SYNNEX Corporation
Reports Second Quarter 2005 Results
FREMONT, CA — June 28, 2005 -- SYNNEX
Corporation (NYSE:SNX), a global IT supply chain services company,
today announced financial results for the second quarter of fiscal
2005, ended May 31, 2005.
For the second quarter of fiscal 2005,
revenues increased by 9% to $1.35 billion compared to $1.23
billion for the quarter ended May 31, 2004. Net income from
continuing operations for the second quarter decreased 2% to
$9.9 million, or $0.32 per share, compared with net income
of $10.1 million, or $0.33 per share in the prior year quarter.
Including income from discontinued
operations and gain on sale of discontinued operations, net
income was $22.4 million, or $0.72 per share, in the second
quarter of fiscal 2005, compared to $10.2 million or $0.34
per share in the prior year quarter.
Income from discontinued operations,
$0.2 million, net of tax, or $0.01 per share, and gain on sale
of discontinued operations, $12.3 million, net of tax, or $0.39
cents per share, relate to the sale of the Company's Japan
operations during the second quarter of fiscal 2005. On April
19, 2005, the Company sold approximately 93% of its Japan operations
to MCJ Company, Ltd., or MCJ, in exchange for 8,603 shares
of MCJ.
Including revenues from the discontinued
Japan operations of $24.8 million in the second quarter of
fiscal 2005, which were factored into the Company's previously
released guidance, and $41.9 million in the second quarter
of fiscal 2004, combined revenues of continuing and discontinued
operations increased by 8% to $1.37 billion compared to $1.27
billion for the quarter ended May 31, 2004.
Including income from the discontinued
Japan operations of $207,000 after related taxes and excluding
the net gain on sale of discontinued operations of $12.3 million
and a net mark-to-market gain of $557,000 from the MCJ stock,
second quarter net income decreased 7% to $9.5 million, or
$0.31 per share, compared with net income in the prior year
quarter, of $10.2 million or $0.34 per share, which includes
$134,000 of income from discontinued operations.
"We are pleased to have exceeded our
revenue guidance and to have delivered income in line with
expectations," said Robert Huang, President and Chief Executive
Officer. "As we look toward the second half of the year, we
will continue to focus on our core distribution and assembly
businesses as well as execute further on our new business investments."
Second Quarter Financial Notes:
-- Distribution revenues were $1.21 billion, an increase of 12%
over the prior year quarter. Contract assembly revenues were
$135 million, a decrease of 10% over the prior year quarter.
-- Gross margin was 4.20%, up four basis points from the prior
year quarter.
-- Income from operations was $18.4 million, or 1.37% of
revenues, versus $18.5 million, or 1.51% of revenues in the
prior year quarter.
-- Income from distribution operations was $14.4 million, or
1.19% of revenues, versus $14.4 million, or 1.33% of revenues
in the prior year quarter.
-- Income from assembly operations was $4.0 million, or 2.93% of
revenues, versus $4.2 million, or 2.78% of revenues in the
prior year quarter.
-- Second quarter depreciation and amortization were $1.2 million
and $1.0 million, respectively.
Third Quarter Fiscal 2005 Outlook:
The following statements are based
on the Company's current expectations for the third 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 $1.36 billion to
$1.41 billion.
-- Net income is expected to be in the range of $9.8 million to
$10.4 million.
-- Earnings per share are expected to be in the range of $0.32 to
$0.34.
The calculation of earnings per share
for the third quarter of fiscal 2005 is based on an approximate
weighted average diluted share count of 31.0 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 866-238-0637
in North America or 703-639-1156 outside North America. The
confirmation code for the call is 723832. 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 12, 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
To supplement the Company's consolidated
financial statements presented on a GAAP basis, SYNNEX uses
non-GAAP additional measures of revenues, net income and net
income per share adjusted to exclude the results of the sale
of the Company's ownership of its Japan operations. These adjustments
to the Company's GAAP results are made with the intent of providing
both management and investors a more complete understanding
of the underlying operational results and related trends. The
non-GAAP results are an indication of the Company's baseline
performance before the results of the sale of the Company's
ownership of its Japan operations that is considered by management
to be outside of the Company's business operational results.
The presentation of this additional information is not meant
to be considered in isolation or as a substitute for net income
or diluted net income per share prepared in accordance with
generally accepted accounting principles in the United States.
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 our core distribution
and assembly businesses, expansion of our business model and
execution on our new business investments, efforts to increase
market share, our expectations of our revenues, and net income
and earnings per share for the third 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 February 28, 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.
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,
2005 2004 2005 2004
=========== =========== =========== ===========
Revenue $1,346,328 $1,231,208 $2,656,091 $2,405,891
Cost of revenue 1,289,772 1,179,999 2,543,401 2,304,440
----------- ----------- ----------- -----------
Gross profit 56,556 51,209 112,690 101,451
Selling, general and
administrative
expenses 38,159 32,664 77,871 65,790
----------- ----------- ----------- -----------
Income from operations 18,397 18,545 34,819 35,661
Interest expense and
finance charges, net 3,521 1,705 7,331 3,788
Other (income)
expense, net (949) 836 (1,656) 1,157
----------- ----------- ----------- -----------
Income before income
taxes and minority
interest 15,825 16,004 29,144 30,716
Provision for income
taxes 6,006 6,021 11,048 11,367
Minority interest in
subsidiaries (32) (94) (58) (244)
----------- ----------- ----------- -----------
Net income from
continuing operations 9,851 10,077 18,154 19,593
Income from
discontinued
operations, net of
tax 207 134 511 271
Gain on sale of
discontinued
operations, net of
tax 12,323 - 12,323 -
----------- ----------- ----------- -----------
Net Income $22,381 $10,211 $30,988 $19,864
=========== =========== =========== ===========
Diluted earnings per
share from continuing
operations $0.32 $0.33 $0.58 $0.66
=========== =========== =========== ===========
Diluted earnings per
share $0.72 $0.34 $0.99 $0.67
=========== =========== =========== ===========
Diluted weighted
average common shares
outstanding 30,900 30,179 31,201 29,865
=========== =========== =========== ===========
Notes to Financial Statements:
-----------------------------
On April 19, 2005, SYNNEX sold approximately 93% of its Japan
operation to MCJ Company, Ltd., or MCJ, in exchange for 8,603 shares
of MCJ. These shares are classified as trading securities for GAAP
purposes. The sale of the Japan operation resulted in an after-tax
gain of $12,323. Under US GAAP, the Company is required to reclassify
Japan's results of operation from continuing operation to discontinued
operations.
The following tables reconcile revenues and income to previously
released guidance assuming the Company has included discontinued
operations through April 19, 2005, from its former Japan operation,
and excluded the mark-to-market gain realized on the securities
received from MCJ.
Three Three Six Six
Months Months Months Months
Ended Ended Ended Ended
May 31, May 31, May 31, May 31,
2005 2004 2005 2004
=========== =========== =========== ===========
Revenue - GAAP $1,346,328 $1,231,208 $2,656,091 $2,405,891
Revenue from
discontinued
operations 24,815 41,853 64,477 89,321
----------- ----------- ----------- -----------
Revenue from
continuing and
discontinued
operations $1,371,143 $1,273,061 $2,720,568 $2,495,212
=========== =========== =========== ===========
Net Income - GAAP $22,381 $10,211 $30,988 $19,864
Gain on sale of Japan,
net of tax (12,323) - (12,323) -
Gain on Japan
investment, net of
tax (557) - (557) -
----------- ----------- ----------- -----------
$9,501 $10,211 $18,108 $19,864
=========== =========== =========== ===========
SYNNEX Corporation
Consolidated Balance Sheets
(in thousands)
(unaudited)
May 31, November 30,
2005 2004
---------- ------------
Assets
Current assets:
Cash and cash equivalents $4,951 $28,726
Restricted cash - 2,020
Short-term investments 27,465 5,051
Accounts receivable, net 327,978 372,604
Receivable from vendors, net 62,182 69,033
Receivable from affiliates 7,166 1,970
Inventories 373,623 408,346
Deferred income taxes 17,254 17,645
Other current assets 11,331 7,599
---------- ------------
Total current assets 831,950 912,994
Property and equipment, net 33,412 33,851
Goodwill and intangible assets 43,704 48,722
Deferred income taxes 2,623 1,421
Other assets 4,664 2,709
---------- ------------
Total assets $916,353 $999,697
========== ============
Liabilities and Stockholders' Equity
Current liabilities:
Borrowings under term loans and lines of
credit $61,443 $74,996
Payable to affiliates 73,520 68,977
Accounts payable 294,159 386,638
Accrued liabilities 58,570 62,611
Income taxes payable 14,885 2,837
---------- ------------
Total current liabilities 502,577 596,059
Long-term borrowings 1,242 13,074
Long-term liabilities 6,161 17,772
Deferred income taxes 820 1,054
---------- ------------
Total liabilities 510,800 627,959
---------- ------------
Minority interest in subsidiaries - 2,082
---------- ------------
Stockholders' equity:
Common stock 29 28
Additional paid-in-capital 154,082 145,423
Accumulated other comprehensive income 8,335 12,086
Retained earnings 243,107 212,119
---------- ------------
Total stockholders' equity 405,553 369,656
---------- ------------
Total liabilities and
stockholders' equity $916,353 $999,697
========== ============