Exhibit 99.1 Arrow Electronics Posts Second Quarter Results Ahead of Wall Street Consensus --- Strong Cash Flow And Earnings --- MELVILLE, N.Y.--(BUSINESS WIRE)--July 27, 2005--Arrow Electronics, Inc. (NYSE:ARW) today reported second quarter 2005 net income of $58.4 million ($.50 and $.48 per share on a basic and diluted basis, respectively) on sales of $2.77 billion, compared with net income of $66.9 million ($.58 and $.55 per share on a basic and diluted basis, respectively) on sales of $2.68 billion in the second quarter of 2004. Cash flow from operations in the second quarter of 2005 was $63.1 million, compared to a use of cash of $37.5 million in the second quarter of 2004. The company's results for 2005 and 2004 include a number of items that impact their comparability. A description of these items is provided below together with a reconciliation under the heading "Certain Non-GAAP Financial Information". Excluding those items, net income for the quarter ended July 1, 2005 would have been $65.4 million ($.56 and $.54 per share on a basic and diluted basis, respectively) and net income for the quarter ended June 30, 2004 would have been $69.2 million ($.60 and $.57 per share on a basic and diluted basis, respectively). Wall Street consensus, as reported by First Call, was $.51 per share. Consolidated operating income of $123.6 million, excluding the items impacting comparability, was up 11% from $110.9 million in the first quarter. Operating income as a percentage of sales, excluding the previously mentioned items impacting comparability, increased by 40 basis points sequentially and decreased 20 basis points year-on-year. "We again delivered strong results as we continue to execute on our strategies to drive sales growth and greater operating efficiencies," said William E. Mitchell, President and Chief Executive Officer of Arrow. "Our initiatives to streamline our organization, leverage our cost structure, and efficiently manage working capital continue to drive strong operating results and cash flow," added Mr. Mitchell. Worldwide components sales of $2.08 billion were essentially flat with the first quarter and up 2% from last year's second quarter. "The North American and Asia/Pacific components businesses posted solid sequential growth in sales and earnings", said Mr. Mitchell, "while in Europe operating performance improved despite the traditional seasonal decline in sales." Worldwide computer products sales of $691 million advanced 9% both sequentially and year-over-year. "Our North American Computer Products business again posted record sales, advancing 12% over both this year's first quarter and last year's second quarter," added Mr. Mitchell. "This marked our North American Computer Products business' 16th consecutive quarter of year-on-year growth in operating income." The company's results for the second quarter of 2005 and 2004 include a number of items outlined below that impact their comparability: -- The company announced, during the first quarter of 2005, that it would be taking additional actions to better optimize the use of its mainframe, reduce real estate costs, be more efficient in its distribution centers, and to be more productive. These actions are expected to reduce costs by approximately $50 million per annum with $40 million to be realized in 2005. Approximately $9 million of the expected 2005 cost reduction was achieved in the second quarter. The estimated net charges associated with these actions are expected to total approximately $7.5 million. In the second quarter of 2005, $4.8 million ($2.9 million net of related taxes or $.02 per share) of these charges were recorded. -- During the second quarter of 2005, the company repurchased, through a series of transactions, $80.8 million accreted value of its zero coupon convertible debentures due in 2021, which could have been initially put to the company in February 2006 ("convertible debentures"). The related loss on the repurchase, including the premium paid and the write-off of related deferred financing costs, aggregated $1.7 million ($1.0 million net of related taxes or $.01 per share). -- At July 1, 2005, the company determined that an other-than-temporary decline in the fair value of an investment occurred, and, accordingly, the company recorded a loss on the write-down of an investment of $3.0 million ($.03 per share) in accordance with Financial Accounting Standards Board Statement No. 115 and Emerging Issues Task Force Issue No. 03-1. -- During the second quarter of 2004, the company recorded a restructuring gain of $1.2 million ($1.9 million net of related taxes or $.02 and $.01 per share on a basic and diluted basis, respectively). -- During the second quarter of 2004, the company repurchased, through a series of transactions, $141.7 million accreted value of its convertible debentures. The related loss on the repurchase, including the premium paid and the write-off of related deferred financing costs, aggregated $7.1 million ($4.2 million net of related taxes or $.04 and $.03 per share on a basic and diluted basis, respectively). "The components markets remain stable. Lead times are short, product is readily available, and customer ordering patterns have remained relatively consistent for several quarters", said Paul J. Reilly, Senior Vice President and Chief Financial Officer. "We expect to see normal seasonality as we enter the third quarter. Based upon all of the information known to us today, we expect third quarter revenues to be between $2.65 billion and $2.75 billion with earnings per share on a diluted basis, excluding charges, in the range of $.49 to $.53 per share," said Mr. Reilly. "We once again improved upon our industry leading levels of earnings, profitability and return on investment by our strategy of outperforming the market, operational excellence, continuous process improvement, and greater financial stability," said Mr. Mitchell, "and we remain committed to creating greater levels of value for our shareholders." SIX MONTH RESULTS Arrow's net income for the first six months of 2005 was $115.6 million ($.99 and $.96 per share on a basic and diluted basis, respectively) on sales of $5.5 billion, compared with net income of $96.4 million ($.87 and $.82 per share on a basic and diluted basis, respectively) on sales of $5.3 billion in the first six months of 2004. Net income for the first six months of 2005 includes the aforementioned restructuring charges, write-down of an investment, and charge associated with the loss on prepayment of debt. Additionally, during the first quarter of 2005, restructuring charges of $4.1 million ($2.6 million net of related taxes or $.02 per share) related to the aforementioned actions to be more efficient and productive, a loss on prepayment of debt of $.4 million ($.2 million net of related taxes) on the repurchase of $13.2 million accreted value of its convertible debentures, and an acquisition indemnification credit of $1.7 million ($1.3 million net of related taxes or $.01 per share on a basic basis) were recorded. Net income for the first six months of 2004 includes the aforementioned restructuring gain and charges associated with the loss on prepayment of debt. Additionally, during the first quarter of 2004, restructuring charges of $8.8 million ($6.5 million net of related taxes or $.06 and $.05 per share on a basic and diluted basis, respectively) were recorded. Also, the company repurchased, through a series of transactions, $250.0 million principal amount of its 8.7% senior notes due in October 2005 and $91.9 million accreted value of its convertible debentures. As a result of these repurchases, a loss on prepayment of debt of $23.7 million ($14.2 million net of related taxes or $.13 and $.12 per share on a basic and diluted basis, respectively) was recorded in the first quarter of 2004. Excluding these items, net income would have been $124.1 million ($1.06 and $1.03 per share on a basic and diluted basis, respectively) and $119.4 million ($1.08 and $1.01 per share on a basic and diluted basis, respectively) for the first six months of 2005 and 2004,respectively. Arrow Electronics is a major global provider of products, services, and solutions to industrial and commercial users of electronics components and computer products. Headquartered in Melville, New York, Arrow serves as a supply channel partner for nearly 600 suppliers and 150,000 original equipment manufacturers, contract manufacturers, and commercial customers through a global network of more than 200 locations in 53 countries and territories. Certain Non-GAAP Financial Information In addition to disclosing results that are determined in accordance with Generally Accepted Accounting Principles ("GAAP"), the company provides certain non-GAAP financial information relating to operating income, net income and net income per basic and diluted share, each as adjusted for certain charges, credits and losses that the company believes impact the comparability of its results of operations. These charges, credits and losses arise out of the company's acquisitions of other companies, the company's efficiency enhancement initiatives, the prepayment of debt, and the write-down of an investment. Reconciliations of the company's non-GAAP financial information to GAAP are set forth in the table below. The company believes that such non-GAAP financial information is useful to investors to assist in assessing and understanding the company's operating performance and underlying trends in the company's business because management considers the charges, credits and losses referred to above to be outside the company's core operating results. This non-GAAP financial information is among the primary indicators management uses as a basis for evaluating the company's financial and operating performance. In addition, the company's Board of Directors may use this non-GAAP financial information in evaluating management performance and setting management compensation. The presentation of this additional non-GAAP financial information is not meant to be considered in isolation or as a substitute for, or alternative to, operating income, net income and net income per basic and diluted share determined in accordance with GAAP. Analysis of results and outlook on a non-GAAP basis should be used as a complement to, and in conjunction with, data presented in accordance with GAAP. ARROW ELECTRONICS, INC. EARNINGS RECONCILIATION (In thousands except per share data) Three Months Ended Six Months Ended July 1, June 30, July 1, June 30, 2005 2004 2005 2004 ------- -------- ------- --------- Operating income, as reported $118,758 $127,933 $227,251 $225,696 Acquisition indemnification credit - - (1,672) - Restructuring charges (gain) 4,847 (1,241) 8,885 7,577 -------------------- --------- --------- Operating income, as adjusted $123,605 $126,692 $234,464 $233,273 ==================== ========= ========= Net income, as reported $ 58,449 $ 66,859 $115,640 $ 96,384 Acquisition indemnification credit - - (1,267) - Restructuring charges (gain) 2,925 (1,914) 5,458 4,581 Loss on prepayment of debt 1,035 4,216 1,247 18,407 Write-down of investment 3,019 - 3,019 - -------------------- --------- --------- Net income, as adjusted $ 65,428 $ 69,161 $124,097 $119,372 ==================== ========= ========= Net income per basic share, as reported $ .50 $ .58 $ .99 $ .87 Acquisition indemnification credit - - (.01) - Restructuring charges (gain) .02 (.02) .04 .04 Loss on prepayment of debt .01 .04 .01 .17 Write-down of investment .03 - .03 - -------------------- --------- --------- Net income per basic share, as adjusted $ .56 $ .60 $ 1.06 $ 1.08 ==================== ========= ========= Net income per diluted share, as reported* $ .48 $ .55 $ .96 $ .82 Restructuring charges (gain) .02 (.01) .03 .04 Loss on prepayment of debt .01 .03 .01 .15 Write-down of investment .03 - .03 - -------------------- --------- --------- Net income per diluted share, as adjusted $ .54 $ .57 $ 1.03 $ 1.01 ==================== ========= ========= * In computing net income per diluted share for the three and six months ended July 1, 2005, net income was increased by $1,553 and $3,226, respectively, for interest (net of taxes) related to the zero coupon convertible debentures ("convertible debentures") which are dilutive common stock equivalents. In addition, the diluted weighted average number of shares outstanding for the three and six months ended July 1, 2005 includes 5,883 shares and 6,195 shares, respectively, related to the convertible debentures. In computing net income per diluted share for the three and six months ended June 30, 2004, net income was increased by $2,536 and $5,906, respectively, for interest (net of taxes) related to the convertible debentures which are dilutive common stock equivalents. In addition, the diluted weighted average number of shares outstanding for the three and six months ended June 30, 2004 includes 9,892 shares and 11,659 shares, respectively, related to the convertible debentures. Safe Harbor The Private Securities Litigation Reform Act of 1995 provides a "safe harbor" for forward-looking statements. This press release contains 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 computer and electronic components markets, changes in relationships with key suppliers, the effects of additional actions taken to lower costs, the ability of the company to generate additional cash flow and the other risks described from time to time in the company's reports to the Securities and Exchange Commission (including the company's Annual Report on Form 10-K and Quarterly Reports on Form 10-Q). Forward-looking statements are those statements, which are not statements of historical fact. You can identify these forward-looking statements by forward-looking words such as "expects," "anticipates," "intends," "plans," "may," "will," "believes," "seeks," "estimates," and similar expressions. Shareholders and other readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date on which they are made. The company undertakes no obligation to update publicly or revise any forward-looking statements. ARROW ELECTRONICS, INC. CONSOLIDATED STATEMENT OF OPERATIONS (In thousands except per share data) Three Months Ended Six Months Ended July 1, June 30, July 1, June 30, 2005 2004 2005 2004 ---------- --------- ---------- ------------ Sales $2,767,547 $2,678,290 $5,494,418 $ 5,304,248 ---------- ----------- ----------- ------------ Costs and expenses: Cost of products sold 2,326,214 2,227,256 4,620,856 4,429,994 Selling, general and administrative expenses 304,235 310,379 613,078 611,892 Depreciation and amortization 13,493 13,963 26,020 29,089 Acquisition indemnification credit - - (1,672) - Restructuring charges (gain) 4,847 (1,241) 8,885 7,577 ----------- ---------- ----------- ------------ 2,648,789 2,550,357 5,267,167 5,078,552 ----------- ---------- ----------- ------------ Operating income 118,758 127,933 227,251 225,696 Equity in earnings of affiliated companies 562 901 1,640 1,346 Loss on prepayment of debt 1,731 7,051 2,086 30,781 Write-down of investment 3,019 - 3,019 - Interest expense, net 24,375 24,493 48,475 55,213 ----------- ---------- ----------- ------------ Income before income taxes and minority interest 90,195 97,290 175,311 141,048 Provision for income taxes 31,627 30,000 59,371 44,082 ----------- ---------- ----------- ------------ Income before minority interest 58,568 67,290 115,940 96,966 Minority interest 119 431 300 582 ----------- ---------- ----------- ------------ Net income $ 58,449 $ 66,859 $ 115,640 $ 96,384 ========== =========== =========== ============ Net income per share: Basic $ .50 $ .58 $ .99 $ .87 ========== =========== =========== ============ Diluted $ .48 $ .55 $ .96 $ .82 ========== =========== =========== ============ Average number of shares outstanding: Basic 117,009 114,917 116,604 110,764 Diluted 124,241 126,698 124,136 124,198 This interim report is subject to independent audit at year-end. ARROW ELECTRONICS, INC. CONSOLIDATED BALANCE SHEET (In thousands) July 1, December 31, 2005 2004 ------- ------------ ASSETS Current assets: Cash and cash equivalents $ 616,213 $ 305,294 Short-term investments - 158,600 ----------- ----------- Total cash and short-term investments 616,213 463,894 Accounts receivable, net 2,118,510 1,984,122 Inventories 1,359,081 1,486,478 Prepaid expenses and other assets 100,060 93,039 ----------- ----------- Total current assets 4,193,864 4,027,533 ----------- ----------- Property, plant and equipment at cost: Land 38,507 40,340 Buildings and improvements 170,147 184,344 Machinery and equipment 409,779 418,721 ----------- ----------- 618,433 643,405 Less: accumulated depreciation and amortization (386,453) (380,422) ----------- ----------- Property, plant and equipment, net 231,980 262,983 ----------- ----------- Investments in affiliated companies 34,353 34,302 Cost in excess of net assets of companies acquired 921,770 974,285 Other assets 200,079 209,998 ----------- ----------- Total assets $5,582,046 $5,509,101 =========== =========== LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable $1,451,602 $1,261,971 Accrued expenses 391,022 395,955 Short-term borrowings, including current portion of long-term debt 229,658 8,462 ----------- ----------- Total current liabilities 2,072,282 1,666,388 ----------- ----------- Long-term debt 1,160,921 1,465,880 Other liabilities 177,369 182,647 Shareholders' equity: Common stock, par value $1: Authorized - 160,000 shares in 2005 and 2004 Issued - 118,272 shares in 2005 and 117,675 in 2004 118,272 117,675 Capital in excess of par value 809,241 797,828 Retained earnings 1,261,446 1,145,806 Foreign currency translation adjustment 7,904 190,595 ----------- ----------- 2,196,863 2,251,904 Less: Treasury stock (294 and 1,374 shares in 2005 and 2004, respectively), at cost (7,861) (36,735) Unamortized employee stock awards (2,626) (3,738) Other (14,902) (17,245) ----------- ----------- Total shareholders' equity 2,171,474 2,194,186 ----------- ----------- Total liabilities and shareholders' equity $5,582,046 $5,509,101 =========== =========== This interim report is subject to independent audit at year-end. ARROW ELECTRONICS, INC. CONSOLIDATED STATEMENT OF CASH FLOWS (In thousands) Six Months Ended --------------------- July 1, June 30, 2005 2004 ---------- --------- Cash flows from operating activities: Net income $ 115,640 $ 96,384 ---------- ---------- Adjustments to reconcile net income to net cash provided by (used for) operations: Minority interest 300 582 Depreciation and amortization 26,020 29,089 Accretion of discount on convertible debentures 5,395 9,880 Amortization of deferred financing costs and discount on notes 1,885 2,807 Amortization of restricted stock and performance awards 3,010 5,936 Equity in earnings of affiliated companies (1,640) (1,346) Deferred income taxes 705 1,568 Acquisition indemnification credit, net of taxes (1,267) - Restructuring charges, net of taxes 5,458 4,581 Loss on prepayment of debt, net of taxes 1,247 18,407 Write-down of investment 3,019 - Change in assets and liabilities, net of effects of acquired businesses: Accounts receivable (207,839) (234,862) Inventories 79,457 (191,974) Prepaid expenses and other assets (6,123) (3,940) Accounts payable 221,484 96,452 Accrued expenses (30,513) (567) Other (124) 7,176 ---------- ---------- Net cash provided by (used for) operating activities 216,114 (159,827) ---------- ---------- Cash flows from investing activities: Acquisition of property, plant and equipment, net (4,564) (3,055) Cash consideration paid for acquired businesses (2,461) (12,179) Proceeds from note receivable - 8,333 Purchase of short-term investments (230,456) (178,836) Proceeds from sale of short-term investments 389,056 178,836 Other 3,711 (286) ---------- ---------- Net cash provided by (used for) investing activities 155,286 (7,187) ---------- ---------- Cash flows from financing activities: Change in short-term borrowings 9,493 (1,213) Change in long-term debt (1,936) (947) Repurchase of senior notes - (268,399) Repurchase of convertible debentures (94,501) (241,790) Proceeds from common stock offering - 312,789 Proceeds from exercise of stock options 35,563 12,701 ---------- ---------- Net cash used for financing activities (51,381) (186,859) ---------- ---------- Effect of exchange rate changes on cash (9,100) 3,416 ---------- ---------- Net increase (decrease) in cash and cash equivalents 310,919 (350,457) Cash and cash equivalents at beginning of period 305,294 612,404 ---------- ---------- Cash and cash equivalents at end of period $ 616,213 $ 261,947 ========== ========== This interim report is subject to independent audit at year-end. ARROW ELECTRONICS, INC. SEGMENT INFORMATION (In thousands) Three Months Ended Six Months Ended July 1, June 30, July 1, June 30, 2005 2004 2005 2004 ----------- ---------- ---------- ----------- Sales: Components $2,076,935 $2,043,329 $4,171,678 $4,077,182 Computer Products 690,612 634,961 1,322,740 1,227,066 ----------- ----------- ----------- ----------- Consolidated $2,767,547 $2,678,290 $5,494,418 $5,304,248 =========== =========== =========== =========== Operating income: Components $ 105,550 $ 119,882 $ 201,297 $ 230,322 Computer Products 40,673 31,694 76,357 52,312 Corporate (a) (27,465) (23,643) (50,403) (56,938) ----------- ----------- ----------- ----------- Consolidated $ 118,758 $ 127,933 $ 227,251 $ 225,696 =========== =========== =========== =========== (a) Includes restructuring charges of $4.8 million for the three months ended July 1, 2005, a restructuring gain of $1.2 million for the three months ended June 30, 2004, an acquisition indemnification credit of $1.7 million and restructuring charges of $8.9 million for the six months ended July 1, 2005, and restructuring charges of $7.6 million for the six months ended June 30, 2004. This interim report is subject to independent audit at year-end CONTACT: Arrow Electronics, Inc. Ira M. Birns Vice President and Treasurer 631-847-1657 Paul J. Reilly Senior Vice President and Chief Financial Officer 631-847-1872 or Media: Jacqueline F. Strayer Vice President, Corporate Communications 631-847-2101