SYNNEX Corporation
Jun 22, 2006

SYNNEX Corporation Reports Second Quarter 2006 Results; GAAP EPS of $0.36; Non-GAAP EPS of $0.38

FREMONT, Calif.--(BUSINESS WIRE)--June 22, 2006--SYNNEX Corporation (NYSE:SNX), a global IT supply chain services company, today announced financial results for its fiscal second quarter ended May 31, 2006.

For the second quarter of fiscal 2006, revenues increased by 12% to $1.51 billion compared to $1.35 billion for the quarter ended May 31, 2005. Net income for the second quarter decreased 49% to $11.3 million, or $0.36 per share, compared with $22.4 million, or $0.72 per share in the prior year quarter.

Adjusted earnings on a non-generally accepted accounting principles, or non-GAAP, basis for the second quarter of fiscal 2006 was $11.9 million, or $0.38 per share, which is net income adjusted to exclude share-based compensation expense of $0.6 million, net of tax, or $0.02 per share, compared with adjusted net income of $9.3 million, or $0.30 per share in the prior year quarter. Net income calculated in accordance with GAAP prior to fiscal 2006 did not include share-based compensation expense due to the adoption of SFAS 123R in the first quarter of fiscal 2006. The non-GAAP results for the second quarter of fiscal 2005 exclude $13.1 million, or $0.42 per share, related to the sale of the Company's former Japan operation.

"We produced another solid quarter of revenue and earnings results and I'm pleased with our progress and growth across our business for the first half of fiscal 2006," said Robert Huang, President and Chief Executive Officer. "In addition to continued growth in our North American distribution business during the second fiscal quarter, our contract assembly segment delivered very good growth in the quarter as well. Looking forward, we will continue to invest in the strategic areas of our business in order to add value in our supply chain and to generate higher economic returns."

    Second Quarter Financial Highlights:

    --  Distribution revenues were $1.36 billion, an increase of 12%
        over the prior year quarter.

    --  Contract assembly revenues were $153.3 million, an increase of
        13% over the prior year quarter.

    --  Income from continuing operations was $22.4 million, or 1.48%
        of revenues, versus $18.4 million, or 1.37% of revenues in the
        prior year quarter. Income from continuing operations on a
        non-GAAP basis, which excludes approximately $0.9 million of
        share-based compensation expense, was $23.3 million, or 1.54%
        of revenues. Non-GAAP and GAAP income from continuing
        operations for the second quarter of fiscal 2005 were
        essentially the same.

    --  Income from distribution continuing operations was $19.6
        million, or 1.44% of revenues, versus $14.4 million, or 1.19%
        of revenues in the prior year quarter. Income from
        distribution continuing operations on a non-GAAP basis,
        excluding share-based compensation expense, was $20.4 million,
        or 1.50% of revenues. Non-GAAP and GAAP income from
        distribution continuing operations for the second quarter of
        fiscal 2005 were essentially the same.

    --  Income from contract assembly continuing operations was $2.8
        million, or 1.83% of revenues, versus $4.0 million, or 2.93%
        of revenues in the prior year quarter. Non-GAAP and GAAP
        income from contract assembly continuing operations were
        essentially the same.

    --  Second quarter depreciation and amortization were $1.3 million
        and $1.0 million, respectively. Second quarter capital
        expenditures were $1.7 million.

    --  Off-balance sheet borrowings totaled approximately $290
        million at May 31, 2006.

Third Quarter Fiscal 2006 Outlook:

The following statements are based on the Company's current expectations for the third quarter of fiscal 2006. The outlook amounts do not include any impact of special charges or restructuring amounts that could be incurred. These statements are forward-looking and actual results may differ materially.

    --  Revenues are expected to be in the range of $1.52 billion to
        $1.57 billion.

    --  Net income is expected to be in the range of $11.3 million to
        $12.0 million.

    --  Earnings per share are expected to be in the range of $0.36 to
        $0.38.

The effect of share-based and other related non-cash compensation expense, which is included in the above figures, will approximate $0.02 to $0.03 per share in the third quarter of fiscal 2006.

The calculation of earnings per share for the third quarter of fiscal 2006 is based on an approximate diluted weighted average share count of 31.8 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 866-802-4305 in North America or 703-639-1317 outside North America. The confirmation code for the call is 921328. 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 July 6, 2006.

About SYNNEX

Founded in 1980, SYNNEX Corporation is a global IT supply chain services company offering a comprehensive range of services to original equipment manufacturers, software publishers and reseller customers worldwide. SYNNEX offers product distribution, related logistics services, demand generation marketing and contract assembly and works with 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 operating expenses, non-GAAP income from distribution continuing operations, non-GAAP contract assembly continuing operations, non-GAAP operating income, non-GAAP net income and non-GAAP earnings per share. 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 share-based compensation expense, Canadian restructuring charges, penalty on early debt payment, gain on sale of Japan operation, income from discontinued operations, and gain on Japan investment and the non-GAAP measures, which exclude this information, 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 Corporation 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:

    --  Share-based compensation expense: The Company's operating
        expenses include share-based compensation related to adoption
        of Statement of Financial Accounting Standard 123R -
        Share-Based Payment. The Company believes it is useful to
        highlight the effect of this share-based compensation expense
        because, in compliance with historical practices under
        previously applicable accounting principles, the Company has
        not historically expensed share-based compensation. However,
        share-based compensation is a key incentive offered to SYNNEX
        employees, and the Company believes it contributed to the
        revenue earned during the period and will contribute to future
        revenue generation. Share-based compensation expenses will
        recur in future periods.

    --  Canadian restructuring charges: The Company incurred
        significant expenses during fiscal 2005 in connection with the
        acquisition of Canadian-based EMJ Data Systems, Ltd. (EMJ)
        that would not have otherwise been incurred. The restructuring
        charges primarily consisted of employee termination benefits,
        facilities exit expenses and other related expenses. The
        Company believes that it is useful for investors to understand
        the effect of these expenses on the overall cost structure of
        the Company. Although restructuring charges are not recurring
        with respect to past acquisitions, the Company expects to
        incur these types of charges in connection with future
        acquisitions.

    --  Penalty on early debt payment: The Company has excluded the
        effects of a penalty on an early debt payment from GAAP net
        income because this cost was associated with restructuring of
        debt acquired as a result of the EMJ acquisition. This
        non-GAAP adjustment is intended to reflect a one time
        non-recurring cost that is not directly associated with the
        Company's normal operations. The Company believes this
        adjustment is useful to investors as a measure of a one time
        non-recurring cost that is not a recurring part of continuing
        operations.

    --  Gain on sale of Japan operation: The Company sold 93% of its
        Japan operation in exchange for 8,603 shares of MCJ Company
        Limited (MCJ), a public entity in Japan. Based on the closing
        price of MCJ shares on the sale date, SYNNEX recognized a gain
        on the sale of this operation. The Company has excluded the
        gain on the sale of the Japan operation from its non-GAAP net
        income from the second quarter of fiscal 2005, as this gain is
        not directly associated with the Company's continuing
        operations and it will not be recurring. The Company believes
        this adjustment is useful to investors as a measure of a one
        time non-recurring gain that is not a recurring part of
        continuing operations.

    --  Income from discontinued operations: The Company has excluded,
        from its non-GAAP net income, the results associated with the
        Company's discontinued Japan operations. This non-GAAP
        adjustment is intended to exclude discontinued operation
        results from the Company's net income results. The Company
        believes this exclusion helps investors to compare and analyze
        the Company's current continuing operating results.

    --  Gain on Japan investment: As noted above, the Company received
        shares of MCJ, as part of the sale of SYNNEX Japan. The
        Company has excluded the mark-to-market gains and impact of
        foreign exchange fluctuations associated with this investment
        from the non-GAAP net income in the second quarter of fiscal
        2005 because the Company does not believe that any movement in
        stock price of the investment or foreign currency fluctuations
        is part of the Company's on-going operating business. The
        Company believes this exclusion helps investors to compare and
        analyze the Company's current continuing operating results.

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 continued investment in strategic areas of our business and the anticipated benefits, our expectations of our revenues, net income and earnings per share for the third quarter of fiscal 2006, the anticipated benefits to our management, investors and analysts of our non-GAAP financial measures, the purpose of using non-GAAP financial measures, and the contribution of share-based compensation to our revenue and future restructuring charges, 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 and other risks and uncertainties detailed in our Form 10-K for the fiscal year ended November 30, 2005 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 2006 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)


                                               May 31,    November 30,
                                                2006         2005
                                             ----------    ----------
 Assets
 Current assets:
       Cash and cash equivalents            $   18,969    $   13,636
       Short-term investments                    8,699        27,985
       Accounts receivable, net                277,892       342,322
       Receivable from vendors, net             83,216        82,721
       Receivable from affiliates                2,188         5,177
       Inventories                             502,652       494,617
       Deferred income taxes                    15,448        15,445
       Current deferred assets                  12,983             -
       Other current assets                     10,198        10,908
                                             ----------    ----------
                 Total current assets          932,245       992,811

 Property and equipment, net                    36,185        33,713
 Goodwill and intangible assets, net            42,289        43,004
 Deferred income taxes                           3,520         4,781
 Long-term deferred assets                     151,232             -
 Other assets                                    5,974         8,179
                                             ----------    ----------

                 Total assets               $1,171,445    $1,082,488
                                             ==========    ==========

 Liabilities and Stockholders' Equity
 Current liabilities:
       Borrowings under term loans and
        lines of credit                     $    5,421    $   28,548
       Accounts payable                        389,489       448,339
       Payable to affiliates                    78,196        85,871
       Accrued liabilities                      63,563        68,619
       Other current liabilities                 6,367         6,085
       Current deferred liabilities             28,384             -
       Income taxes payable                     10,454         4,820
                                             ----------    ----------
                 Total current liabilities     581,874       642,282

 Long-term borrowings                           16,444         1,153
 Long-term liabilities                           1,928           840
 Long-term deferred liabilities                101,152             -
 Deferred income taxes                             990           988
                                             ----------    ----------
                 Total liabilities             702,388       645,263
                                             ----------    ----------

 Stockholders' equity:
       Preferred stock                               -             -
       Common stock                                 30            29
       Additional paid-in-capital              166,012       159,551
       Accumulated other comprehensive income   16,071        12,701
       Retained earnings                       286,944       264,944
                                             ----------    ----------
                 Total stockholders' equity    469,057       437,225
                                             ----------    ----------

                 Total liabilities and
                  stockholders' equity      $1,171,445    $1,082,488
                                             ==========    ==========


                          SYNNEX Corporation
                 Consolidated Statements of Operations
             (in thousands, except for per share amounts)
                              (unaudited)

                        Three        Three        Six         Six
                        Months       Months      Months      Months
                        Ended        Ended       Ended       Ended
                        May 31,      May 31,     May 31,     May 31,
                         2006         2005        2006        2005
                      -----------------------------------------------

 Revenue             $1,511,701   $1,346,328  $3,013,436  $2,656,091

 Cost of revenue      1,443,353    1,289,772   2,880,078   2,543,401
                      -----------------------------------------------

 Gross profit            68,348       56,556     133,358     112,690

 Selling, general and
  administrative
  expenses               45,952       38,159      88,715      77,871
                      -----------------------------------------------

 Income from continuing
  operations before
  non-operating items,
  income taxes and
  minority interest      22,396       18,397      44,643      34,819

 Interest expense
  and finance
  charges, net            4,340        3,521      10,192       7,333
 Other (income)
  expense, net              482         (949)        209      (1,658)
                      -----------------------------------------------

 Income from continuing
  operations before
  income taxes and
  minority interest      17,574       15,825      34,242      29,144

 Provision for
  income taxes            6,257        6,006      12,242      11,048
 Minority interest
  in subsidiary               -          (32)          -         (58)
                      -----------------------------------------------

 Income from
  continuing
  operations             11,317        9,851      22,000      18,154

 Income from
  discontinued
  operations, net
  of tax                      -          207           -         511

 Gain on sale of
  discontinued
  operations, net
  of tax                      -       12,323           -      12,323
                      -----------------------------------------------

 Net income          $   11,317   $   22,381  $   22,000  $   30,988
                      -----------------------------------------------

 Diluted earnings
  per share from
  continuing
  operations         $     0.36   $     0.32  $     0.70  $     0.58
                      -----------------------------------------------

 Diluted earnings
  per share          $     0.36   $     0.72  $     0.70  $     0.99
                      -----------------------------------------------

 Diluted weighted
  average common
  shares outstanding     31,600       30,900      31,477      31,201
                      -----------------------------------------------


                          SYNNEX Corporation
                    GAAP to Non-GAAP Reconciliation
             (in thousands, except for per share amounts)
                              (unaudited)

The following tables reconcile GAAP to Non-GAAP financial information
---------------------------------------------------------------------

1. Operating Expenses
    Reconciliation:
                                    Three    Three     Six     Six
                                    Months   Months   Months  Months
                                    Ended    Ended    Ended   Ended
                                    May 31,  May 31,  May 31, May 31,
                                     2006     2005     2006    2005
                                    ---------------------------------

Operating expenses - GAAP          $45,952 $ 38,159 $88,715 $ 77,871
Canadian restructuring charges           -        -       -   (1,640)
Share-based compensation expense      (925)       -  (1,660)       -
                                    ---------------------------------
Operating expenses - non-GAAP      $45,027 $ 38,159 $87,055 $ 76,231
                                    =================================


2. Income from Distribution Continuing
    Operations Reconciliation:
                                    Three    Three     Six     Six
                                    Months   Months   Months  Months
                                    Ended    Ended    Ended   Ended
                                    May 31,  May 31,  May 31, May 31,
                                     2006     2005     2006    2005
                                    ---------------------------------

Income from distribution continuing
 operations before non-operating
 items, income taxes and minority
 interest - GAAP                   $19,593 $ 14,429 $39,850 $ 27,445
Canadian restructuring charges           -        -       -    1,640
Share-based compensation expense       839        -   1,515        -
                                    ---------------------------------
Income from distribution continuing
 operations before non-operating
 items, income taxes and minority
 interest - non-GAAP               $20,432 $ 14,429 $41,365 $ 29,085
                                    =================================


3. Income from Contract Assembly
    Continuing Operations
    Reconciliation:
                                    Three    Three     Six     Six
                                    Months   Months   Months  Months
                                    Ended    Ended    Ended   Ended
                                    May 31,  May 31,  May 31, May 31,
                                     2006     2005     2006    2005
                                    ---------------------------------

Income from contract assembly
 continuing operations before non-
 operating items, income taxes and
 minority interest - GAAP          $ 2,803 $  3,968 $ 4,793 $  7,374
Share-based compensation expense        86        -     145        -
                                    ---------------------------------
Income from contract assembly
 continuing operations before non-
 operating items, income taxes and
 minority interest - non-GAAP      $ 2,889 $  3,968 $ 4,938 $  7,374
                                    =================================


4. Operating Income Reconciliation:
                                    Three    Three     Six     Six
                                    Months   Months   Months  Months
                                    Ended    Ended    Ended   Ended
                                    May 31,  May 31,  May 31, May 31,
                                     2006     2005     2006    2005
                                    ---------------------------------

Income from continuing operations
 before non-operating items, income
 taxes and minority
 interest - GAAP                   $22,396 $ 18,397 $44,643 $ 34,819
Canadian restructuring charges           -        -       -    1,640
Share-based compensation expense       925        -   1,660        -
                                    ---------------------------------
Income from continuing operations
 before non-operating items, income
 taxes and minority interest -
 non-GAAP                          $23,321 $ 18,397 $46,303 $ 36,459
                                    =================================


5. Net Income Reconciliation:
                                    Three    Three     Six     Six
                                    Months   Months   Months  Months
                                    Ended    Ended    Ended   Ended
                                    May 31,  May 31,  May 31, May 31,
                                     2006     2005     2006    2005
                                    ---------------------------------

Net income - GAAP                  $11,317 $ 22,381 $22,000 $ 30,988
Share-based compensation expense,
 net of tax                            596        -   1,066        -
Canadian restructuring charges,
 net of tax                              -        -       -    1,092
Penalty on early debt payment,
 net of tax                              -        -       -      333
Income from discontinued
 operations, net of tax                  -     (207)      -     (511)
Gain on sale of Japan operation,
 net of tax                              -  (12,323)      -  (12,323)
Gain on Japan investment,
 net of tax                              -     (557)      -     (557)
                                    ---------------------------------
Net income - non-GAAP              $11,913 $  9,294 $23,066 $ 19,022
                                    =================================


6. Diluted Earnings Per Share
    Reconciliation:
                                    Three    Three     Six     Six
                                    Months   Months   Months  Months
                                    Ended    Ended    Ended   Ended
                                    May 31,  May 31,  May 31, May 31,
                                     2006     2005     2006    2005
                                    ---------------------------------

Diluted earnings per share - GAAP  $  0.36 $   0.72 $  0.70 $   0.99
Share-based compensation expense,
 net of tax                           0.02        -    0.03        -
Canadian restructuring charges,
 net of tax                              -        -       -     0.03
Penalty on early debt payment,
 net of tax                              -        -       -     0.01
Income from discontinued
 operations, net of tax                  -    (0.01)      -    (0.02)
Gain on sale of Japan operation,
 net of tax                              -    (0.39)      -    (0.39)
Gain on Japan investment,
 net of tax                              -    (0.02)      -    (0.01)
                                    ---------------------------------
Diluted earnings per share -
 non-GAAP                          $  0.38 $   0.30 $  0.73 $   0.61
                                    =================================

CONTACT: SYNNEX Corporation
Laura Crowley, 510-668-3715
laurack@synnex.com
SOURCE: SYNNEX Corporation