,487,292	$	12,065,283

Total assets, by geographic area, at December 31 ~~1993 $1,191,304 -31-~~ are as follows (in thousands):

		2002		2001		2000

Americas	$	2,619,996	$	3,253,575	$	4,840,169
Europe		1,717,709		1,771,137		2,104,837
Asia/Pacific		329,900		334,272		659,535

	$	4,667,605	$	5,358,984	$	7,604,541

ARROW ELECTRONICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CONTINUED Sales to Identifiable Unaffiliated Operating Assets at 1992 Customers Income (Loss) December 31, North America.... $1,504,958 $116,007 $598,017 Europe........... 116,577 1,420 94,145 Pacific Rim...... - - - Eliminations and Corporate.. - (13,646) 23,838 $1,621,535 $103,781 716,000 Investments in affiliated companies 64,893 Total assets at December 31, 1992 $780,893 11.

18. Quarterly Financial Data (Unaudited)

A summary of the company's quarterly results of operations for 1993 and 1992 follows: First Second Third Fourth Quarter Quarter Quarter Quarter (Infollows (in thousands except per share data) 1993: Sales.......................$551,391 $584,069 $697,825 $702,299 Gross profit................ 120,091 120,847 136,876 135,517 Net income.................. 17,982 19,114 21,734 22,729 Per common share:........... Primary .................. .59 .62 .69 .72 Fully diluted............. .55 .58 .64 .67 First Second Third Fourth Quarter Quarter Quarter Quarter (In thousands except:

		First				Second				Third				Fourth
		Quarter				Quarter				Quarter				Quarter

2002 (a)

Sales	$	1,844,539			$	1,843,317			$	1,811,339			$	1,890,959
Gross profit		314,532				319,588				308,622				316,831
Income from continuing
operations		2,085				576		(c)		524				8,902
Income (loss) from
discontinued operations		699				(6,610	)			-				-

Income (loss) before
extraordinary item		2,784				(6,034	)			524				8,902
Extraordinary loss		-				-				(11,641	)			(1,308	)

Income (loss) before
cumulative effect of change
in accounting principle		2,784				(6,034	)			(11,117	)			7,594
Cumulative effect of change
in accounting principle		(603,709	)			-				-				-

Net income (loss)	$	(600,925	)	(b)	$	(6,034	)	(d)	$	(11,117	)	(e)	$	7,594		(f)


Net income (loss) per basic share:

Income from continuing
operations	$	.02			$	.01		(c)	$	.01			$	.09
Income (loss) from
discontinued operations		.01				(.07	)			-				-
Loss from extraordinary item		-				-				(.12	)			(.01	)
Cumulative effect of change
in accounting principle		(6.07	)			-				-				-

Net income (loss) per basic
share	$	(6.04	)	(b)	$	(.06	)	(d)	$	(.11	)	(e)	$	.08


Net income (loss) per diluted share:

Income from continuing
operations	$	.02			$	.01		(c)	$	.01			$	.09
Income (loss) from
discontinued operations		.01				(.07	)			-				-
Loss from extraordinary item		-				-				(.12	)			(.01	)
Cumulative effect of change
in accounting principle		(5.96	)			-				-				-

Net income (loss) per
diluted share	$	(5.93	)	(b)	$	(.06	)	(d)	$	(.11	)	(e)	$	.08


2001 (a)

Sales	$	3,096,619			$	2,355,745			$	2,014,029			$	2,020,899
Gross profit		537,424				388,869				222,329		(h)		334,013
Income (loss) from
continuing operations		71,642				6,284				(159,967	)	(h)		6,454
Income from discontinued
operations		37				670				879				175

Net income (loss)	$	71,679		(g)	$	6,954			$	(159,088	)		$	6,629

ARROW ELECTRONICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

First
Second
Third
Fourth
Quarter
Quarter
Quarter
Quarter
Net income (loss) per basic
  share:
Income (loss) from
  continuing operations
$
.73
$
.06
$
(1.62
)
$
.07
Income from discontinued
  operations
-
.01
.01
-
Net income (loss) per basic
  share
$
.73
(g)
$
.07
$
(1.61
)
$
.07
Net income (loss) per diluted
  share:
Income (loss) from
  continuing operations
$
.68
$
.06
$
(1.62
)
$
.07
Income from discontinued
  continuing operations
-
.01
.01
-
Net income (loss) per
  diluted share
$
.68
(g)
$
.07
$
(1.61
)
$
.07

(a)	The disposition of the Gates/Arrow operations in the second quarter of 2002 represents a disposal of a "component of an entity" as defined in FASB Statement No. 144. Accordingly, all amounts prior to the disposition have been restated to reflect Gates/Arrow as a discontinued operation.

(b)	The company adopted Statement No. 142 as of January 1, 2002 and recorded an impairment charge of $603,709,000 as a cumulative effect of change in accounting principle. The impairment charge was determined by the company in the second quarter of 2002; however, in accordance with the provisions of FASB Statement No. 142, the charge has been reflected in the first quarter. Net loss also includes income from discontinued operations of $699,000, net of related taxes.

(c)	Income from continuing operations includes a severance charge of $5,375,000 ($3,214,000 net of related taxes). Excluding this charge, income from continuing operations would have been $3,790,000 or $.04 per share on a basic and diluted basis.

(d)	Net loss includes a severance charge totaling $5,375,000 ($3,214,000 net of related taxes), and a loss from discontinued operations of $6,610,000, net of related taxes. Excluding these amounts, net income would have been $3,790,000 or $.04 per share on a basic and diluted basis.

(e)	Net loss includes an extraordinary charge from early extinguishment of debt of $11,641,000, net of related taxes. Excluding this charge, net income would have been $524,000 or $.01 per share on a basic and diluted basis.

(f)	Net income includes an extraordinary charge from the early extinguishment of debt of $1,308,000, net of related taxes. Excluding this charge, net income would have been $8,902,000 or $.09 per share on a basic and diluted basis.

(g)	Net income includes an integration charge totaling $9,375,000 ($5,719,000 net of related taxes), associated with the acquisition of Wyle and income from discontinued operations of $37,000. Excluding these amounts, net income would have been $77,361,000 or $.79 and $.73 per share on a basic and diluted basis, respectively.

(h)	Gross profit and loss from continuing operations include restructuring costs and other special charges totaling $97,475,000 and $227,622,000 ($145,079,000 net of related taxes), respectively. Excluding these charges, gross profit and loss from continuing operations would have been $319,804,000 and $14,888,000, respectively, or $.15 per share on a basic and diluted basis.

ARROW ELECTRONICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

19. Subsequent Events (Unaudited)

In February 2003, the company purchased substantially all of the assets of the Industrial Electronics Division ("IED") of Pioneer-Standard Electronics, Inc. for approximately $235,000,000, subject to adjustment based upon an audit of the assets and liabilities being acquired. IED will be integrated with the North American Components group. IED serves industrial OEMs and contract manufacturers and includes a specialized power supply value-added business located in California. Through the combined businesses, the company expects cost savings and additional revenue that is estimated to improve earnings by $.20 per share data) 1992: Sales.......................$378,679 $382,041 $407,421 $453,394 Gross profit................ 78,930 82,706 87,038 93,215 Earnings before extraordinary charges..... 9,270 11,518 13,323 16,133 Net income.................. 9,270 9,094 13,323 13,133 Per common share: Earnings before extraordinary charges.... .38 .41 .47 .53 Extraordinary charges ..... - (.10) - (.10) Net income.................... .38 .31 .47 .43 -32- annually after the first full year following completion of the integration.

During the first quarter of 2003, the company took steps to more effectively organize its North American structure, systems, and processes. The net result of these steps will be to reduce the company's cost structure by at least $40,000,000 annually. The programs and positions to be affected have been identified and the vast majority of personnel have been notified. The majority of the impact of these initiatives will be seen in the second quarter of 2003. The company will record a special restructuring charge ranging from $12,000,000 to $15,000,000 in the first quarter of 2003.

During the first quarter of 2003, the company repurchased an additional $69,250,000 of its 8.2% senior notes, due in October 2003. The premium paid and the deferred financing costs written-off upon the repurchase of this debt, aggregated approximately $2,500,000 and will be expensed in the consolidated statement of operations in the first quarter of 2003. As a result of this transaction net interest expense will be reduced by approximately $2,800,000 from the date of repurchase through the original maturity date, if interest rates remain the same.

Item 9. Changes Inin and Disagreements with Accountants onAccounting and
Financial ~~Disclosure.~~ Disclosure.

None.

Part III

Item 10. Directors and Executive Officers of the ~~Registrant.~~ Registrant.

See "Executive Officers" in ~~the response to~~ Item 1 above. In addition, the information set forth under the heading "Election of Directors" in the company's Proxy Statement filed in connection with the Annual Meeting of Shareholders scheduled to be held May ~~10, 1994~~22, 2003 is hereby is incorporated herein by reference.

Item 11. Executive ~~Compensation.~~ Compensation.

The information set forth under the heading "Executive Compensation and Other Matters" in the company's Proxy Statement filed in connection with the Annual Meeting of Shareholders scheduled to be held May ~~10, 1994~~22, 2003 is hereby is incorporated herein by reference.

Item 12. Security Ownership of Certain Beneficial Owners and ~~Manage- ment.~~ Management.

The information ~~on page 3 and under~~(except for the ~~heading "Election of Directors"~~Equity Compensation Plan Information set forth below) is included in the company's Proxy Statement filed in connection with the Annual Meeting of Shareholders scheduled to be held May ~~10, 1994~~22, 2003 is hereby is incorporated herein by reference.

	Number of securities
	to be issued upon	Weighted average	Number of
	exercise of	exercise price of	securities
	outstanding	outstanding	remaining
	options, warrants	options, warrants	available for
	and rights	and rights	future issuance


Equity compensation plans
approved by security
holders	10,569,096	$22.81	4,999,844	(a)

Equity compensation plans
not approved by security
holders	-	-	-

Total	10,569,096	$22.81	4,999,844	(a)

(a)	Includes 4,250,306 options available for grant and 749,538 shares of common stock not yet awarded.

Item 13. Certain Relationships and Related ~~Transactions.~~ Transactions.

The information ~~set forth under the heading "Executive Compensation and Other Matters"~~is included in the company's Proxy Statement filed in connection with the Annual Meeting of Shareholders scheduled to be held May ~~10, 1994~~22, 2003 is hereby is incorporated herein by reference. ~~Part IV~~

Item 14. Controls and Procedures.

The company's chief executive officer and chief financial officer have evaluated the effectiveness of the company's disclosure controls and procedures (as defined in Rules 13a-14(c) and 15d-14(c) under the Securities Exchange Act of 1934 (the "Exchange Act")) as of a date (the "Evaluation Date") within 90 days before the filing date of this annual report. Based on such evaluation, they have concluded that, as of the Evaluation Date, the company's disclosure controls and procedures were effective to ensure that information required to be disclosed by the company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the rules and forms of the Securities and Exchange Commission.

There were no significant changes in the company's internal controls or in other factors that could significantly affect these controls subsequent to the Evaluation Date.

Part IV

Item 15.Exhibits, Financial Statement Schedules and Reports on Form ~~8-K.~~ 8-K.



(a)	The following documents are filed as part of this report:

	1.	Financial Statements.	Page
		Report of Ernst & Young LLP, Independent Auditors	24

		Management's Responsibility for Financial Reporting	25

		Consolidated Statement of Operations for the years ended
		December 31, 2002, 2001, and 2000	26

		Consolidated Balance Sheet at December 31, 2002 and 2001	27

		Consolidated Statement of Cash Flows for the years ended
		December 31, 2002, 2001, and 2000	28

		Consolidated Statement of Shareholders' Equity for the years
		ended December 31, 2002, 2001, and 2000	29

		Notes to Consolidated Financial Statements for the years
		ended December 31, 2002, 2001, and 2000	31

	2.	Financial Statement Schedule.

		Schedule II - Valuation and Qualifying Accounts	67

		All other schedules have been omitted since the required information is not present or is not present in amounts sufficient to require submission of the schedule, or because the information required is included in the consolidated financial statements, including the notes thereto.

	3.	Exhibits.

		See index of Exhibits included on pages 60 - 65.

(b)	Reports on Form 8-K.

	Subsequent to September 30, 2002, the company has filed the following Current Reports on Form 8-K:

	Date of Report		Item Reported

	January 14, 2003		Press release announcing that the company had entered into a definitive agreement under which it will acquire substantially all of the assets of Pioneer-Standard Electronics, Inc.'s Industrial Electronics Division.

	January 21, 2003		Press release announcing the appointment of William E. Mitchell to the position of President and chief executive officer, effective February 3, 2003.

	February 20, 2003		Press release announcing the company's year-end 2002 earnings.

	February 25, 2003		Amendment No. 7 to Transfer and Administration Agreement and Third Amendment to the company's Amended and Restated Three Year Credit Agreement.

(a)1. Financial Statements. The financial statements listed in the accompanying index to financial statements and financial statement schedules are filed as part of this annual report. 2. Financial Statement Schedules. The financial statement schedules listed in the accompanying index to financial statements and financial statement schedules are filed as part of this annual report. -33- All other schedules have been omitted since the required information is not present or is not present in amounts sufficient to require submission of the schedule, or because the information required is included in the consolidated financial statements, including the notes thereto. ARROW ELECTRONICS, INC. INDEX TO FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES (Item 143.Exhibits.

(2) (a)) Page Report of Ernst & Young, independent auditors 15 Consolidated balance sheet at December 31, 1993 and 1992 16 For the years ended December 31, 1993, 1992 and 1991: Consolidated statement of operations 17 Consolidated statement of cash flows 18 Consolidated statement of shareholders' equity 19 Notes to consolidated financial statements for the years ended December 31, 1993, 1992 and 1991 20 Consolidated schedules for the three years ended December 31, 1993: II - Amounts receivable from employees 45 VIII - Valuation and qualifying accounts 46 IX - Short-term borrowings 47 -34- 3. Exhibits. (2)(a) Restated Agreement of Purchase and Sale, dated as of September 20, 1987, between Ducommun Incorporated and Arrow Electronics, Inc. (incorporated by reference to Exhibit 2(b) to the company's Registration Statement on Form S-4, Commission File No. 33-17942). (b) Letter Agreement dated January 11, 1988 between Ducommun Incorporated and Arrow Electronics, Inc. (incorporated by reference to Exhibit 2(b) to the company's Current Report on Form 8-K dated January 21, 1988, Commission File No. 1-4482). (c) Acquisition Agreement, dated July 28, 1988, between Craig, Hochreiter & Co., Incorporated and Arrow Electronics, Inc., as amended and supplemented (incorporated by reference to Exhibit 2 to the company's Quarterly Report on Form 10-Q for the quarter ended September 30, 1988, Commission File No. 1-4482). (d)(i) Acquisition Agreement, dated July 6, 1989, between Arrow Electronics (UK) Limited and Electrocomponents plc (incorporated by reference to Exhibit 2(d)(i) to the company's Annual Report on Form 10-K for the year ended December 31, 1989, Commission File No. 1-4482). (ii) English language translation of Acquisition Agreement, dated July 6, 1989, between Spoerle Electronic Handelsgesell- schaft mbH & Co. and Retron Manger Electronic GmbH and Eldi GmbH Electronik Distributor (incorporated by reference to Exhibit 2(d)(ii) to the company's Annual Report on Form 10-K for the year ended December 31, 1989, Commission File No. 1-4482). (iii) Umbrella Agreement, dated July 6, 1989, between Electrocomponents plc; Retron Elektronische Bauteile und Gerate Handelsgesellschaft mbH, Manger Elektronik GmbH, and Eldi GmbH Elektro- nik Distributor; Arrow Electronics, Inc.; Arrow Electronics (UK) Limited; and Spoerle Electronic Handelsgesellschaft GmbH & Co. (incorpo- rated by reference to Exhibit 2(d)(iii) to the company's Annual Report on Form 10-K for the year ended December 31, 1989, Commission File No. 1-4482). (e)(i) Agreement of Purchase and Sale, as amended, by and among Lex Service PLC, Lex Burlington Inc., and Arrow Electron- ics, Inc. (incorporated by reference to Exhibit 6(a) to the company's Quarterly Report on Form 10-Q for the quarter ended September 30, 1991, Commission File No. 1-4482). (ii) Stockholders' Agreement dated as of September 27, 1991 by and among Arrow Electronics, Inc., Lex Service PLC, and Lex Burlington Inc. (incorporated by reference to Exhibit 2(e)(ii) to the company's Annual Report on Form 10-K for the year ended December 31, 1991, Commission File No. 1-4482). (iii) Amendment No. 1 dated as of February 28, 1992 to the Stockholders' Agreement in (2)(e)(ii) above (incorporated by reference to Exhibit 2(g)(iii) to the company's Annual Report on Form 10-K for the year ended December 31, 1991, Commission File No. 1-4482). -35- (iv) Amendment No. 2 dated as of July 30, 1992 to the Stockholders' Agreement in (2)(e)(ii) above (incorporated by reference to Exhibit 2(e)(iv) to the company's Annual Report on Form 10-K for the year ended December 31, 1992, Commission File No. 1-4482). (v) Amendment No. 3 dated as of February 1, 1993 to the Stockholders' Agreement in (2)(e)(ii) above (incorporated by reference to Exhibit 2(e)(v) to the company's Annual Report on Form 10-K for the year ended December 31, 1992, Commission File No. 1-4482). (vi) Registration Rights Agreement dated as of September 27, 1991 by and among Arrow Electronics, Inc., Lex Service PLC, and Lex Burlington Inc. (incorporated by reference to Exhibit 2(e)(iii) to the company's Annual Report on Form 10-K for the year ended December 31, 1991, Commission File No. 1-4482). (vii) Amendment No. 1 dated as of February 28, 1992 to the Registration Rights Agreement in (2)(e)(vi) above (incorporated by reference to Exhibit (2)(g)(iv) to the company's Annual Report on Form 10-K for the year ended December 31, 1991, Commission File No. 1-4482). (viii) Amendment No. 2 dated as of July 30, 1992 to the Registration Rights Agreement in (2)(e)(vi) above (incorporated by reference to Exhibit (2)(e)(viii) to the company's Annual Report on Form 10-K for the year ended December 31, 1992, Commission File No. 1-4482). (ix) Amendment No. 3 dated as of February 1, 1993 to the Registration Rights Agreement in (2)(e)(vi) above (incorporated by reference to Exhibit (2)(e)(ix) to the company's Annual Report on Form 10-K for the year ended December 31, 1992, Commission File No. 1-4482). (f)(i) Share Purchase Agreement dated as of October 10, 1991 among EDI Electronics Distribution International B.V., Aquarius Investments Ltd., Andromeda Investments Ltd., and the other persons named therein (incorporated by reference to Exhibit 2.2 to the company's Registration Statement on Form S-3, Registration No. 33-42176). (ii) Standstill Agreement dated as of October 10, 1991 among Arrow Electronics, Inc., Aquarius Investments Ltd., Andromeda Investments Ltd., and the other persons named therein (incorporated by reference to Exhibit 4.1 to the company's Registration Statement on Form S-3, Registration No. 33-42176). (iii) Shareholder's Agreement, dated as of October 10, 1991, among EDI Electronics Distribution International B.V., Giorgio Ghezzi, Germano Fanelli, and Renzo ~~Ghezzi. (g) Asset Purchase Agreement, dated as of February 12, 1993, between Zeus Components, Inc. and Arrow Electronics, Inc.~~Ghezzi (incorporated by reference to Exhibit ~~10(1)~~2(f)(iii) to the company's Annual Report on Form 10-K for the year ended December 31, ~~1992,~~1993, Commission File No. 1-4482). ~~(h)~~

(b) Share Purchase Agreement, dated as of February ~~28, 1992 among Lex Service PLC,~~7, 2000, by and between Arrow Electronics, ~~(UK) Limited, EDI Electronics Distribution International (France) SA, Arrow Electronics GmbH,~~Inc., Tekelec Airtronic, Zedtek, Investitech, and ~~Arrow Electronics, Inc.~~Natec (incorporated by reference to Exhibit ~~2(1)~~2(g) to the company's ~~Current~~Annual Report on Form ~~8-K, dated March 11, 1992, Commis- sion~~10-K for the year ended December 31, 2000, Commission File No. 1-4482). ~~-36- (i) Subscription~~

(c) Agreement for Sale and Purchase of Shares of Jakob Hatteland Electronic AS, dated ~~February 7, 1992,~~as of April 20, 2000, between Jakob Hatteland Holding AS, Jakob Hatteland, and Arrow Electronics, Inc. ~~and various purchasers, pertaining to the sale of the company's Series B $19.375 Convertible Exchangeable Preferred Stock~~ (incorporated by reference to Exhibit 2(h) to the company's Annual Report on Form 10-K for the year ended December 31, ~~1991,~~2000, Commission File No. 1-4482).

�� (d) Share Purchase Agreement, dated as of August 7, 2000, among VEBA Electronics GmbH, EBV Verwaltungs GmbH i.L., Viterra Grundstucke Verwaltungs GmbH, VEBA Electronics LLC, VEBA Electronics Beteiligungs GmbH, VEBA Electronics (UK) Plc, Raab Karcher Electronics Systems Plc and E.ON AG and Arrow Electronics, Inc., Avnet, Inc., and Cherrybright Limited regarding the sale and purchase of the VEBA electronics distribution group (incorporated by reference to Exhibit 2(i) to the company's Annual Report on Form 10-K for the year ended December 31, 2000, Commission File No. 1-4482).

(e) Purchase Agreement, dated as of January 13, 2003, by and between the company and Pioneer-Standard Electronics, Inc., Pioneer-Standard Illinois, Inc., Pioneer-Standard Minnesota, Inc., Pioneer-Standard Electronics, Ltd., and Pioneer-Standard Canada, Inc.

(3) (a) ~~Amended and~~(i) Restated Certificate of ~~Incorpo- ration~~Incorporation of the company, as amended (incorporated by reference to Exhibit ~~4(1)~~3(a) to the company's ~~Registration Statement~~Annual Report on Form ~~S-3, Registration~~10-K for the year ended December 31, 1994 Commission File No. ~~33-67890)~~1-4482). ~~(b)~~

(ii) Certificate of Amendment of the ~~Amended and~~Certificate of Incorporation of Arrow Electronics, Inc., dated as of August 30, 1996 (incorporated by reference to Exhibit 3 to the company's Quarterly Report on Form 10-Q for the quarter ended September 30, 1996, Commission File No.
1-4482).

(iii) Certificate of Amendment of the Restated Certificate of Incorporation of the company, dated as of ~~August 24, 1993~~October 12, 2000 (incorporated by reference to Exhibit ~~4(2)~~3(a)(iii) to the company's ~~Registration Statement~~Annual Report on Form ~~S-3, Registration~~10-K for the year ended December 31, 2000, Commission File No. ~~33-67890)~~
1-4482). ~~(c)~~

(b) By-Laws of the company, as amended ~~(incorpo- rated~~(incorporated by reference to Exhibit 3(b) to the company's Annual Report on Form 10-K for the year ended December 31, 1986, Commission File No. 1-4482).

(4) (a) Indenture, including Debenture, dated as of November 25, 1992 between the company and the Bank of Montreal Trust Company, as Trustee, with respect to the company's 5-3/4% Convertible Subordinated Debentures due 2004 (incorporated by reference to Exhibit 4(a) to the company's Annual Report on Form 10-K for the year ended December 31, 1992, Commission File No. 1-4482). (b)(i) Rights Agreement dated as of March 2, 1988 between Arrow Electronics, Inc. and Manufacturers Hanover Trust Company, as Rights Agent, which includes as Exhibit A a Certificate of Amendment of the Restated Certificate of Incorporation for Arrow Electronics, Inc. for the Participating Preferred Stock, as Exhibit B a letter to ~~share- holders~~shareholders describing the Rights and a summary of the provisions of the Rights Agreement and as Exhibit C the forms of Rights Certificate and Election to Exercise (incorporated by reference to Exhibit 1 to the company's Current Report on Form 8-K dated March 3, 1988, Commission File No. 1-4482).

(ii) First Amendment, dated June 30, 1989, to the Rights Agreement in (4)~~(b)~~(a)(i) above (incorporated by reference to Exhibit 4(b) to the Company's Current Report on Form 8-K dated June 30, 1989, Commission File No. 1-4482).

(iii) Second Amendment, dated June 8, 1991, to the Rights Agreement in (4)~~(b)~~(a)(i) above (incorporated by reference to Exhibit 4(i)(iii) to the company's Annual Report on Form 10-K for the year ended December 31, 1991, Commission File No. 1-4482).

(iv) Third Amendment, dated July 19, 1991, to the Rights Agreement in (4)~~(b)~~(a)(i) above (incorporated by reference to Exhibit 4(i)(iv) to the company's Annual Report on Form 10-K for the year ended December 31, 1991, Commission File No. 1-4482).

(v) Fourth Amendment, dated August 26, 1991, to the Rights Agreement in (4)~~(b)~~(a)(i) above (incorporated by reference to Exhibit 4(i)(v) to the company's Annual Report on Form 10-K for the year ended December 31, 1991, Commission File No. 1-4482). ~~-37- (10)(a) Investment Management Agreement,~~

(vi) Fifth Amendment, dated ~~as of September 28, 1981, between the company and Fayez Sarofim & Co. (incor- porated by reference to Exhibit 10(b)(ii)~~February 25, 1998, to the ~~company's Quarterly Report on Form 10-Q for the quarter ended September 30, 1981, Commission File No. 1-4482). (b)~~Rights Agreement in (4)(a)(i) ~~Arrow Electronics Savings Plan, as amended and restated through January 1, 1989~~above (incorporated by reference to Exhibit ~~10(b)~~7 to the company's current report on Form 8-A/A dated March 2, 1998, Commission File No. 1-4482).

(b)(i) Indenture, dated as of January 15, 1997, between the company and the Bank of Montreal Trust Company, as Trustee (incorporated by reference to Exhibit 4(b)(i) to the company's Annual Report on Form 10-K for the year ended December 31, ~~1989,~~1996, Commission File No. 1-4482).

(ii) ~~Amendment No. 1,~~Officers' Certificate, as defined by the Indenture in 4(b)(i) above, dated ~~December 7, 1989,~~as of January 22, 1997, with respect to the ~~Arrow Electronics Savings Plan in (10)(b)(i) above~~company's $200,000,000 7% Senior Notes due 2007 and $200,000,000 7 1/2% Senior Debentures due 2027 (incorporated by reference to Exhibit ~~10(b)~~4 (b)(ii) to the company's Annual Report on Form 10-K for the year ended December 31, ~~1992,~~1996, Commission File No. 1-4482).

(iii) ~~Amendment No. 2,~~Officers' Certificate, as defined by the indenture in 4(b)(i) above, dated as of January ~~18, 1990,~~15, 1997, with respect to the ~~Arrow Electronics Savings Plan in (10)(b)(i) above (incorporated~~$200,000,000 6 7/8% Senior Debentures due 2018, dated as of May 29, 1998 (incoporated by reference to Exhibit ~~10(b)(ii)~~4(b)(iii) to the company's Annual Report on Form 10-K for the year ended December 31, ~~1991,~~1998, Commission File No. 1-4482).

(iv) ~~Amendment No. 3,~~Officers' Certificate, as defined by the indenture in 4(b)(i) above, dated ~~February 21, 1992,~~as of January 15, 1997, with respect to the ~~Arrow Electronics Savings Plan in (10)(b)(i) above~~$250,000,000 6.45% Senior Notes due 2003, dated October 21, 1998 (incorporated by reference to Exhibit ~~10(b)~~4(b)(iv) to the company's Annual Report on Form 10-K for the year ended December 31, ~~1992,~~1998, Commission File No. 1-4482).

(v) ~~Supplement,~~Supplemental Indenture, dated ~~September 27, 1991,~~as of February 21, 2001, between the company and The Bank of New York (as successor to the ~~Arrow Electronics Savings Plan in (10)(b)(i) above~~Bank of Montreal Trust Company), as trustee (incorporated by reference to Exhibit ~~10(b)(v)~~4.2 to the company's current report on Form 8-K dated February 15, 2001, Commission File No. 1-4482).

(vi) Supplemental Indenture, dated as of December 31, 2001, between the company and The Bank of New York (as successor to the Bank of Montreal Trust Company), as trustee (incorporated by reference to Exhibit 4(b)(vi) to the company's Annual Report on Form 10-K for the year ended December 31, ~~1992,~~2001, Commission File No. 1-4482). ~~(vi) Supplement No. 3, dated August 24, 1993, to the~~

(10)(a) Arrow Electronics Savings Plan, ~~in 10(b)(i) above. (vii)~~as amended and restated through February 15, 2002.

(b) Wyle Electronics Retirement Plan, as amended and restated February 15, 2002.

(d) (i) Arrow Electronics, Inc. Stock Option Plan, as amended and restated effectiveh February 27, 2002.

(ii) Form of Stock Option Agreement under 10(d)(i) above.

(e) (i) Restricted Stock Plan of Arrow Electronics, Inc., as amended and restated effective February 27, 2002.

(ii) Form of Restricted Stock Award Agreement under 10(e)(i) above.

(f) 2002 Non-Employee Directors Stock Option Plan as of May 23, 2002.

(g) Non-Employee Directors Deferral Plan as of May 15, 1997 (incorporated by reference to Exhibit ~~10(b)(ii)~~99(d) to the ~~company's Annual Report~~Company's Registration Statement on Form ~~10-K for the year ended December 31, 1989, Commission File~~S-8, Registration No. ~~1-4482)~~333-45631). ~~(viii) Amendment No. 1, dated November 29, 1989, to the~~

(h) Arrow Electronics, ~~Stock Ownership~~Inc. Supplemental Executive Retirement Plan, in (10)(b)(vii) above (incor- porated by reference to Exhibit 10(b)(vii) to the company's Annual Report on Form 10-K for the year ended December 31, 1992, Commission File No. 1-4482). (ix) Amendment No. 2, dated December 7, 1989, to the Arrow Electronics Stock Ownership Plan in (10)(b)(vii) above (incor- porated by reference to Exhibit 10(b)(viii) to the company's Annual Report on Form 10-K for the year ended December 31, 1992, Commission File No. 1-4482). (x) Amendment No. 3, dated January 18, 1990, to the Arrow Electronics Stock Ownership Plan in (10)(b)(vii) above (incorporated by reference to Exhibit 10(b)(iv) to the company's Annual Report on Form 10-K for the year ended December 31, 1991, Commission File No. 1-4482). (xi) Amendment No. 4, dated December 31, 1992 to the Arrow Electronics Stock Ownership Plan in (10)(b)(vii) above (incor- porated by reference to Exhibit 10(b)(x) to the company's Annual Report on Form 10-K for the year ended December 31, 1992, Commission File No. 1-4482). -38- (xii) Supplement No. 1, dated September 8, 1992, to the Arrow Electronics Stock Ownership Plan in (10)(b)(vii) above (incor- porated by reference to Exhibit 10(b)(xi) to the company's Annual Report on Form 10-K for the year ended December 31, 1992, Commission File No. 1-4482). (xiii) Supplement No. 3, dated August 24, 1993, to the Arrow Electronics Stock Ownership Plan in (10)(b)(vii) above. (xiv) Capstone Electronics Corp. Profit-Sharing Plan,as amended effective January 1, 1990 (incorporated by reference to Exhibit 10(b)(iii) to the company's Annual Report on Form 10-K for the year ended December 31, 1990, Commission File No. 1-4482). (xv) Supplement No. 1, dated September 8, 1992, to the Capstone Electronics Profit-Sharing Plan in (10)(b)(xiv) above (incorporated by reference to Exhibit 10(b)(xiii) to the company's Annual Report on Form 10-K for the year ended December 31, 1992, Commission File No. 1-4482). (xvi) Supplement No. 2, dated August 24, 1993, to the Capstone Electronics Profit Sharing Plan in (10)(b)(xiv) above. (c)2002.

(i) (i) Employment Agreement, dated as of October 16, 1990, between the company and John C. Waddell (incorporated by reference to Exhibit 10(c)(i) to the company's Annual Report on Form 10-K for the year ended December 31, 1990, Commission File No. 1-4482). (ii) Employment Agreement, dated as of March 13, 1991, between the company and Stephen P. Kaufman (incorporated by reference to Exhibit 10(c)(ii) to the company's Annual Report on Form 10-K for the year ended December 31, 1990, Commission File No. 1-4482). (iii) Employment Agreement, dated as of March 13, 1991,January 1, 1998 between the company and Robert E. Klatell (incorporated by reference to Exhibit 10(c)(iii) to the company's Annual Report on Form 10-K for the year ended December 31, ~~1990,~~1997, Commission File No. 1-4482). ~~(iv)~~

(ii) Form of agreement between the company and the ~~employees parties~~employee party to the Employment ~~Agreements~~Agreement listed in ~~10(c)~~10(i)(i)~~, (ii), and (iii)~~ above, providing extended separation benefits under certain circumstances (incorporated by reference to Exhibit 10(c)(iv) to the company's Annual Report on Form 10-K for the year ended December 31, 1988, Commission File No.
1-4482).

(iii) Consulting Agreement dated as of June 3, 2002, between the company and Stephen P. Kaufman (incorporated by reference to Exhibit 10(i) to the company's Quarterly Report on Form 10-Q for the quarter ended June 30, 2002, Commission File No. 1-4482).

(iv) Amended and Restated Agreement dated as of June 13, 2002, between the company and Francis M. Scricco (incorporated by reference to Exhibit 10(i) to the company's Quarterly Report on Form 10-Q for the quarter ended June 30, 2002, Commission File No. 1-4482).

(v) ~~Form of~~ Employment Agreement, dated as of ~~April~~September 1, ~~1989,~~1997, between the company and ~~Robert~~Jan M. Salsgiver (incorporated by reference to Exhibit 10(c)(vi) to the company's Annual Report on Form 10-K for the year ended December 31, 1997, Commission File No. 1-4482).

(vi) Employment Agreement, dated as of January 1, 2001, by and between the company and Michael J. ~~McInerney~~Long (incorporated by reference to Exhibit 10(c)(v) to the company's Annual Report on Form 10-K for the year ended December 31, ~~1989,~~2000, Commission File No. 1-4482). ~~(vi) Form of~~

(vii) Employment Agreement, dated as of ~~March~~December 13, ~~1991,~~2002, by and between the company and Steven W. Menefee (incorporated by reference to Exhibit 10(c)(vi) to the company's Annual Report on Form 10-K for the year ended December 31, 1990, Commission File No. 1-4482). (vii) Form of Employment Agreement, as amended and restated as of January 1, 1990, between the company and WesleyPeter S. Sagawa (incorporated by reference to Exhibit 10(c)(vi) to the company's Annual Report on Form 10-K for the year ended December 31, 1989, Commission File No. 1-4482). -39-Brown.

(viii) ~~Form of~~ Employment Agreement, dated as of ~~October 27, 1988,~~January 1, 2003, between the company and ~~William J. Smith (incorporated by reference to Exhibit 10(c)(v) to the company's Annual Report on Form 10-K for the year ended December 31, 1988, Commission File No. 1-4482).~~Betty Jane Scheihing.

(ix) Employment Agreement, dated as of ~~October 19, 1990,~~January 1, 2003, by and between the company and ~~Don E. Burton (incorporated by reference to Exhibit 10(c)(ix) to the company's Annual Report on Form 10-K for the year ended December 31, 1990, Commission File No. 1-4482).~~Mark F. Settle.

(x) Employment Agreement, dated as of January ~~7, 1991,~~14, 2003, by and between the company and ~~Betty Jane Scheihing (incorporated by reference to Exhibit 10(c)(xi) to the company's Annual Report on Form 10-K for the year ended December 31, 1990, Commission File No. 1-4482).~~Paul J. Reilly.

(xi) Employment Agreement, dated as of ~~January 7, 1991,~~February 3, 2003, by and between the company and ~~John S. Smith (incorporated by reference to Exhibit 10(c)~~William E. Mitchell.

(xii) to the company's Annual Report on Form 10-K for the year ended December 31, 1990, Commission File No. 1-4482). (xii) Employment Agreement, dated as of March 17, 1993, between the company and Jan Salsgiver. (xiii) Form of agreement between the company and all corporate ~~Vice Presidents,~~officers, including the employees parties to the Employment Agreements listed in ~~10(c)~~10(i)(v)-~~(xii)~~(xi) above, and excluding the party listed in 10 (i)(i) above, providing extended separation benefits under certain circumstances (incorporated by reference to Exhibit 10(c)(ix) to the company's Annual Report on Form 10-K for the year ended December 31, 1988, Commission File No. 1-4482).

(xiii) Consulting Agreement, dated January 1, 2003, by and between the company and Steven W. Menefee.

(xiv) Form of agreement between the company and non-corporate officers providing extended separation benefits under certain circumstances (incorporated by reference to Exhibit 10(c)(x) to the company's Annual Report on Form 10-K for the year ended December 31, 1988, Commission File No. 1-4482).

(xv) Unfunded Pension Plan for Selected Executives of Arrow Electronics, Inc., as amended (incorporated by reference to Exhibit 10(c)(xiii) to the company's Annual Report on Form 10-K for the year ended December 31, 1994, Commission File No. 1-4482).

(xvi) Amendment, dated May 1998, to the Unfunded Pension Plan for Selected Executives of Arrow Electronics, Inc. in 10(d)(xiv) above (incorporated by reference to Exhibit 10(d)(xv) to the company's Annual Report on Form 10-K for the year ended December 31, ~~1990,~~1998, Commission File No. 1-4482). ~~(xvi)~~

(xvii) Grantor Trust Agreement, dated June 25, 1998, by and between Arrow Electronics, Inc. and Wachovia Bank, N.A. (incorporated by reference to Exhibit 10(b)(xv) to the company's Annual Report on Form 10-K for the year ended December 31, 1998, Commission File No. 1-4482).

(xviii) English translation of the Service Agreement, dated January 19, 1993, between Spoerle Electronic and Carlo Giersch (incorporated by reference to Exhibit 10(f)(v) to the company's Annual Report on Form 10-K for the year ended December 31, 1992, Commission File No.
1-4482). ~~(d)~~

(j) (i) Senior Note Purchase Agreement, dated as of December 29,1992, with respect to the company's 8.29% Senior Secured Notes due 2000 (incorporated by reference to Exhibit 10(d) to the company's Annual Report on Form 10-K for the year ended December 31, 1992, Commission File No. 1-4482). (ii) First Amendment, dated as of December 22, 1993, to the Senior Note Purchase Agreement in 10(d)(i) above. (e) Amended and Restated 364-Day Credit Agreement, dated as of ~~January 28, 1994~~February 22, 2001, among Arrow Electronics, Inc., the Subsidiary Borrowers, the several ~~Banks~~banks from time to time parties hereto, ~~Bankers Trust Company and Chemical~~Bank of America, N.A., as syndication agent, Fleet National Bank, as ~~agents. -40- (f)(i) English translation of the Agreement of Purchase~~documentation agent, and ~~Sale, dated January 19, 1993, between Carlo Giersch and Arrow Electronics GmbH with respect to the purchase of an additional 15% interest in Spoerle Electronic~~The Chase Manhattan Bank, as administrative agent (incorporated by reference to Exhibit ~~10(f)~~10(g)(i) to the company's Annual Report on Form 10-K for the year ended December 31, ~~1992,~~2000, Commission File No. 1-4482).

(ii) English translation of the Offer Agreement, with supplemental letters attached, dated January 19, 1993, between Arrow Electronics GmbH and Carlo Giersch with respect to the purchase of a second 15% interest in Spoerle Electronic (incorporated by reference to Exhibit 10(f)(ii) to the company's Annual Report on Form 10-K for the year ended December 31, 1992, Commission File No. 1-4482). (iii) English translation of the Partnership Agreement of Spoerle Electronic, dated January 19, 1993 (incorporated by reference to Exhibit 10(f)(iii) to the company's Annual Report on Form 10-K for the year ended December 31, 1992, Commission File No. 1-4482). (iv) English translation of the Articles of Spoerle GmbH,First Amendment, dated as of ~~January 1, 1993~~November 29, 2001, to the Amended and Restated 364-Day Credit Agreement in (10)(e)(i) above among Arrow Electronics, Inc., the Subsidiary Borrowers, the several banks and other financial institutions from time to time parties thereto, Bank of America, N.A., as syndication agent, Fleet National Bank, as documentation agent and JPMorgan Chase Bank, as administrative agent (incorporated by reference to Exhibit 10(f)(iv) to the company's Annual Report on Form 10-K for the year ended December 31, ~~1992,~~2001, Commission File No. 1-4482). ~~(g) Amendment and Restatement Agreement relating to a Facilities~~

(k) Commercial Paper Private Placement Agreement, dated ~~February 28, 1992, between~~as of November 9, 1999, among Arrow Electronics, ~~(UK) Limited~~Inc., as issuer, and ~~National Westminster~~Chase Securities Inc., Bank ~~PLC. (h)(i) Credit Agreement, dated April 14, 1993, between Berliner Handels- und Frankfurter Bank~~of America Securities LLC, Goldman, Sachs & Co., and Arrow Electronics GmbH. (ii) Amendment, dated January 28, 1994, to the Credit Agreement in (10)(h)(i) above. (iii) Guarantee, dated January 16, 1990, between Arrow Electronics, Inc. and Berliner Handels- und Frankfurter BankMorgan Stanley & Co. Incorporated as placement agents (incorporated by reference to Exhibit 10(g) to the company's Annual Report on Form 10-K for the year ended December 31, 1999, Commission File No. 1-4482).

(l) (i) 8.20% Senior Exchange Notes due October 1, 2003, dated as of October 6, 2000, among Arrow Electronics, Inc. and Goldman, Sachs & Co., Chase Securities Inc., Morgan Stanley & Co. Incorporated, Banc of America Securities LLC, Donaldson, Lufkin & Jenrette Securities Corporation, BNY Capital Markets, Inc., Credit Suisse First Boston Corporation, Deutsche Bank Securities Inc., Fleet Securities, Inc., and HSBC Securities (USA) Inc., as underwriters (incorporated by reference to Exhibit 4.2 to the company's Registration Statement on Form S-4, Registration No. 333-51100).

(ii) 8.70% Senior Exchange Notes due October 1, 2005, dated as of October 6, 2000, among Arrow Electronics, Inc. and Goldman, Sachs & Co., Chase Securities Inc., Morgan Stanley & Co. Incorporated, Banc of America Securities LLC, Donaldson, Lufkin & Jenrette Securities Corporation, BNY Capital Markets, Inc., Credit Suisse First Boston Corporation, Deutsche Bank Securities Inc., Fleet Securities, Inc., and HSBC Securities (USA) Inc., as underwriters (incorporated by reference to Exhibit 4.3 to the company's Registration Statement on Form S-4, Registration No. 333-51100).

(iii) 9.15% Senior Exchange Notes due October 1, 2010, dated as of October 6, 2000, among Arrow Electronics, Inc. and Goldman, Sachs & Co., Chase Securities Inc., Morgan Stanley & Co. Incorporated, Banc of America Securities LLC, Donaldson, Lufkin & Jenrette Securities Corporation, BNY Capital Markets, Inc., Credit Suisse First Boston Corporation, Deutsche Bank Securities Inc., Fleet Securities, Inc., and HSBC Securities (USA) Inc., as underwriters (incorporated by reference to Exhibit 4.4 to the company's Registration Statement on Form S-4, Registration No. 333-51100).

(m) (i) Amended and Restated Three Year Credit Agreement, dated as of February 22, 2001, among Arrow Electronics, Inc., the Subsidiary Borrowers, the several banks from time to time parties hereto, Bank of America, N.A., as syndication agent, Fleet National Bank, as documentation agent, and The Chase Manhattan Bank, as administrative agent (incorporated by reference to Exhibit 10(h) to the company's Annual Report on Form 10-K for the year ended December 31, 2000, Commission File No. 1-4482).

(ii) First Amendment, dated as of November 29, 2001, to the Amended and Restated Three Year Credit Agreement in (10)(m)(i) above among Arrow Electronics, Inc., the Subsidiary Borrowers, the several banks and other financial institutions from time to time parties thereto, Bank of America, N.A. as syndication agent, Fleet National Bank, as documentation Agent, and JPMorgan Chase Bank, as administrative agent (incorporated by reference to Exhibit 10(l)(ii) to the company's Annual Report on Form 10-K for the year ended December 31, ~~1989,~~2001, Commission File No. 1-4482). ~~(iv) Subordination~~

(iii) Second Amendment, dated as of February 19, 2002, to the Amended and Restated Three Year Credit Agreement ~~dated January 16, 1990, between Berliner Handels- und Frankfurter Bank,~~in (10)(m)(i) above among Arrow Electronics, Inc., the Subsidiary Borrowers, the several banks and ~~The First~~other financial institutions from time to time parties thereto, Bank of America, N.A., as Syndication Agent, Fleet National Bank, ~~of Chicago~~as documentation Agent, and JPMorgan Chase Bank, as Administrative Agent (incorporated by reference to Exhibit ~~10(h)~~10(l)(iii) to the company's Annual Report on Form 10-K for the year ended December 31, ~~1989,~~2001, Commission File No. 1-4482). ~~(v) First~~

(iv) Third Amendment, dated ~~December 29, 1992,~~as of February 16, 2003, to the ~~Subordination~~Amended and Restated Three Year Credit Agreement in (10)~~(h)(iv)~~(m)(i) above among Arrow Electronics, Inc., the Subsidiary Borrowers, the several banks and other financial institutions from time to time parties thereto, Bank of America, N.A., as Syndication Agent, Fleet National Bank, as documentation Agent, and JPMorgan Chase Bank, as Administrative Agent (incorporated by reference to Exhibit 99.2 to the company's Current Report on Form 8-K dated February 19, 2003, Commission File No. 1-4482).

(n) (i) Transfer and Administration Agreement, dated as of March 21, 2001, by and among Arrow Electronics Funding Corporation, Arrow Electronics, Inc., individually and as Master Servicer, the several Conduit Investors, Alternate Investors and Funding Agents and Bank of America, National Association, as administrative agent (incorporated by reference to Exhibit 10(m)(i) to the company's Annual Report on Form 10-K for the year ended December 31, 2001, Commission File No. 1-4482).

(ii) Amendment No. 1 to the Transfer and Administration Agreement, dated as of November 30, 2001, to the Transfer and Administration Agreement in (10)(n)(i) above (incorporated by reference to Exhibit ~~10(h)~~10(m)(ii) to the company's Annual Report on Form 10-K for the year ended December 31, 2001, Commission File No. 1-4482).

(iii) Amendment No. 2 to the Transfer and Administration Agreement, dated as of December 14, 2001, to the Transfer and Administration Agreement in (10)(n)(i) above (incorporated by reference to Exhibit 10(m)(iii) to the company's Annual Report on Form 10-K for the year ended December 31, 2001, Commission File No. 1-4482).

(iv) Amendment No. 3 to the Transfer and Administration Agreement, dated as of March 20, 2002, to the Transfer and Administration Agreement in (10)(n)(i) above (incorporated by reference to Exhibit 10(m)(iv) to the company's Annual Report on Form 10-K for the year ended December 31, ~~1992,~~2001, Commission File No. 1-4482). ~~(vi) Second~~

(v) Amendment ~~dated January 26, 1993,~~No. 4 to the ~~Subordination~~Transfer and Administration Agreement, dated as of March 29, 2002, to the Transfer and Administration Agreement in (10)~~(h)(iv) above (incorporated by reference to Exhibit 10(h)(v)~~(n)(i) above.

(vi) Amendment No. 5 to the ~~company's Annual Report on Form 10-K for the year ended December 31, 1992, Commission File No. 1-4482). -41- (vii) Third Amendment,~~Transfer and Administration Agreement, dated ~~April 12, 1993,~~as of May 22, 2002, to the ~~Subordination~~Transfer and Administration Agreement in (10)~~(h)(iv)~~(n)(i) above. ~~(viii) Fourth~~

(vii) Amendment ~~dated January 28, 1994,~~No. 6 to the ~~Subordination~~Transfer and Administration Agreement, dated as of September 27, 2002, to the Transfer and Administration Agreement in (10)~~(h)(iv)~~(n)(i) above. ~~(viv) Assignments, dated January 16, 1990, by Arrow Electronics GmbH in favor of Berliner Handels- und Frankfurter Bank (incorporated by reference to Exhibit 10(h)(iv)~~

(viii) Amendment No. 7 to the ~~company's Annual Report on Form 10-K for the year ended December 31, 1989, Commission File No. 1-4482). (i)(i) Arrow Electronics, Inc. Stock Option Plan,~~Transfer and Administration Agreement, dated as ~~amended (incorporated by reference to Exhibit (27)(a)~~of February 19, 2003, to the ~~company's Registration Statement on Form S-8, Registration No. 33-66594). (ii) Form of Stock Option~~Transfer and Administration Agreement ~~under (i)~~in (10)(n)(i) above (incorporated by reference to Exhibit ~~10(k)(ii)~~99.1 to the company's Current Report on Form 8-K dated February 19, 2003, Commission File No. 1-4482).

(o) Form of Indemnification Agreement between the company and each director (incorporated by reference to Exhibit 10(g) to the company's Annual Report on Form 10-K for the year ended December 31, 1986, Commission File No. 1-4482). (iii) Form of Nonqualified Stock Option Agreement under (i)(i) above (incorporated by reference to Exhibit 10(k)(iv) to the company's Registration Statement on Form S-4, Registration No. 33-17942). (j)(i) Restricted Stock Plan of Arrow Electronics, Inc., as amended and restated (incorporated by reference to Exhibit 10(j)(i) to the company's Annual Report on Form 10-K for the year ended December 31, 1991, Commission File No. 1-4482). (ii) Form of Award Agreement under (j)(i) above (incorporated by reference to Exhibit 10(l)(iv) to the company's Registration Statement on Form S-4, Registration No. 33-17942). (k) Form of Indemnification Agreement between the company and each director (incorporated by reference to Exhibit 10(m) to the company's Annual Report on Form 10-K for the year ended December 31, 1986, Commission File No. 1-4482). (l) Share Purchase Agreement dated as of July 2, 1993 between Baring Brothers (Guernsey) Limited and Others and Arrow Electronics (UK) Limited. (m) Share Sale Agreement dated as of August 17, 1993 between Ocean Information Holdings Limited and Arrow Electronics, Inc. (11) Statement Re: Computation of Earnings Per Share. (22) List of Subsidiaries. (24)

(21) Subsidiary Listing.

(23) Consent of Ernst & Young ~~(28)~~LLP.

(99) (i) ~~Record~~Certification of ~~Decision, issued by~~William E. Mitchell, Chief Executive Officer, under Section 906 of the ~~EPA on September 28, 1990, with respect to environmental clean-up in Plant City, Florida (incorporated by reference to Exhibit 28 to~~Sarbanes-Oxley Act of 2002.

(ii) Certification of Paul J. Reilly, Chief Financial Officer, under Section 906 of the company's Annual Report on Form 10-K for the year ended December 31, 1990, Commission File No. 1-4482). -42- (ii) Consent Decree lodged with the U.S. District Court for the Middle DistrictSarbanes-Oxley Act of Florida, Tampa Division, on December 18, 1991, with respect to environmental clean-up in Plant City, Florida (incorporated by reference to Exhibit 28(ii) to the company's Annual Report on Form 10-K for the year ended December 31, 1991, Commission File No. 1-4482). (b) Reports on Form 8-K None. -43- 2002.

EXHIBIT 23

CONSENT OF INDEPENDENT AUDITORS

We consent to the incorporation by reference in the Registration Statements (Forms S-8 No. 333-101533, No. 333-101534, No. 333-52872, No. 333-37704, No. 333-70343, No. 333-45631, No. 33-55565, No. 33-66594, No. 33-48252, No. 33-20428 and No. 2-78185) and in the related Prospectuses pertaining to the employee stock plans of Arrow Electronics, Inc., in the Registration Statement and related Prospectus (Form S-3 No. 333-38692) pertaining to the registration of 775,000 shares of Arrow Electronics, Inc. common stock, and in the Registration Statement and related Prospectus (Form S-3 No. 333-50572) pertaining to the sale of up to $2,000,000,000 in aggregate offering price of any combination of securities described in the Prospectus, in the Registration Statement and related Prospectus (Form S-4 No. 333-51100) pertaining to the issuance of up to $1,075,000,000 in aggregate principal amount of exchange notes, in the Registration Statement (Form S-3 No. 333-91387) and in the related Prospectus pert aining to the registration and issuance of the senior notes and senior debentures of Arrow Electronics, Inc., in the Registration Statement (Form S-3 No. 333-52695) and in Amendment No. 1 to the Registration Statement (Form S-3 No. 333-19431) and in the related Prospectuses pertaining to the registration and issuance of the senior notes and senior debentures of Arrow Electronics, Inc., in Amendment No. 1 to the Registration Statement and related Prospectus (Form S-3 No. 33-54473) pertaining to the registration of 1,376,843 shares of Arrow Electronics, Inc. Common Stock, in Amendment No. 1 to the Registration Statement (Form S-3 No. 33-67890) and in the related Prospectus pertaining to the registration of 1,009,086 shares of Arrow Electronics, Inc. Common Stock, ~~and~~ in Amendment No. 1 to the ~~Registra- tion~~Registration Statement and related Prospectus (Form S-3 No. 33-42176) ~~and in the related Prospectus~~ pertaining to the registration of up to 944,445 shares of Arrow ~~Elec- tronics,~~Electronics, Inc. Common Stock held by Aquarius Investments Ltd. and Andromeda Investments Ltd., of our report dated February ~~24, 1994~~13, 2003, with respect to the consolidated financial statements and ~~schedules~~schedule of Arrow Electronics, Inc. included in this Annual Report on Form 10-K for the year ended December 31, ~~1993.~~2002.

/s/ ERNST & YOUNG LLP

New York, New York
March ~~25, 1994 -44-~~ 27, 2003

ARROW ELECTRONICS, INC. ~~SCHEDULE II - AMOUNTS RECEIVABLE FROM EMPLOYEES For the three years ended December 31, 1993~~
Deductions Balance at Amounts Balance beginning Amounts written at end of year Additions collected off of year 1993 John C. Waddell (1) $ 120,000 $ - $ - $ - $ 120,000 1992 John C. Waddell (1) 120,000 - - - 120,000 1991 John C. Waddell (1) 120,000 - - - 120,000 (1) Demand note bearing interest at 12% per annum. The obligation was satisfied in full in 1994.
~~-45-~~ ~~ARROW ELECTRONICS, INC. SCHEDULE VIII - VALUATION AND QUALIFYING ACCOUNTS For the three years ended December 31, 1993~~
Additions Balance at Balance beginning Charged Charged at end of year to income to other Write-offs of year Allowance for doubtful accounts 1993 $8,268,000 $10,769,000 $3,060,000(1) $ 5,606,000 $16,491,000 1992 $7,734,000 $12,081,000 $1,288,000(2) $12,835,000 $ 8,268,000 1991 $5,678,000 $ 4,677,000 $5,589,000(3) $ 8,210,000 $ 7,734,000 (1) Represents the allowance for doubtful accounts of the electronics distribution businesses acquired by the company in 1993 including Zeus Components, Inc., Microproces- sor & Memory Distribution Limited, Amitron-Arrow S.A., ATD Electronica S.A., CCI Electronique S.A., and Spoerle Electronic. (2) Represents the allowance for doubtful accounts of the European electronics distribution businesses acquired from Lex Service PLC in 1992. (3) Represents the allowance for doubtful accounts of the North American electronics distribution businesses acquired from Lex Service PLC in 1991.
~~-46-~~ ~~ARROW ELECTRONICS, INC. SCHEDULE IX - SHORT-TERM BORROWINGS For the three years ended December 31, 1993~~
Maximum Weighted amount Weighted average outstanding Average average interest at any amount interest Balance at rate at month-end outstanding rate end of end of during during during the year the year the year the year the year Short-term borrowings 1993 $35,769,000 6.61% $35,769,999 $19,666,000 7.82% 1992 $ - - $ 399,000 $ 114,000 8.23% 1991 $1,520,000 8.00% $ 1,790,000 $ 341,000 13.53% Short-term borrowings represent obligations payable under short-term lines of credit arrange- ments with various banks. Borrowings were arranged on an as needed basis at either the bank's prime lending rate or LIBOR plus various credit margins which vary from country to country in 1993, sterling LIBOR plus 2 1/4% in 1992, and sterling LIBOR plus 2% in 1991. The average amount outstanding during the year was computed by averaging the total month-end outstanding principal balances during the year. The weighted average interest rate for each year was computed by dividing the interest expense by the average amount outstanding. -47- SIGNATURES
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
For the three years ended December 31, 2002

(in thousands)
Balance
Balance
beginning
Charged
Charged to
at end
of year
to income
other (2)
Write-down
of year
Allowance for doubtful
  accounts (1)
2002
$
80,970
$
12,622
$
-
$
40,987
$
52,605
2001
$
108,142
$
62,736
$
-
$
89,908
$
80,970
2000
$
32,338
$
59,321
$
55,192
$
38,709
$
108,142
(1) The disposition of the Gates/Arrow operations represents a disposal of a "component of an entity" as defined in Financial Accounting     Standards Board Statement No. 144. Accordingly, all periods have been restated to exclude Gates/Arrow.
(2) Represents the allowance for doubtful accounts of the businesses acquired by the company during 2000.
67
Signatures
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this annual report to be signed on its behalf by the undersigned, thereunto duly authorized.
                                                 ARROW ELECTRONICS, INC.
                                                 By: /s/ Peter S. Brown
                                                     Peter S. Brown
                                                     Senior Vice President
                                                     March 27, 2003
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated:
By:/s/ Daniel W. Duval                                         March 27, 2003
    Daniel W. Duval, Chairman
By:/s/ William E. Mitchell                                     March 27, 2003
    William E. Mitchell, President and Chief
     Executive Officer
By:/s/ Paul J. Reilly                                          March 27, 2003
    Paul J. Reilly, Chief Financial Officer
By:/s/ Robert E. Klatell                                       March 27, 2003
    Robert E. Klatell, Executive Vice President
     and Director
By:/s/ Carlo Giersch                                           March 27, 2003
    Carlo Giersch, Director
By:/s/ John N. Hanson                                          March 27, 2003
    John N. Hanson, Director
By:/s/ Stephen P. Kaufman                                      March 27, 2003
    Stephen P. Kaufman, Director
By:/s/ Roger King                                              March 27, 2003
    Roger King, Director
By:/s/ Karen Gordon Mills                                      March 27, 2003
    Karen Gordon Mills, Director
By:/s/ Barry W. Perry                                          March 27, 2003
    Barry W. Perry, Director
By:/s/ Richard S. Rosenbloom                                   March 27, 2003
    Richard S. Rosenbloom, Director
By:/s/ John C. Waddell                                         March 27, 2003
    John C. Waddell, Director
68
Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
I, William E. Mitchell, Chief Executive Officer, certify that:
1.
I have reviewed this annual report on Form 10-K of Arrow Electronics, Inc.;
2.
Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to ~~be signed on its behalf by~~state a material fact necessary to make the undersigned, thereunto duly authorized. ARROW ELECTRONICS, INC. By/s/ Stephen P. Kaufman Stephen P. Kaufman President March 30, 1994 Pursuantstatements made, in light of the circumstances under which such statements were made, not misleading with respect to the ~~requirements~~period covered by this annual report;
3.
Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the ~~Securities~~registrant as of, and for, the periods presented in this annual report;
4.
The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act ~~of 1934,~~Rules 13a-14 and 15d-14) for the registrant and we have:
a)
designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report ~~has been signed below by~~is being prepared;
b)
evaluated the ~~following persons on behalf~~effectiveness of the ~~Registrant~~registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this annual report (the "Evaluation Date"); and
c)
presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;
5.
The registrant's other certifying officer and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors:
a)
all significant deficiencies in the ~~capacities~~design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and onreport financial data and have identified for the ~~dates indicated: By/s/ Stephen P. Kaufman March 30, 1994 Stephen P. Kaufman, Principal Executive Officer~~registrant's auditors any material weaknesses in internal controls; and ~~Director By/s/ Robert E. Klatell March 30, 1994 Robert E. Klatell, Senior Vice President, Principal Financial Officer,~~
b)
any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and ~~Director By/~~
6.
The registrant's other certifying officer and I have indicated in this annual report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

Date: March 27, 2003                        By: /s/ William E. Mitchell
                                                William E. Mitchell
                                                President and Chief Executive
                                                 Officer
69
Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
I, Paul J. Reilly, ~~March 30, 1994 Controller and Principal Accounting~~Chief Financial Officer, ~~By/s/ John C. Waddell March 30, 1994 John C. Waddell, Chairman~~certify that:
1.
I have reviewed this annual report on Form 10-K of Arrow Electronics, Inc.;
2.
Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the ~~Board~~circumstances under which such statements were made, not misleading with respect to the period covered by this annual report;
3.
Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of Directors By/s/ Thomas M. Davidson March 30, 1994 Thomas M. Davidson, Director By/s/ Daniel W. Duval March 30, 1994 Daniel W. Duval, Director By/s/ Carlo Giersch March 30, 1994 Carlo Giersch, Director By/s/ J. Spencer Gould March 30, 1994 J. Spencer Gould, Director By/s/ Lawrence R. Kem March 30, 1994 Lawrence R. Kem, Director By/s/ Steven W. Menefee March 30, 1994 Steven W. Menefee, Director By/s/ Richard S. Rosenbloom March 30, 1994 Richard S. Rosenbloom, Director -48- operations and cash flows of the registrant as of, and for, the periods presented in this annual report;
4.
The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a)
designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared;
b)
evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this annual report (the "Evaluation Date"); and
c)
presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;
5.
The registrant's other certifying officer and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors:
a)
all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and
b)
any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and
6.
The registrant's other certifying officer and I have indicated in this annual report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

Date: March 27, 2003                            By: /s/ Paul J. Reilly
                                                    Paul J. Reilly
                                                    Vice President and Chief
                                                     Financial Officer
70

For the year ended:	2002(b)(c)				2001(d)			2000		1999(e)		1998


Sales		$	7,390,154	$	9,487,292		$	12,065,283	$	8,325,401	$	7,235,556


Operating income		$	167,530	$	152,670		$	773,193	$	326,169	$	328,156

Income (loss) from
continuing operations		$	12,087	$	(75,587	)	$	351,934	$	115,379	$	135,024

Income (loss) per share
from continuing
operations:
Basic		$	.12	$	(.77	)	$	3.64	$	1.21	$	1.42


Diluted		$	.12	$	(.77	)	$	3.56	$	1.20	$	1.39


At year-end:
Accounts receivable
and inventories		$	2,579,833	$	2,762,679		$	5,419,476	$	2,890,365	$	2,431,774
Total assets			4,667,605		5,358,984			7,604,541		4,483,255		3,839,871
Long-term debt			1,807,113		2,441,983			3,027,671		1,553,421		1,047,041
Shareholders' equity			1,235,249		1,766,461			1,913,748		1,550,529		1,487,319

-	Inventories are recorded at the lower of cost or market. Write-downs of inventories to market value are based upon contractual provisions governing price protection, stock rotation, and obsolescence, as well as assumptions about future demand and market conditions. If assumptions about future demand change and/or actual market conditions are less favorable than those projected by the company, additional write-downs of inventories may be required. Because of the large number of transactions and the complexity of managing the process around price protections and stock rotations, estimates are made regarding adjustments to the book cost of inventories. Actual amounts could be different from those estimated.

-	The company assesses its investments accounted for as available-for-sale on a quarterly basis to determine whether declines in market value below cost are other than temporary. When the decline is determined to be other than temporary, the cost basis for the individual security is reduced and a loss is realized in the period in which it occurs. The company makes such determination based upon the quoted market price and operating results of the investment. In addition, the company evaluates its intent to retain the investment over a period of time which would be sufficient to allow for any recovery in market value.

-	The carrying value of the company's deferred tax assets is dependent upon the company's ability to generate sufficient future taxable income in certain tax jurisdictions. Should the company determine that it would not be able to realize all or part of its deferred tax assets in the future, a valuation allowance to the deferred tax assets would be established in the period such determination was made.

-	The company uses various financial instruments, including derivative financial instruments, for purposes other than trading. Derivatives used as part of the company's risk management strategy are designated at inception as hedges and measured for effectiveness both at inception and on an ongoing basis. The company has also entered into interest rate swap transactions that convert certain fixed rate debt to variable rate debt, effectively hedging the change in fair value of the fixed rate debt resulting from fluctuations in interest rates. The fair value hedges and the hedged debt are adjusted to current market values through interest expense.

-	The company is subject to proceedings, lawsuits, and other claims related to environmental, labor, product and other matters. The company assesses the likelihood of an adverse judgment or outcomes for these matters, as well as the range of potential losses. A determination of the reserves required, if any, is made after careful analysis. The required reserves may change in the future due to new developments.

-	The company has recorded special charges in connection with restructuring its businesses, as well as the integration of acquired businesses. These reserves principally include estimates related to employee separation costs, the consolidation of facilities, contractual obligations, and the valuation of certain assets including accounts receivable, inventories, and investments. Actual amounts could be different from those estimated.

-	In assessing the recoverability of the company's goodwill and other long-lived assets, significant assumptions regarding the estimated future cash flows and other factors to determine the fair value of the respective assets must be made, as well as the related estimated useful lives. If these estimates or their related assumptions change in the future as a result of changes in strategy and/or market conditions, the company may be required to record impairment charges for these assets. On January 1, 2002, the company adopted FASB Statement No. 142, "Goodwill and Other Intangible Assets," and accordingly, discontinued the amortization of goodwill.

ARROW ELECTRONICS, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 1993, 1992, AND 1991

ARROW ELECTRONICS, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

ARROW ELECTRONICS, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

ARROW ELECTRONICS, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

ARROW ELECTRONICS, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

ARROW ELECTRONICS, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CONTINUED In September 1991,

ARROW ELECTRONICS, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

ARROW ELECTRONICS, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

ARROW ELECTRONICS, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CONTINUED income before income

ARROW ELECTRONICS, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

ARROW ELECTRONICS, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CONTINUED

ARROW ELECTRONICS, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CONTINUED 6.

ARROW ELECTRONICS, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

ARROW ELECTRONICS, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

ARROW ELECTRONICS, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

ARROW ELECTRONICS, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

ARROW ELECTRONICS, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

ARROW ELECTRONICS, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

ARROW ELECTRONICS, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CONTINUED 8. Retirement

ARROW ELECTRONICS, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

ARROW ELECTRONICS, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

ARROW ELECTRONICS, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

ARROW ELECTRONICS, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

ARROW ELECTRONICS, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

ARROW ELECTRONICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 1993, 1992, AND 1991

ARROW ELECTRONICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

ARROW ELECTRONICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

ARROW ELECTRONICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

ARROW ELECTRONICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

ARROW ELECTRONICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CONTINUED In September 1991,

ARROW ELECTRONICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

ARROW ELECTRONICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

ARROW ELECTRONICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CONTINUED income before income

ARROW ELECTRONICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

ARROW ELECTRONICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CONTINUED

ARROW ELECTRONICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CONTINUED 6.

ARROW ELECTRONICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

ARROW ELECTRONICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

ARROW ELECTRONICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

ARROW ELECTRONICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

ARROW ELECTRONICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

ARROW ELECTRONICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

ARROW ELECTRONICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CONTINUED 8. Retirement

ARROW ELECTRONICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

ARROW ELECTRONICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

ARROW ELECTRONICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

ARROW ELECTRONICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

ARROW ELECTRONICS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS