SYNNEX Corporation Reports 2006 Fourth Quarter
and Year End Results
FREMONT, Calif., Jan
09, 2007 (BUSINESS WIRE) -- SYNNEX
Corporation (NYSE:SNX), a global IT supply chain services company,
today announced financial results for the fourth quarter and
fiscal year ended November 30, 2006.
For the fourth quarter of fiscal 2006, revenues increased
by 9.1% to $1.74 billion compared to $1.59 billion for the
quarter ended November 30, 2005. Net income from continuing
operations for the fourth quarter increased by 25.7% to $15.6
million, or $0.48 per share, compared with $12.4 million, or
$0.40 per share in the prior year quarter.
Net income from continuing operations on a non-generally accepted
accounting principles, or non-GAAP, basis for the fourth quarter
of fiscal 2006 was $16.3 million, or $0.50 per share, which
is net income adjusted to exclude share-based compensation
expense of $0.7 million, or $0.02 per share, compared with
net income of $12.7 million, or $0.41 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 of fourth quarter of fiscal
2005 exclude, net of tax, $0.4 million in secondary offering
expenses, $0.5 million in line of credit renewal expenses and
$0.6 million in investment gains.
For the year ended November 30, 2006, revenues increased by
12.5% to $6.34 billion, compared to $5.64 billion for the year
ended November 30, 2005. Net income from continuing operations
for the year increased 29.7% to $51.4 million, or $1.61 per
share, compared with $39.6 million, or $1.27 per share for
fiscal 2005.
Net income from continuing operations on a non-GAAP basis
for fiscal 2006 was $53.8 million, or $1.68 per share which
is net income adjusted to exclude share-based compensation
expenses of $2.4 million, net of tax, or $0.07 per share, compared
with net income of $42.2 million, or $1.36 per share in the
prior year. Net income calculated in accordance with GAAP prior
to fiscal 2006 did not include share-based compensation expense.
The non-GAAP results of fiscal 2005 exclude, net of tax, $1.6
million in restructuring charges, $0.4 million in secondary
offering expenses, $0.5 million in line of credit renewal expenses,
$0.3 million penalty on early debt payment and $0.2 million
in investment gains.
"I am very pleased with our fourth quarter and fiscal 2006
performance. Our solid results were made possible by our continued
improvement of our main distribution businesses and the investments
we have made in new businesses over the past few years. Our
focus on productivity improvement and increasing value added
service offerings to our customers and vendors has been working," said
Robert T. Huang, President and Chief Executive Officer. "For
our fiscal 2007 we will continue to focus our efforts on growing
our core distribution operations as well as making additional
investments in new businesses to further enhance and diversify
our offerings."
Fourth Quarter Financial Notes:
-- Distribution revenues were $1.59 billion, an increase of
8.7% over the prior year quarter.
-- Contract assembly revenues were $144.6 million, an increase
of 13.8% over the prior year quarter.
-- Income from continuing operations was $28.1 million, or
1.62% of revenues, versus $24.4 million, or 1.53% of revenues
in the prior year quarter. Income from operations on a non-GAAP
basis, which excludes $1.1 million share-based compensation
expense, was $29.2 million, or 1.68% of revenues.
-- Income from distribution continuing operations was $26.6
million, or 1.67% of distribution revenues, versus $21.4 million,
or 1.46% of revenues in the prior year quarter. Income from
distribution continuing operations on a non-GAAP basis excluding
$1.0 million share-based compensation expense was $27.6 million,
or $1.73% of revenues.
-- Income from contract assembly continuing operations was
$1.51 million, or 1.04% of contract assembly revenues, versus
$3.0 million, or 2.34% of revenues in the prior year quarter.
Income from contract assembly continuing operations on non-GAAP
basis excluding share-based compensation expense of $0.1 million,
was $1.6 million or 1.10% of revenues.
-- Fourth quarter depreciation and amortization were $1.5
million and $1.3 million, respectively. Fourth quarter capital
expenditures were approximately $2.1 million.
-- Off-balance sheet borrowings totaled approximately $343.8
million at November 30, 2006.
First Quarter Fiscal 2007 Outlook:
The following statements are based on the Company's current
expectations for the first quarter of fiscal 2007. 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 $1.57 billion
to $1.62 billion.
-- Net income is expected to be in the range of $12.8 million
to $13.5 million.
-- Earnings per share are expected to be in the range of $0.39
to $0.41.
The calculation of earnings per share for the first quarter
of fiscal 2007 is based on an approximate weighted average
diluted share count of 32.9 million.
Conference Call and Webcast
SYNNEX will be discussing its financial results and outlook
on a conference call today at 2:00 p.m. (PST). A webcast of
the call will be available at http://ir.synnex.com. The conference
call can be accessed by dialing 866-256-3815 in North America
or 703-639-1212 outside North America. The confirmation code
for the call is 1018105. 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 January 23, 2007.
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 income from contract assembly
continuing operations, non-GAAP operating income, non-GAAP
net income and non-GAAP diluted 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 its 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, secondary offering expenses, 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
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 expense 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.
-- Secondary offering expenses: The Company has excluded expenses
incurred with a secondary offering in fourth quarter of fiscal
2005 from net income from continuing operations because these
expenses were not related to its ongoing operations. The Company
believes this adjustment is useful to investors as a measure
of a one time non-recurring expense that is not a recurring
part of continuing operations.
-- Canadian line of credit expenses: The Company has excluded
expenses associated with a new Canadian borrowing facility
entered into in the fourth quarter of fiscal 2005 from its
net income from continuing operations because these expenses
were not related to its ongoing operations. The Company believes
this adjustment is useful to investors as a measure of a one
time non-recurring expense that is not a recurring part of
continuing operations.
-- Penalty on early debt payment: The Company has excluded
the effects of a penalty on an early debt payment from net
income from continuing operations because this cost was associated
with restructuring of debt acquired as a result of the EMJ
acquisition. 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.
-- Income from discontinued operations: The Company has excluded
from its net income the results associated with the Company's
discontinued Japan operations. This adjustment is intended
to exclude discontinued operations 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 sale of Japan operations: The Company sold 93%
of its Japan operations in exchange for 25,809 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 the Japan operations. The Company has
excluded the gain on the sale of the Japan operation from its
net income in the three and nine months ended November 30,
2005, as this gain is not directly associated with the Company's
continuing operations and 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.
-- 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 loss and impact of foreign
exchange fluctuations associated with this investment from
net income in the three and the twelve months ended November
30, 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 continuing 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 efforts
to grow our core distribution operations, our investment in
new businesses, our goal to enhance and diversify our offerings,
our expectations of our revenues, net income and earnings per
share for the first quarter of fiscal 2007, the effect of share-based
compensation and other non-compensation expenses on our revenues,
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 and other risks and uncertainties detailed
in our Form 10-Q for the fiscal quarter ended August 31, 2006
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)
November November
30, 30,
2006 2005
----------- -----------
Assets
Current assets:
Cash and cash equivalents $27,881 $13,636
Short-term investments 13,271 27,985
Accounts receivable, net 363,437 342,322
Receivable from vendors, net 95,080 82,721
Receivable from affiliates 1,855 5,177
Inventories 594,642 494,617
Deferred income taxes 17,994 15,445
Current deferred assets 13,990 -
Other current assets 9,887 10,908
----------- -----------
Total current assets 1,138,037 992,811
Property and equipment, net 36,698 33,713
Goodwill and intangible assets, net 48,588 43,004
Deferred income taxes 6,716 4,781
Long-term deferred assets 139,111 -
Other
assets 13,584 8,179
----------- -----------
Total assets $1,382,734 $1,082,488
=========== ===========
Liabilities and Stockholders' Equity
Current liabilities:
Borrowings under term loans and lines of
credit $50,834 $28,548
Accounts payable 462,480 448,339
Payable to affiliates 89,831 85,871
Accrued liabilities 81,818 68,619
Other current liabilities - 6,085
Current deferred liabilities 29,516 -
Income taxes payable 6,693 4,820
----------- -----------
Total current liabilities 721,172 642,282
Long-term borrowings 47,162 1,153
Long-term liabilities 10,936 840
Long-term deferred liabilities 90,686 -
Deferred income taxes 1,232 988
----------- -----------
Total liabilities 871,188 645,263
----------- -----------
Stockholders' equity:
Preferred stock - -
Common stock 30 29
Additional paid-in-capital 181,188 159,551
Accumulated other comprehensive income 13,999 12,701
Retained earnings 316,329 264,944
----------- -----------
Total stockholders' equity 511,546 437,225
----------- -----------
Total liabilities and stockholders'
equity $1,382,734 $1,082,488
=========== ===========
SYNNEX Corporation
Consolidated Statements of Operations
(in thousands, except for per share amounts)
(unaudited)
Three Three
Months Months Fiscal Year Fiscal Year
Ended Ended Ended Ended
November November November November
30, 2006 30, 2005 30, 2006 30, 2005
----------- ----------- ----------- -----------
Revenue $1,737,874 $1,593,088 $6,343,514 $5,640,769
Cost of revenue 1,658,591 1,526,198 6,058,155 5,402,211
----------- ----------- ----------- -----------
Gross profit 79,283 66,890 285,359 238,558
Selling, general and
administrative
expenses 51,197 42,501 189,117 159,621
----------- ----------- ----------- -----------
Income from continuing
operations before non-
operating items,
income taxes and
minority interest 28,086 24,389 96,242 78,937
Interest expense and
finance charges, net 3,724 5,926 16,659 17,036
Other (income) expense,
net (515) (1,056) (570) (1,559)
----------- ----------- ----------- -----------
Income from continuing
operations before
income taxes and
minority interest 24,877 19,519 80,153 63,460
Provision for income
taxes 9,064 7,105 28,320 23,912
Minority interest in
subsidiary 207 - 448 (58)
----------- ----------- ----------- -----------
Income from continuing
operations 15,606 12,414 51,385 39,606
Income from
discontinued
operations, net of tax - - - 511
Gain on sale of
discontinued
operations, net of tax - 385 - 12,708
----------- ----------- ----------- -----------
Net Income $15,606 $12,799 $51,385 $52,825
----------- ----------- ----------- -----------
Diluted earnings per
share from continuing
operations $0.48 $0.40 $1.61 $1.27
----------- ----------- ----------- -----------
Diluted earnings per
share $0.48 $0.41 $1.61 $1.70
----------- ----------- ----------- -----------
Diluted weighted
average common shares
outstanding 32,565 31,103 32,014 31,131
----------- ----------- ----------- -----------
The following tables reconcile GAAP to non-GAAP financial information
(unaudited)
----------------------------------------------------------------------
1. Operating Expenses
Reconciliation:
Three Three Fiscal Fiscal
Months Months Year Year
Ended Ended Ended Ended
November November November November
30, 2006 30, 2005 30, 2006 30, 2005
---------- --------- --------- ---------
Operating Expenses - GAAP $51,197 $42,501 $189,117 $159,621
Canadian restructuring charges - - - (2,482)
Secondary offering expenses - (610) - (610)
Share-based compensation
expense (1,125) - (3,710) -
---------- --------- --------- ---------
Operating Expenses - non-GAAP $50,072 $41,891 $185,407 $156,529
========== ========= ========= =========
2. Income from Distribution
Continuing Operations
Reconciliation:
Three Three Fiscal Fiscal
Months Months Year Year
Ended Ended Ended Ended
November November November November
30, 2006 30, 2005 30, 2006 30, 2005
---------- --------- --------- ---------
Income from Distribution
Continuing Operations before
non-operating items, income
taxes and minority interest -
GAAP $26,575 $21,421 $88,458 $65,912
Canadian restructuring charges - - - 2,482
Secondary offering expenses - 561 - 561
Share-based compensation
expense 1,040 - 3,407 -
---------- --------- --------- ---------
Income from Distribution
Continuing Operations before
non-operating items, income
taxes and minority interest -
non-GAAP $27,615 $21,982 $91,865 $68,955
========== ========= ========= =========
3. Income from Contract
Assembly Continuing
Operations Reconciliation:
Three Three Fiscal Fiscal
Months Months Year Year
Ended Ended Ended Ended
November November November November
30, 2006 30, 2005 30, 2006 30, 2005
---------- --------- --------- ---------
Income from Contract Assembly
Continuing Operations before
non-operating items, income
taxes and minority interest -
GAAP $1,511 $2,968 $7,784 $13,025
Secondary offering expenses - 49 - 49
Share-based compensation
expense 85 - 303 -
---------- --------- --------- ---------
Income from Contract Assembly
Continuing Operations before
non-operating items, income
taxes and minority interest -
non-GAAP $1,596 $3,017 $8,087 $13,074
========== ========= ========= =========
4. Operating Income
Reconciliation:
Three Three Fiscal Fiscal
Months Months Year Year
Ended Ended Ended Ended
November November November November
30, 2006 30, 2005 30, 2006 30, 2005
---------- --------- --------- ---------
Income from Continuing
Operations before non-
operating items, income taxes
and minority interest - GAAP $28,086 $24,389 $96,242 $78,937
Canadian restructuring charges - - - 2,482
Secondary offering expenses 610 - 610
Share-based compensation
expense 1,125 - 3,710 -
---------- --------- --------- ---------
Income from Continuing
Operations before non-
operating items, income taxes
and minority interest - non-
GAAP $29,211 $24,999 $99,952 $82,029
========== ========= ========= =========
5. Net Income Reconciliation:
Three Three Fiscal Fiscal
Months Months Year Year
Ended Ended Ended Ended
November November November November
30, 2006 30, 2005 30, 2006 30, 2005
---------- --------- --------- ---------
Net Income - GAAP $15,606 $12,799 $51,385 $52,825
Share-based compensation
expense, net of tax 715 - 2,391 -
Canadian restructuring
charges, net of tax - - - 1,605
Secondary offering expenses,
net of tax - 384 - 384
Canadian line of credit
expenses, net of tax - 519 - 519
Penalty on early debt payment,
net of tax - - - 333
Income from discontinued
operations, net of tax - - - (511)
Gain on Japan investment, net
of tax - (642) - (204)
Gain on sale of Japan
Operations, net of tax - (385) - (12,708)
---------- --------- --------- ---------
Net Income - non-GAAP $16,321 $12,675 $53,776 $42,243
========== ========= ========= =========
6. Diluted Earnings Per Share
Reconciliation:
Three Three Fiscal Fiscal
Months Months Year Year
Ended Ended Ended Ended
November November November November
30, 2006 30, 2005 30, 2006 30, 2005
---------- --------- --------- ---------
Diluted Earnings Per Share -
GAAP $0.48 $0.41 $1.61 $1.70
Share-based compensation
expense, net of tax 0.02 - 0.07 -
Canadian restructuring
charges, net of tax - - - 0.05
Secondary offering expenses,
net of tax - 0.01 - 0.01
Canadian line of credit
expenses, net of tax - 0.02 - 0.02
Penalty on early debt payment,
net of tax - - - 0.01
Income from discontinued
operations, net of tax - - - (0.02)
Gain on Japan investment, net
of tax - (0.02) - (0.01)
Gain on sale of Japan
Operations, net of tax - (0.01) - (0.40)
---------- --------- --------- ---------
Diluted Earnings Per Share -
non-GAAP $0.50 $0.41 $1.68 $1.36
========== ========= ========= =========
SOURCE: SYNNEX Corporation
SYNNEX Corporation
Laura Crowley, 510-668-3715
Director of Investor Relations and Public Relations
laurack@synnex.com