Arrow Electronics, Inc. Fourth Quarter and Year End 2006 Earnings Call. February 22, 2007

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1 Arrow Electronics, Inc. Fourth Quarter and Year End 2006 Earnings Call February 22, 2007

2 Welcome Ira Birns Vice President & Treasurer

3 Safe Harbor Statement Some of the comments to be made on this morning s s call may include forward- looking statements, including statements addressing future financial results, that are subject to a number of risks and uncertainties that could cause actual results or facts to differ materially from such statements for a variety of reasons including, but not limited to: industry conditions, the company s s ongoing planned implementation of its new global financial system and new enterprise rise resource planning system, changes in product supply, pricing and customer demand, competition, other vagaries in the electronic components and computer products markets, changes in relationships with key suppliers, increased profit margin pressure, the effects of additional actions taken to become more efficient or lower costs, the company s s ability to generate additional cash flow and the other risks described from time to time in the company s s reports to the Securities and Exchange Commission (including the company s s Annual Report on Form 10-K K and Quarterly Reports on Form 10-Q). Forward-looking statements are those statements, which are not statements of historical fact. You can n 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 of the forward-looking statements. 3

4 Business Overview Bill Mitchell Chairman, President & CEO

5 Market Overview We continue to post strong results & industry leading profitability Global Components Sales increased 15% Y/Y Europe/Asia: Record Q4 sales and strong WC performance NAC: Core SMB drove profits to 2 nd highest level since 2000 despite large customer weakness Book to bill positive worldwide: in Europe, Asia, Core SMB in NA Pricing remains stable, cancellation rates remain low, normal lead times Gained market share globally Y/Y Enterprise Computing Solutions Sales up 32% year-over over-year Strong performance in every product line Strengthened geographic reach, supplier relationships, product offerings o and market share in fast growing segments 5

6 Fourth Quarter Highlights Overall, we had another good quarter Consolidated sales increased 18% to $3.49 BN, record Q4 level since 2000 Comparable EPS* of $0.75, operating income at record Q4 level since th consecutive quarter of Y/Y decreases in operating expenses*/sales Working capital/sales decreased 160bps Q/Q to 18.1% Strong operating cash flow of $288MM Return on invested capital** was higher than our weighted average cost of capital for the 12 th consecutive quarter *Represents GAAP measure adjusted to exclude the impact of restructuring and other items affecting comparability. Excludes $6MM ($3.6MM net of taxes) in costs related to accelerated ERP initiative that were not previously anticipated. See Earnings Reconciliation for a reconciliation between GAAP and Comparable EPS. **ROIC = Annualized, tax effected op. income excluding restructuring and other items affecting comparability/(avg Debt + Avg Equity Avg Cash over $150MM). Excludes impact of Alternative Technology and InTechnology acquisitions. 6

7 Full Year Highlights Looking back we had a terrific year Record level of sales increase of 22%, 11% organically Gained market share in all businesses Continued to grow profits at a faster pace than sales for the 4 th year in a row Comparable EPS* of $ nd highest in company history Operating expenses*/sales down 90 basis points Return on working capital at highest level since 2000 Strong cash flow generation for the 6 th consecutive year ROIC** greater that cost of capital for 3 years 11.4% in 2006, +120bps *Represents GAAP measure adjusted to exclude the impact of restructuring and other items affecting comparability. Excludes $6MM ($3.6MM net of taxes) in costs related to accelerated ERP initiative that were not previously anticipated. See Earnings Reconciliation for a reconciliation between GAAP and Comparable EPS. **ROIC = Annualized, tax effected op. income excluding restructuring and other items affecting comparability/(avg Debt + Avg Equity Avg Cash over $150MM). Excludes impact of Alternative Technology and InTechnology acquisitions and $6MM in cost related to accelerated ERP initiative. 7

8 Global Enterprise Resource Planning Initiative This strategic initiative will enable us to be more efficient and more effective Recognize increasing globalization in our business Opportunity to adopt most efficient processes Empower employees to be more productive while providing superior service Follows successful implementation of our Global Financial System Phased implementation Will not dilute EPS Strongly accretive to earnings & cash flow over long-term 8

9 Financial Overview Paul Reilly Senior Vice President & CFO

10 Consolidated Sales ($ in millions) $2,434 $2,723 $2,960 $3,493 Sales of $3.49Bn +18% Y/Y +8%Y/Y Pro forma for acquisitions* Q4-03 Q4-04 Q4-05 Q4-06 *Does not include InTechnology, which closed on December 29,

11 Worldwide Component Sales ($ in millions) $1,879 $2,100 $2,303 $2,659 Sales of $2.7Bn +15% Y/Y +10% Y/Y Pro forma for Ultra Source Operating margin* flat Y/Y Q4-03 Q4-04 Q4-05 Q4-06 *Excludes Ultra Source. 11

12 Worldwide Computer Product Sales ($ in millions) $555 $623 $657 $834 Sales of $834MM +27% Y/Y and +26% Q/Q +4% Y/Y Pro forma for acquisitions* Operating margin +90bps Q/Q Q4-03 Q4-04 Q4-05 Q4-06 *Does not include InTechnology, which closed on December 29,

13 P&L Highlights ($ in millions, except per share data) 4Q06 3Q06 Change 4Q05 Change Sales $3,493 $3,454 +1% $2,960 18% Gross Profit Margin 14.6% 14.7% -10bps 15.1% -50bps Operating Exp*/Sales 10.1% 10.2% -10bps 10.4% -30bps Operating Income* $158.3 $ % $ % Operating Margin* 4.5% 4.5% Flat 4.7% -20bps Net Income* $92.2 $ % $ % Diluted EPS* $0.75 $ % $ % *Represents GAAP measure adjusted to exclude the impact of restructuring and other items affecting comparability. Excludes $6MM ($3.6MM net of taxes) in costs related to accelerated ERP initiative that were not previously anticipated. a See Earnings Reconciliation for a reconciliation between GAAP and Comparable EPS. 13

14 Improved Working Capital Performance Working Capital/Sales of 18.1%* Inventory turns > 7x for 2 nd time in company history Generated strong operating cash flow of $288MM ROIC** ahead of our Cost of Capital for 12 consecutive quarters Balance sheet strong and liquid Net debt near 10 year low Net debt/cap 23% $1.3BN in available liquidity *Pro forma for Alternative Technology and excluding InTechnology. **ROIC = Annualized, tax effected op. income excluding restructuring and other items affecting comparability/(avg Debt + Avg Equity Avg Cash over $150MM). Excludes impact of of Alternative Technology and InTechnology acquisitions. 14

15 Global Components Overview Mike Long President Arrow Global Components

16 Global Fundamentals Trends on a worldwide basis Markets generally performed as expected Preliminary data indicates market share gains on a global basis year-over over-year Lead times normal and pricing remains stable No notable increases in cancellation rates Book to bill positive worldwide: in Europe, Asia, Core SMB in NA Stable markets to date in Q1 16

17 North America Component Sales ($ in millions) $1,123 $1,082 $991 $1,017 Q4-03 Q4-04 Q4-05 Q4-06 Sales at second highest Q4 level +4% Y/Y Strong SMB, weakness in large customer segment Operating income at 2 nd highest Q4 level, since 2000 Strong PEMCO Q4 survey: majority well positioned for Q1 17

18 North America Components 2006 SUMMARY Sales increased to highest level, excluding 2000 Operating income +11% on further traction in efficiency initiatives WC/Sales at second lowest level ROWC at second highest level, excluding 2000 Will take further advantage of opportunities in the market place in 2007 PEMCO Lighting Medical Transportation 18

19 Europe Sales ($ in millions) $949 $838 $821 $717 Q4-03 Q4-04 Q4-05 Q4-06 Strength in Europe, as reported led to record Q4 sales of $949MM +16% Y/Y Components +19% Y/Y Operating income +46% Y/Y*, 3x growth in sales Operating margin +110bps Y/Y ROWC +350bps Y/Y, to highest Q4 level in five years 19

20 Europe 2006 SUMMARY Record level of sales Increased sales focus and investment in the region Progress on One Arrow led to highest level of profitability, excluding Tech bubble ROWC improved 40% to its second highest level 20

21 Asia Pac Component Sales ($ in millions) $248 $313 $451 $627 Improved profitability Sales of $627MM +39% Y/Y +10% Y/Y Pro forma for Ultra Source Strong PEMCO, double digit growth Y/Y Highest Q4 inventory turns Lowest Q4 WC/Sales since 2000 Q4-03 Q4-04 Q4-05 Q

22 Asia Pac Components 2006 SUMMARY Grew sales by 63%, +20% Pro forma for Ultra Source Expanded customer base & product offerings Solid performance from Ultra Source Focused on profitable growth: grew earnings 8x faster than sales Seeing more favorable market dynamics Continue to be focused on becoming the Clear #1 in Asia Outperform the market Gain market share Achieve targeted profitability 22

23 Enterprise Computing Solutions Overview Cathy Morris & Kevin Gilroy Presidents Arrow Enterprise Computing Solutions

24 Enterprise Computing Solutions Sales ($ in millions) $446 $527 $574 $761 Sales of $761MM +32% Y/Y, +28% Q/Q +5% Y/Y Pro forma for acquisitions Strength in all product segments 12 th consecutive Q of Y/Y sales growth Alternative Technology continues to perform at a high level Q4-03 Q4-04 Q4-05 Q

25 Enterprise Computing Solutions 2006 SUMMARY We have transformed our ECS business Expanded geographic presence from 2 countries to almost 20 Strengthened position in fast growing markets Grew sales by 23% Continue to deliver industry leading margins and returns Significant opportunities to cross-sell sell storage and software Keylink acquisition: will become leading distributor of IBM and HP enterprise products 25

26 Closing Comments Bill Mitchell Chairman, President & CEO

27 Full Year Financial Highlights We continue to manage the company for consistent growth Highest level of sales in company history, gained market share in all of our businesses Over the past 4 years Earnings* grew faster than sales Net Income* advanced from $15MM to $362MM EPS* has grown 110% CAGR Return on working capital to highest level since 2000 Generated cash for 6 consecutive years ROIC** in excess of cost of capital for 3 consecutive years, 11.4% in 2006 more than doubled since 2003 *Represents GAAP measure adjusted to exclude the impact of restructuring and other items affecting comparability. Excludes $6MM ($3.6MM net of taxes) in costs related to accelerated ERP initiative that were not previously anticipated. a See Earnings Reconciliation for a reconciliation between GAAP and Comparable EPS. **ROIC = Annualized, tax effected op. income excluding restructuring and other items affecting comparability/(avg Debt + Avg Equity Avg Cash over $150MM). Excludes impact of Alternative Technology and InTechnology acquisitions and $6MM in cost related to accelerated ERP initiative. 27

28 2006: A Year of Continued Transformation Took advantage of ECS window of opportunity DNS: Entry into the European enterprise market Alternative Technology: 3,000 new SMB VARs to cross-sell sell HW into InTechnology: Increased presence in fast growing storage and software markets Keylink: : Will become #1 Distributor of HP and IBM enterprise products Embarked on ERP initiative Standardize systems and processes worldwide practices Empower employees significant efficiencies adopt best increase productivity and create 28

29 First Quarter 2007 Guidance Consolidated Sales Worldwide Components Worldwide Computer Products $3.525Bn to $3.725Bn $2.775Bn to $2.875Bn $750MM to $850MM Diluted EPS* $0.72 to $0.76 *Excluding Charges 29

30 Questions & Answers

31 Earnings Reconciliation ($ in thousands, except per share data) 4Q06 4Q Operating Income as Reported $141,379 $134,769 $606,225 $480,258 Restructuring Charges Pre-acquisition warranty claim Pre-acquisition environmental matters Amortization of intangible assets Acquisition indemnification credit 5,411 2,837 1,449 1,207 3,719 11,829 2,837 1,449 12,716 (1,672) Operating Income Adjusted $152,283 $138,488 $622,340 $491,302 Net Income as Reported $128,071 $74,446 $388,331 $253,609 Restructuring Charges Pre-acquisition warranty claim Pre-acquisition environmental matters Amortization of intangible assets Impact of settlement of tax matters Income Taxes: January to September 30, and prior Interest (net of taxes): January to September 30, and prior Loss on repayment of debt Write down of investment Acquisition indemnification credit 5,062 1, ,207 (4,312) (40,426) (1,327) (2,431) 2, ,977 1, (40,426) (2,431) 1,558 7,310 2,596 3,019 (1,267) Net Income Adjusted $88,572 $77,417 $358,737 $265,267 Diluted EPS as Reported $1.04 $0.60 $3.16 $2.09 Restructuring Charges Pre-acquisition warranty claim Pre-acquisition environmental matters Amortization of intangible assets Impact of settlement of tax matters Income Taxes: January to September 30, and prior Interest (net of taxes): January to September 30, and prior Loss on repayment of debt Write down of investment (0.04) (0.33) (0.01) (0.02) (0.33) (0.02) Diluted EPS Adjusted $0.72 $0.63 $2.92 $

32 Earnings Reconciliation References to restructuring and other charges refer to the following incremental charges taken in the quarters indicated: 4Q 06 Impact of settlement of tax matters : The company settled certain tax matters covering multiple years during the fourth quarter of As such, the company recorded a reduction of the provision for income i taxes of $46.2 million and related interest expense of $6.9 9 million ($4.2 million net of related taxes) in the fourth quarter. The impact on net income was an increase of $50.4 million, of which $1.9 million related to the fourth quarter of Q 06 Accelerated ERP charges: During the fourth quarter of 2006, the company made the decision n to expand and accelerate a strategic initiative that includes the introduction of a worldwide ERP system. The impact on net income was a decrease of $3.6 million. The e company expects that future costs of this initiative will be offset by further f cost efficiencies within its business and, as such, does not expect this initiative to be dilutive to future earnings. 4Q 06 Amortization of intangible assets: During the fourth quarter of 2006, the company completed the valuation of identifiable intangibles associated with an acquisition completed in the fourth quarter of Accordingly, the company recorded the related amortization on expense for the full year 2006 in the fourth quarter of The impact on net income was a decrease of $1.6 million, of which $.4 million ion related to the fourth quarter of Q 06 Restructuring and other charges: The company recorded restructuring charges and costs associated with pre-acquisition warranty and environmental claims. The impact of these various items was a decrease of $7.8 million in net income. 4Q 05 Charges: Included in the fourth quarter of 2005 were restructuring charges s and a loss on the prepayment of debt. The impact on net income was a decrease of $3.0 million Impact of settlement of tax matters: The company settled certain tax matters covering multiple years during the fourth quarter of As such, the company recorded a reduction in the provision for income i taxes and related interest expense in the fourth quarter. The impact on net income was an increase of $50.4 million, of which $7.5 million related to the full year Going forward, the company expects ects an annual reduction in income taxes of $5.8 million and a reduction in related interest expense of $2.6 million ($1.5 million net of related ed taxes) Accelerated ERP charges : During the fourth quarter of 2006, the company made the decision n to expand and accelerate a strategic initiative that includes the introduction of a worldwide ERP system. The impact on net income was a decrease of $3.6 million Restructuring and other charges: The company recorded restructuring charges and costs associated with pre-acquisition warranty and environmental claims. The impact of these various items was a decrease of $11.7 million in net income Loss on repayment of debt: The company recorded a loss on prepayment of debt related to the e redemption of certain of its zero coupon convertible debentures due in 2021 and on the repurchase of certain of its 7% Senior Notes due in January 2007, which have since been fully repaid. The impact on net income was a decrease of $1.6 million Charges: Net income for 2005 includes restructuring charges totaling $12.7 million ($7.3 million net of related taxes or $.06 and $.05 per p share on a basic and diluted basis, respectively), a loss of $4.3 3 million ($2.6 million net of related taxes or $.02 and $.01 per r share on a basic and diluted basis, respectively) associated with the prepayment of approximately $179 million of the company s s debt, a write-down of an investment of $3.0 million ($.03 per share on both a basic and diluted d basis), and an acquisition indemnification credit of $1.7 million ($1.3 million net of related taxes or $.01 per share on a basic basis). 32

33 2006 Year End Pro Forma Balance Sheet ($ in millions, may reflect rounding) Pre-Acq Alternative Technology & InTechnology Reported Cash A/R Inventories PP&E Goodwill Other $492 2,579 1, , *($154) $338 2,710 1, , Total Assets $6,548 $122 $6,670 A/P Accrued Expenses Debt Other Shareholders Equity $1, , ,994 $ $1, , ,997 Total Liabilities and SE $6,548 $122 $6,670 * $155MM aggregate cash purchase price, net of $1MM cash at Alternative Technology & InTechnology. 33

Arrow Electronics, Inc. Second Quarter 2006 Earnings Call. July 25, 2006

Arrow Electronics, Inc. Second Quarter 2006 Earnings Call July 25, 2006 Welcome Sabrina Weaver Director, Investor Relations Safe Harbor Statement Some of the comments to be made on this morning s s call