SYNNEX Corporation
Sep 24, 2007

SYNNEX Corporation Reports 2007 Third Quarter Results

FREMONT, Calif.--(BUSINESS WIRE)--Sept. 24, 2007--SYNNEX Corporation (NYSE:SNX), a leading business process services company, today announced financial results for the third quarter ended August 31, 2007.

Revenues were $1.76 billion, exceeding the Company's guidance of $1.70 to $1.75 billion and an increase of 11% compared to $1.59 billion for the quarter ended August 31, 2006.

On a GAAP basis, net income for the third quarter was $14.4 million, or $0.44 per diluted share, compared with $13.8 million, or $0.43 per diluted share in the prior year quarter.

On a non-GAAP basis, net income for the third quarter was $15.0 million, or $0.46 per diluted share, also at the high end of the Company's stated guidance for the quarter. Non-GAAP net income is adjusted to exclude a one-time third quarter restructuring charge of $1.7 million, net of tax, and a one-time benefit of a $1.1 million reduction in income tax expense, both described below. As noted in the Company's second quarter earnings press release dated June 25, 2007, the Company provided net income guidance in the range of $14.5 to $15.2 million or $0.44 to $0.46 per diluted share, excluding the charge for the previously announced third quarter restructuring of its Canadian operations.

"The strong revenue and gross margin improvement reflects the healthy growth of our core distribution operations as well as our other business process services," stated Robert T. Huang, President and Chief Executive Officer. "The Company's strategy to expand our business process services is working. Looking forward, SYNNEX is poised to capitalize on our increasing momentum."

During the third quarter, the Company recorded a charge of $2.7 million, or $1.7 million net of tax, for the restructuring and consolidation of its Canadian operations as a result of the acquisition of the Redmond Group of Companies (RGC) and the purchase of its logistics facility in Guelph, Canada, during the second quarter of fiscal 2007. The Company also benefited from a one-time $1.1 million reduction in income tax expense resulting from the conclusion of an income tax audit. Both of these items are excluded from the Company's third quarter 2007 non-GAAP statement of operations and non-GAAP diluted earnings per share (EPS).

On March 5, 2007, SYNNEX Canada completed the purchase of a logistics facility in Guelph, Canada. On May 1, 2007, SYNNEX Canada completed its acquisition of RGC. As a result, the Company is in the process of restructuring its Canadian operations and consolidating certain of its various Canadian logistics facilities. Within the reported results of the third quarter of fiscal 2007, the Company incurred approximately $0.02 on a diluted earnings per share basis in redundant costs. These costs are associated with the transition and ramp-up in operations to the new facility from the previously existing facilities which are being closed. These costs are not included as part of the restructuring charge. The Company expects to incur approximately $0.02 on a diluted earnings per share basis of similar expenses in the Company's fourth quarter. This amount is factored into the fourth quarter outlook contained in this press release.

The following table, prepared in $000's, reconciles the third quarter of fiscal 2007 non-GAAP income from operations before non-operating items and income taxes, non-GAAP income before income taxes and minority interest, non-GAAP provision for income taxes, non-GAAP net income, and non-GAAP diluted earnings per share to the Company's attached statement of operations prepared in accordance with U.S. Generally Accepted Accounting Principles (GAAP):

                                      Non-GAAP Adjustments
                                     ----------------------
                           Q3 2007   Restructuring Tax Item  Q3 2007
                             GAAP        costs               Non-GAAP
                          ---------- ------------- -------- ----------

Revenue                   $1,760,360                        $1,760,360

Cost of revenue            1,669,134                         1,669,134
                          ---------- ------------- -------- ----------

Gross profit                  91,226                            91,226

Selling, general &
 administrative expenses      63,960                            63,960

Restructuring charge           2,744       (2,744)                   -
                          ---------- ------------- -------- ----------

Income from operations
 before non-operating
  items and income taxes      24,522         2,744              27,266

Interest expense and
 finance charges, net          3,472                             3,472
Other (income) expense,
 net                             132                               132
                          ---------- ------------- -------- ----------

Income before income taxes
 and minority interest        20,918         2,744              23,662

Provision for income
 taxes                         6,452           996    1,135      8,583
Minority interest in
 subsidiary                       70                                70
                          ---------- ------------- -------- ----------

Net income                   $14,396        $1,748 $(1,135)    $15,009
                          ---------- ------------- -------- ----------

Diluted EPS                    $0.44         $0.05  $(0.03)      $0.46
                          ---------- ------------- -------- ----------

Diluted weighted-average
 common shares outstanding
 (000's)                      32,742                            32,742
                          ---------- ------------- -------- ----------

The non-GAAP data contained in this press release are included with the intention of providing investors an additional tool in evaluating the Company's operational results and trends, but should only be used in conjunction with results reported in accordance with GAAP.

Third Quarter Financial Highlights:

Fourth Quarter Fiscal 2007 Outlook:

The following statements are based on the Company's current expectations for the fourth quarter of fiscal 2007. These statements are forward-looking and actual results may differ materially.

The calculation of diluted earnings per share for the fourth quarter of fiscal 2007 is based on an approximate weighted-average diluted share count of approximately 33.2 million.

Conference Call and Webcast

SYNNEX will be discussing its financial results and outlook on a conference call today at 2:00 p.m. (PDT). A webcast of the call will be available at http://ir.synnex.com. The conference call can be accessed by dialing 866-814-1916 in North America or 703-639-1360 outside North America. The confirmation code for the call is 1142508. A replay of the conference call will be available at http://ir.synnex.com approximately two hours after the conference call has concluded and will be archived until October 8, 2007.

About SYNNEX

Founded in 1980, SYNNEX Corporation, a Fortune 500 company, is a leading business process services company offering a comprehensive range of services to original equipment manufacturers, software publishers and reseller customers worldwide. SYNNEX' service offering includes product distribution, logistics services, business process outsourcing and contract assembly. SYNNEX' vendor base includes the leading industry suppliers of IT systems, peripherals, system components, software and networking equipment. Additional information about SYNNEX may be found online at www.synnex.com.

Use of Non-GAAP Financial Information

To supplement the financial results presented in accordance with GAAP, SYNNEX uses the following non-GAAP financial measures: non-GAAP income from operations before non-operating items and income taxes, non-GAAP income before income taxes and minority interest, non-GAAP provision for income taxes, non-GAAP net income, and non-GAAP diluted earnings per share, (in aggregate, termed non-GAAP statement of operations.) These measures are non-GAAP. The Company presents such non-GAAP financial measures in reporting its financial results to provide investors with an additional tool to evaluate operating results. Because these non-GAAP measures are not calculated in accordance with GAAP, they may not necessarily be comparable to similarly titled measures employed by other companies. These non-GAAP financial measures should not be considered in isolation or as a substitute for comparable GAAP measures, and should be read only in conjunction with the Company's consolidated financial statements prepared in accordance with GAAP.



SYNNEX management uses each of the non-GAAP financial measures internally to understand, manage and evaluate the business. SYNNEX management believes it is useful for the Company and investors to review, as applicable, both GAAP information, which includes Canadian restructuring charges and benefit from the income tax audit, and the non-GAAP measures, which excludes this information because of its one-time nature, in order to assess the performance of the Company's continuing businesses and for planning and forecasting in future periods. Each of these non-GAAP measures is intended to provide investors with an understanding of the Company's operational results and trends that more readily enable investors to analyze SYNNEX' base financial and operating performance and to facilitate period-to-period comparisons and analysis of operational trends. The management of SYNNEX believes each of these non-GAAP financial measures is useful to investors in allowing for greater transparency with respect to supplemental information used by management in its financial and operational decision-making.

The Company's non-GAAP financial measures reflect adjustments based on the following items:

Safe Harbor Statement

Statements in this press release regarding SYNNEX Corporation, which are not historical facts, are "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These forward-looking statements may be identified by terms such as believe, expect, may, will, provide, could and should and the negative of these terms or other similar expressions. These statements, including statements regarding our strategy to develop a successful BPO and services business, expectations of our revenues, net income and earnings per share for the fourth quarter of fiscal 2007, the consolidation of our Canadian facilities and the related expenses and impact on our earnings per share, the anticipated benefits to our management, investors and analysts of our non-GAAP financial measures and the purpose of using non-GAAP financial measures, are subject to risks and uncertainties that could cause actual results to differ materially from those discussed in the forward-looking statements. These risks and uncertainties include, but are not limited to: general economic conditions and any weakness in IT spending; the loss or consolidation of one or more of our significant OEM suppliers or customers; market acceptance and product life of the products we assemble and distribute; competitive conditions in our industry and their impact on our margins; pricing, margin and other terms with our OEM suppliers; variations in our levels of excess inventory and doubtful accounts and changes in the terms of OEM supplier-sponsored programs; changes in our costs and operating expenses; changes in foreign currency exchange rates; risks associated with our international operations; uncertainties and variability in demand by our reseller and contract assembly customers; supply shortages or delays; any termination or reduction in our floor plan financing arrangements; credit exposure to our reseller customers, and negative trends in their businesses; any future incidents of theft; risks associated with our contract assembly business; risks associated with the consolidation, integration and performance of our recent acquisitions and other risks and uncertainties detailed in our Form 10-Q for the fiscal quarter ended May 31, 2007 and from time to time in our SEC filings. Statements included in this press release are based upon information known to SYNNEX Corporation as of the date of this release, and SYNNEX Corporation assumes no obligation to update information contained in this press release.

Copyright 2007 SYNNEX Corporation. All rights reserved. SYNNEX, the SYNNEX Logo, and all other SYNNEX company, product and services names and slogans are trademarks or registered trademarks of SYNNEX Corporation. SYNNEX and the SYNNEX Logo Reg. U.S. Pat. & Tm. Off. Other names and marks are the property of their respective owners.

                          SYNNEX Corporation
                     Consolidated Balance Sheets
                            (in thousands)
                             (unaudited)


                                                 August 31, November
                                                    2007     30, 2006
                                                 ---------- ----------
 Assets
 Current assets:
    Cash and cash equivalents                       $44,142    $27,881
    Short-term investments                           16,412     13,271
    Accounts receivable, net                        603,170    363,437
    Receivable from vendors, net                     95,846     95,080
    Receivable from affiliates                        9,553      1,855
    Inventories                                     593,220    594,642
    Deferred income taxes                            18,729     17,994
    Current deferred assets                          14,314     13,990
    Other current assets                             12,141      9,887
                                                 ---------- ----------
       Total current assets                       1,407,527  1,138,037

 Property and equipment, net                         58,521     36,698
 Goodwill and intangible assets, net                115,430     48,588
 Deferred income taxes                                6,835      6,716
 Long-term deferred assets                          106,641    139,111
 Other assets                                        18,362     13,584
                                                 ---------- ----------

       Total assets                              $1,713,316 $1,382,734
                                                 ========== ==========

 Liabilities and Stockholders' Equity
 Current liabilities:
    Borrowings under securitization, term loans
     and lines of credit                           $257,715    $50,834
    Accounts payable                                545,591    462,480
    Payable to affiliates                            68,406     89,831
    Accrued liabilities                             100,941     81,818
    Current deferred liabilities                     35,511     29,516
    Income taxes payable                              7,921      6,693
                                                 ---------- ----------
       Total current liabilities                  1,016,085    721,172

 Long-term borrowings                                41,603     47,967
 Long-term liabilities                               13,520     10,131
 Long-term deferred liabilities                      67,186     90,686
 Deferred income taxes                                1,127      1,232
                                                 ---------- ----------
       Total liabilities                          1,139,521    871,188
                                                 ---------- ----------

 Minority interest in subsidiary                        717          -
                                                 ---------- ----------

 Stockholders' equity:
    Preferred stock                                       -          -
    Common stock                                         31         30
    Additional paid-in-capital                      191,173    181,188
    Accumulated other comprehensive income           22,603     13,999
    Retained earnings                               359,271    316,329
                                                 ---------- ----------
       Total stockholders' equity                   573,078    511,546
                                                 ---------- ----------

       Total liabilities and stockholders'
        equity                                   $1,713,316 $1,382,734
                                                 ========== ==========
                          SYNNEX Corporation
                Consolidated Statements of Operations
             (in thousands, except for per share amounts)
                             (unaudited)


                             Three      Three      Nine       Nine
                             Months     Months     Months     Months
                             Ended      Ended      Ended      Ended
                             August     August     August     August
                               31,        31,        31,        31,
                              2007       2006       2007       2006
                           --------------------- ---------- ----------

 Revenue                   $1,760,360 $1,592,204 $5,033,444 $4,605,640

 Cost of revenue            1,669,134  1,519,486  4,783,549  4,399,564
                           --------------------- ---------- ----------

 Gross profit                  91,226     72,718    249,895    206,076

 Selling, general and
  administrative expenses      63,960     49,205    171,874    137,920
 Restructuring charges          2,744          -      2,744          -
                           --------------------- ---------- ----------

 Income from operations
  before non-operating
   items and income taxes      24,522     23,513     75,277     68,156

 Interest expense and
  finance charges, net          3,472      2,743     10,225     12,935
 Other (income) expense,
  net                             132      (265)      (930)       (56)
                           --------------------- ---------- ----------

 Income before income taxes
  and minority interest        20,918     21,035     65,982     55,277

 Provision for income
  taxes                         6,452      7,015     22,908     19,257
 Minority interest in
  subsidiary                       70        241        132        241
                           --------------------- ---------- ----------

 Net income                   $14,396    $13,779    $42,942    $35,779
                           --------------------- ---------- ----------

 Diluted earnings per
  share                         $0.44      $0.43      $1.32      $1.13
                           --------------------- ---------- ----------
 Diluted weighted-average
  common shares outstanding    32,742     31,878     32,502     31,673
                           --------------------- ---------- ----------

CONTACT: SYNNEX Corporation
Laura Crowley, 510-668-3715
Director of Investor Relations and Public Relations
laurack@synnex.com
SOURCE: SYNNEX Corporation