SYNNEX Corporation
Sep 27, 2005

SYNNEX Corporation Reports Fiscal Third Quarter 2005 Results

FREMONT, Calif.--(BUSINESS WIRE)--Sept. 27, 2005--SYNNEX Corporation (NYSE:SNX), a global IT supply chain services company, today announced financial results for the third quarter of fiscal 2005, ended August 31, 2005.

For the third quarter of fiscal 2005, revenues increased by 7% to $1.39 billion compared to $1.30 billion for the quarter ended August 31, 2004. Net income from continuing operations for the third quarter decreased 21% to $9.0 million, or $0.29 per share, compared with net income of $11.4 million, or $0.38 per share in the prior year quarter.

Net income on a non generally accepted accounting principles, or Non-GAAP, basis was $10.5 million or $0.34 per share. Non-GAAP net income represents GAAP net income adjusted to exclude, net of tax, $0.5 million in restructuring charges related to the Company's Canadian operations and a $1.0 million non operating loss on the Company's equity investment in MCJ Company, Ltd. The Company's investment in MCJ was a result of the sale of its Japan operations in the second quarter of fiscal 2005. In the prior year quarter, Non-GAAP net income was $10.7 million, or $0.36 per share. Non-GAAP net income in the third quarter of fiscal 2004 excludes a non-operating settlement gain of $0.8 million, net of tax.

"In a generally stable demand environment in the North American IT channel marketplace, we are pleased with our results and execution for the third quarter of fiscal 2005," said Robert Huang, President and Chief Executive Officer. "We continue to maintain our focus on profitable growth in our core business segments and we are making strides in our new business investments as well. Looking forward we will plan to continue to execute on our cost efficient business model while at the same time investing in new initiatives that deliver additional value to our customers and vendors."

Third Quarter Financial Notes:

 
    --  Distribution revenues were $1.26 billion, an increase of 9%
        over the prior year quarter. Contract assembly revenues were
        $128 million, a decrease of 13% over the prior year quarter.

    --  Gross margin was 4.24%, up 20 basis points from the prior year
        quarter.

    --  Income from operations was $19.7 million, or 1.42% of
        revenues, versus $18.9 million, or 1.45% of revenues in the
        prior year quarter. Income from operations, excluding the
        Canadian restructuring charge, was $20.6 million or 1.48% of
        revenues.

    --  Income from distribution operations was $17.0 million, or
        1.35% of revenues, versus $15.7 million, or 1.36% of revenues
        in the prior year quarter. Income from distribution
        operations, excluding the Canadian restructuring charge, was
        $17.9 million or 1.42% of revenues.

    --  Income from assembly operations was $2.7 million, or 2.09% of
        revenues, versus $3.2 million, or 2.16% of revenues in the
        prior year quarter.

    --  Third quarter depreciation and amortization were $1.2 million
        and $1.0 million, respectively.

Fourth Quarter Fiscal 2005 Outlook:

The following statements are based on the Company's current expectations for the fourth quarter of fiscal 2005. The outlook amounts do not include any impact of stock option expensing, gains or losses from the Company's investment in MCJ and 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 $1.475 billion to
        $1.525 billion.

    --  Net income is expected to be in the range of $11.45 million to
        $12.15 million.

    --  Earnings per share are expected to be in the range of $0.37 to
        $0.39.

The calculation of earnings per share for the fourth quarter of fiscal 2005 is based on an approximate weighted average diluted share count of 31.3 million.

Conference Call and Webcast

SYNNEX will be discussing its financial results and outlook on a conference call today at 5:00 p.m. (EDT). A webcast of the call will be available at http://ir.synnex.com. The conference call can be accessed by dialing 866-814-1919 in North America or 703-639-1363 outside North America. The confirmation code for the call is 777138. 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 11, 2005.

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

The Non-GAAP data contained in this release are included with the intention of providing investors a more complete understanding of our operational results and trends, but should only be used in conjunction with results reported in accordance with Generally Accepted Accounting Principles, or GAAP. The Non-GAAP financial measures enable investors to analyze the base financial and operating performance of the Company and facilitate period-to-period comparisons and analysis of operating trends. Non-GAAP measures presented in this release or other releases, presentations and similar documents issued by the Company, exclude restructuring charges, non operating settlement gains or losses, results associated with the Company's discontinued Japan operations, gains or losses, including foreign exchange, in the Company's equity investment in MCJ and other infrequent or unusual items. A detailed reconciliation of the adjustments between results calculated using GAAP and Non-GAAP in this release is contained in the attached financial summary.

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, could and should and the negative of these terms or other similar expressions. These statements, including statements regarding our expectations as to our intent to continue to focus on profitable growth in our core business segments, expansion of our business model and execution on our new business investments, our intent to continue to execute our cost efficient business model and to invest in new initiatives that derive additional value to our customers and vendors, our expectations of our revenues, and net income and earnings per share for the fourth quarter of fiscal 2005, 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-Q for the fiscal quarter ended May 31, 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.

SYNNEX and the SYNNEX logo are trademarks of SYNNEX Corporation or its subsidiaries and should be treated as such. All rights reserved. All other company names mentioned herein are trademarks of their respective owners.

                     Consolidated Balance Sheets
                            (in thousands)
                             (unaudited)

                                               August 31, November 30,
                                                  2005        2004
                                               ----------- -----------
Assets
Current assets:
       Cash and cash equivalents              $     9,870 $    28,726
       Restricted cash                                  -       2,020
       Short-term investments                      21,868       5,051
       Accounts receivable, net                   363,467     372,604
       Receivable from vendors, net                74,682      69,033
       Receivable from affiliates                   7,749       1,970
       Inventories                                404,601     408,346
       Deferred income taxes                       17,320      17,645
       Other current assets                        12,968       7,599
                                               ----------- -----------
              Total current assets                912,525     912,994

Property and equipment, net                        33,257      33,851
Goodwill and intangible assets                     44,427      48,722
Deferred income taxes                               2,773       1,421
Other assets                                        5,663       2,709
                                               ----------- -----------

                 Total assets                 $   998,645 $   999,697
                                               =========== ===========

Liabilities and Stockholders' Equity
Current liabilities:
       Borrowings under term loans and
        lines of credit                       $    60,491 $    74,996
       Payable to affiliates                       63,140      68,977
       Accounts payable                           369,749     386,638
       Accrued liabilities                         62,950      62,611
       Income taxes payable                        13,995       2,837
                                               ----------- -----------
              Total current liabilities           570,325     596,059

Long-term borrowings                                1,224      13,074
Long-term liabilities                               6,985      17,772
Deferred income taxes                                 820       1,054
                                               ----------- -----------
              Total liabilities                   579,354     627,959
                                               ----------- -----------

Minority interest in subsidiaries                       -       2,082
                                               ----------- -----------

Stockholders' equity:
       Common stock                                    29          28
       Additional paid-in-capital                 155,764     145,423
       Accumulated other comprehensive income      11,353      12,086
       Retained earnings                          252,145     212,119
                                               ----------- -----------
            Total stockholders' equity            419,291     369,656
                                               ----------- -----------

                    Total liabilities and
                     stockholders' equity     $   998,645 $   999,697
                                               =========== ===========

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


                 Three Months Three Months  Nine Months  Nine Months
                  Ended August Ended August  Ended August Ended August
                    31, 2005     31, 2004      31, 2005     31, 2004
                 -----------------------------------------------------

Revenue           $ 1,391,590   $ 1,303,741  $ 4,047,681  $ 3,709,632

Cost of revenue     1,332,612     1,251,080    3,876,013    3,555,520
                   -----------   -----------  -----------  -----------

Gross profit           58,978        52,661      171,668      154,112

Selling, general
 and
administrative
 expenses              39,249        33,772      117,120       99,562
                   -----------   -----------  -----------  -----------

Income from
 operations            19,729        18,889       54,548       54,550

Interest expense
 and finance
 charges, net           3,775         1,378       11,108        5,166
Other (income)
 expense, net           1,157          (241)        (501)         916
                   -----------   -----------  -----------  -----------

Income before
 income taxes
 and minority
  interest             14,797        17,752       43,941       48,468

Provision for
 income taxes           5,759         6,382       16,807       17,749
Minority interest
in subsidiaries             -           (76)         (58)        (320)
                   -----------   -----------  -----------  -----------

Net income from
 continuing
 operations             9,038        11,446       27,192       31,039

Income from
 discontinued
 operations,
 net of tax                 -             3          511          274

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

Net Income        $     9,038   $    11,449  $    40,026  $    31,313
                   -----------   -----------  -----------  -----------

Diluted earnings
per share from
 continuing
 operations       $      0.29   $      0.38  $      0.87  $      1.04
                   -----------   -----------  -----------  -----------

Diluted earnings
 per share        $      0.29   $      0.38  $      1.28  $      1.05
                   -----------   -----------  -----------  -----------

Diluted weighted
 average common
 shares
 outstanding           31,120        29,939       31,177       29,899
                   -----------   -----------  -----------  -----------

The following tables reconcile GAAP  to Non GAAP Reported Results
----------------------------------------------------------------------

1. Operating Expenses Reconciliation:
                           Three        Three       Nine      Nine
                           Months      Months      Months    Months
                           Ended        Ended       Ended     Ended
                         August 31,  August 31,   August 31,August 31,
                             2005        2004        2005      2004
                        ----------------------------------------------

Operating Expenses
 - GAAP                     $ 39,249    $ 33,772   $117,120  $ 99,562
Canadian restructuring
charges                         (842)          -     (2,482)        -
                             --------    --------   --------  --------
Operating Expenses
 - Non GAAP                 $ 38,407    $ 33,772   $114,638  $ 99,562
                             ========    ========   ========  ========


2. Income from Distribution Operations Reconciliation:

                           Three        Three       Nine      Nine
                           Months      Months      Months    Months
                           Ended        Ended       Ended     Ended
                         August 31,  August 31,   August 31,August 31,
                             2005        2004        2005       2004
                        ----------------------------------------------

Income from Distribution
Operations - GAAP           $ 17,046    $ 15,708   $ 44,491  $ 44,237
Canadian restructuring
charges                          842           -      2,482         -
                             --------    --------   --------  --------
Income from Distribution
Operations - Non GAAP       $ 17,888    $ 15,708   $ 46,973  $ 44,237
                             ========    ========   ========  ========


3. Income from Contract Assembly Operations Reconciliation:

                           Three        Three       Nine      Nine
                           Months       Months     Months    Months
                           Ended        Ended       Ended     Ended
                         August 31,  August 31,   August 31,August 31,
                             2005        2004        2005      2004
                        ----------------------------------------------

Income from Contract
 Assembly Operations -
 GAAP                       $  2,683    $  3,181   $ 10,057  $ 10,313
Canadian restructuring
 charges                           -           -          -         -
                             --------    --------   --------  --------
Income from Contract
 Assembly Operations -
 Non GAAP                   $  2,683    $  3,181   $ 10,057  $ 10,313
                             ========    ========   ========  ========
4. Operating Income Reconciliation:
                                      Three   Three    Nine    Nine
                                      Months  Months  Months   Months
                                      Ended   Ended    Ended   Ended
                                      August  August  August   August
                                       31,     31,      31,     31,
                                       2005    2004    2005     2004
                                     ---------------------------------

Income from Operations - GAAP        $19,729 $18,889 $ 54,548 $54,550
Canadian restructuring charges           842       -    2,482       -
                                      ------- ------- -------- -------
Income from Operations - Non GAAP    $20,571 $18,889 $ 57,030 $54,550
                                      ======= ======= ======== =======


5. Net Income Reconciliation:

                                      Three   Three    Nine    Nine
                                      Months  Months  Months   Months
                                      Ended   Ended    Ended   Ended
                                      August  August  August   August
                                       31,     31,      31,     31,
                                       2005    2004    2005     2004
                                     ---------------------------------

Net Income - GAAP                    $ 9,038 $11,449 $ 40,026 $31,313
Canadian restructuring charges, net
 of tax                                  513       -    1,605       -
Penalty on early debt payment, net of
 tax                                       -       -      333       -
Loss on Japan investment, net of tax     995       -      438       -
Gain on sale of Japan, net of tax          -       -  (12,323)      -
Gain on settlement of UK acquisition,
 net of tax                                -    (784)       -    (784)
                                      ------- ------- -------- -------
Net Income - Non GAAP                $10,546 $10,665 $ 30,079 $30,529
                                      ======= ======= ======== =======


6. Diluted Earnings Per Share Reconciliation:
                                      Three   Three    Nine    Nine
                                      Months  Months  Months   Months
                                      Ended   Ended    Ended   Ended
                                      August  August  August   August
                                       31,     31,      31,     31,
                                       2005    2004    2005     2004
                                     ---------------------------------

Diluted Earnings Per Share - GAAP    $  0.29 $  0.38 $   1.28 $  1.05
Canadian restructuring charges, net
 of tax                                 0.02       -     0.06       -
Penalty on early debt payment, net of
 tax                                       -       -     0.01       -
Loss on Japan investment, net of tax    0.03       -     0.01       -
Gain on sale of Japan, net of tax          -       -    (0.40)      -
Gain on settlement of UK acquisition,
 net of tax                                -   (0.02)       -   (0.03)
                                      ------- ------- -------- -------
Diluted Earnings Per Share - Non
 GAAP                                $  0.34 $  0.36 $   0.96 $  1.02
                                      ======= ======= ======== =======

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

SOURCE: SYNNEX Corporation