Arrow Electronics Announces Second Quarter Results -- Initiates Significant Cost Reduction Programs --.

Business Editors

MELVILLE, N.Y.--(BUSINESS WIRE)--July 24, 2001

Arrow Electronics, Inc. (NYSE:ARW) reported net income of $7 million ($.07 per share on a diluted basis) on sales of $2.5 billion in the second quarter, compared with net income of $84 million ($.84 per share on a diluted basis) on sales of $3.2 billion in the prior year.

Computer products revenue declined 4% to $695 million from last year's second quarter, but strengthened toward the end of the quarter. "This pick up in our computer products business is largely responsible for our earnings coming in above the range we estimated in late June," stated Francis M. Scricco, President and Chief Executive Officer of Arrow.

Worldwide components revenue decreased 26% from last year's second quarter to $1.8 billion. Gross profit margin improvement in the second quarter was a result of a change in components customer mix, reflecting significantly lower sales to large, low margin customers. Reflecting the fact that working capital requirements decline as sales decline, the company generated over $560 million in free cash flow in the second quarter.

"Although we are seeing some hints of the early stages of recovery from the depths of the recession in our mid-range computer businesses, we do not yet see similar signs in the components sector," added Mr. Scricco. "Our components businesses are continuing to experience sequentially declining sales as electronic equipment OEMs and contract manufacturers, particularly in the communications and networking segments, are still ordering at greatly reduced rates in order to work off their own inventories of components and finished products. Moreover, components gross profit margins came under pressure in the second quarter. Thus, with the traditionally slower summer months upon us, we assume that the third quarter will be somewhat worse than the second, although it is too early to quantify how much worse."

To mitigate the continuing impact of the downturn, the company is taking a number of significant steps in the third quarter, including a further reduction of more than 1,000 people in its worldwide workforce, cutbacks in discretionary spending, deferral of non-strategic projects, consolidation of facilities, and other major cost containment and cost reduction actions. In the aggregate, these actions are expected to reduce the company's expense levels by over $100 million on an annualized basis, with the first portion of this reduction becoming clearly evident in the third quarter. The company expects to take an as yet unquantified special charge in the third quarter for the one-time costs of these restructurings and expense reductions. In addition, the company is in the process of reviewing its Internet investments, which may result in an adjustment to their book value.

"These actions, while difficult, are necessary to appropriately structure and size our company to match our current level of business," stated Mr. Scricco. "We will continue to focus on containing costs in this extremely challenging environment, while still providing the highest level of service to our more than 200,000 customers and 600 suppliers around the world," he added.

Six month results

Arrow's net income for the first six months of the year, excluding the $9.4 million integration charge ($5.7 million after taxes) associated with the acquisition and integration of Wyle Electronics, was $84.4 million ($.80 per share on a diluted basis) on sales of $5.8 billion, versus $147 million ($1.50 per share on a diluted basis) on sales of $5.9 billion in the first six months of last year. Including the charge, net income and earnings per share for the first half of the year were $78.6 million and $.75 per share on a diluted basis, respectively.

Arrow Electronics is the world's largest distributor of electronic components and computer products, with 2000 sales of $13 billion. Headquartered in Melville, New York, Arrow serves as a supply channel partner for more than 600 suppliers and 200,000 original equipment manufacturers, contract manufacturers, and commercial customers through more than 225 sales facilities and 23 distribution centers in 39 countries. Detailed information about Arrow's operations can be found at www.arrow.com.

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 are 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 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). 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 INCOME
                 (In thousands except per share data)

                         Three Months Ended        Six Months Ended
                              June 30,                 June 30,

                          2001        2000         2001(A)     2000

Sales                  $2,510,041  $3,161,670   $5,785,788  $5,931,094
Costs and expenses:
Cost of products sold   2,112,095   2,671,370    4,839,560   5,017,795
Selling, general and
 administrative
 expenses                 298,088     287,380      624,551     548,605
Depreciation and
 amortization              29,585      21,090       58,169      40,684
Integration charge              -           -        9,375           -
                        2,439,768   2,979,840    5,531,655   5,607,084

Operating income           70,273     181,830      254,133     324,010

Equity in losses of
 affiliated companies        (997)       (612)     (1,393)     (1,910)
Interest expense           54,786      35,540      120,693      66,119

Earnings before income
 taxes and minority
 interest                  14,490     145,678      132,047     255,981
Provision for income taxes  7,830      60,310       53,677     106,637
Earnings before minority
 interest                   6,660      85,368       78,370     149,344
Minority interest            (294)      1,398         (263)      2,315
Net income               $  6,954  $   83,970   $   78,633  $  147,029

Net income per share:
 Basic                       $.07        $.87         $.80       $1.53
 Diluted                     $.07        $.84         $.75       $1.50

Average number of
 shares outstanding:
 Basic                     98,006      96,398       97,957      95,888
 Diluted                   99,580      99,419      113,017      97,741

(A)  Excluding the integration charge, net income and net income per
     share on a basic and diluted basis were $84.4 million, $.86, and
     $.80, respectively, for the six months ended June 30, 2001.

      This interim report is subject to independent audit at year-end.

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

                                          June 30,        December 31,
                                            2001              2000


Assets

Current assets:
  Cash and short-term investments      $   69,094         $   55,546
  Accounts receivable, including
    retained interest in securitized
    receivables, net                    1,879,489          2,635,595
  Inventories                           2,228,696          2,972,661
  Other                                    64,931            100,408

Total current assets                    4,242,210          5,764,210

Property, plant and equipment, net        312,193            316,459
Investments in affiliated companies        43,662             35,885
Cost in excess of net assets of
 companies acquired, net of
 amortization                           1,196,506          1,237,099
Other assets                              346,916            250,888
                                       $6,141,487         $7,604,541

Liabilities and Shareholders' Equity

Current liabilities:
Accounts payable                        $ 806,117         $1,567,631
Accrued expenses                          377,388            473,984
Short-term borrowings, including
 current maturities of long-term debt     333,796            529,261

Total current liabilities               1,517,301          2,570,876

Long-term debt                          2,591,167          3,027,671
Other                                      80,222             92,246
Shareholders' equity                    1,952,797          1,913,748
                                       $6,141,487         $7,604,541

      This interim report is subject to independent audit at year-end.

                        ARROW ELECTRONICS, INC.
                          SEGMENT INFORMATION
                            (In thousands)

                         Three Months Ended        Six Months Ended
                              June 30,                 June 30,

                          2001        2000        2001(A)      2000

Sales:
 Components            $1,814,757  $2,439,254   $4,348,631  $4,533,215
 Computer products        695,284     722,416    1,437,157   1,397,879
  Consolidated         $2,510,041  $3,161,670   $5,785,788  $5,931,094

Operating income:
 Components            $   91,398  $  213,495   $  306,635  $  370,942
 Computer products         11,072      10,338       18,805      19,556
 Corporate               (32,197)    (42,003)     (71,307)    (66,488)
  Consolidated         $   70,273  $  181,830   $  254,133  $  324,010

(A) Excluding the integration charge of $9.4 million, operating

income was $263.5 million for the six months ended June 30, 2001.

The company has redefined certain of its reportable segments. The prior periods have been restated for comparative purposes.

This interim report is subject to independent audit at year-end.