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
=================================