SYNNEX Corporation Reports 2007 Third Quarter Results
FREMONT, CA—September 24, 2007—SYNNEX
Corporation (NYSE:SNX), a leading business process services company,
today announced financial results for the third quarter ended August
31, 2007.
Revenues were $1.76 billion, exceeding the Company's guidance of
$1.70 to $1.75 billion and an increase of 11% compared to $1.59
billion for the quarter ended August 31, 2006.
On a GAAP basis, net income for the third quarter was $14.4
million, or $0.44 per diluted share, compared with $13.8 million, or
$0.43 per diluted share in the prior year quarter.
On a non-GAAP basis, net income for the third quarter was $15.0
million, or $0.46 per diluted share, also at the high end of the
Company's stated guidance for the quarter. Non-GAAP net income is
adjusted to exclude a one-time third quarter restructuring charge of
$1.7 million, net of tax, and a one-time benefit of a $1.1 million
reduction in income tax expense, both described below. As noted in the
Company's second quarter earnings press release dated June 25, 2007,
the Company provided net income guidance in the range of $14.5 to
$15.2 million or $0.44 to $0.46 per diluted share, excluding the
charge for the previously announced third quarter restructuring of its
Canadian operations.
"The strong revenue and gross margin improvement reflects the
healthy growth of our core distribution operations as well as our
other business process services," stated Robert T. Huang, President
and Chief Executive Officer. "The Company's strategy to expand our
business process services is working. Looking forward, SYNNEX is
poised to capitalize on our increasing momentum."
During the third quarter, the Company recorded a charge of $2.7
million, or $1.7 million net of tax, for the restructuring and
consolidation of its Canadian operations as a result of the
acquisition of the Redmond Group of Companies (RGC) and the purchase
of its logistics facility in Guelph, Canada, during the second quarter
of fiscal 2007. The Company also benefited from a one-time $1.1
million reduction in income tax expense resulting from the conclusion
of an income tax audit. Both of these items are excluded from the
Company's third quarter 2007 non-GAAP statement of operations and
non-GAAP diluted earnings per share (EPS).
On March 5, 2007, SYNNEX Canada completed the purchase of a
logistics facility in Guelph, Canada. On May 1, 2007, SYNNEX Canada
completed its acquisition of RGC. As a result, the Company is in the
process of restructuring its Canadian operations and consolidating
certain of its various Canadian logistics facilities. Within the
reported results of the third quarter of fiscal 2007, the Company
incurred approximately $0.02 on a diluted earnings per share basis in
redundant costs. These costs are associated with the transition and
ramp-up in operations to the new facility from the previously existing
facilities which are being closed. These costs are not included as
part of the restructuring charge. The Company expects to incur
approximately $0.02 on a diluted earnings per share basis of similar
expenses in the Company's fourth quarter. This amount is factored into
the fourth quarter outlook contained in this press release.
The following table, prepared in $000's, reconciles the third
quarter of fiscal 2007 non-GAAP income from operations before
non-operating items and income taxes, non-GAAP income before income
taxes and minority interest, non-GAAP provision for income taxes,
non-GAAP net income, and non-GAAP diluted earnings per share to the
Company's attached statement of operations prepared in accordance with
U.S. Generally Accepted Accounting Principles (GAAP):
Non-GAAP Adjustments
----------------------
Q3 2007 Restructuring Tax Item Q3 2007
GAAP costs Non-GAAP
---------- ------------- -------- ----------
Revenue $1,760,360 $1,760,360
Cost of revenue 1,669,134 1,669,134
---------- ------------- -------- ----------
Gross profit 91,226 91,226
Selling, general &
administrative expenses 63,960 63,960
Restructuring charge 2,744 (2,744) -
---------- ------------- -------- ----------
Income from operations
before non-operating
items and income taxes 24,522 2,744 27,266
Interest expense and
finance charges, net 3,472 3,472
Other (income) expense,
net 132 132
---------- ------------- -------- ----------
Income before income taxes
and minority interest 20,918 2,744 23,662
Provision for income
taxes 6,452 996 1,135 8,583
Minority interest in
subsidiary 70 70
---------- ------------- -------- ----------
Net income $14,396 $1,748 $(1,135) $15,009
---------- ------------- -------- ----------
Diluted EPS $0.44 $0.05 $(0.03) $0.46
---------- ------------- -------- ----------
Diluted weighted-average
common shares outstanding
(000's) 32,742 32,742
---------- ------------- -------- ----------
The non-GAAP data contained in this press release are included
with the intention of providing investors an additional tool in
evaluating the Company's operational results and trends, but should
only be used in conjunction with results reported in accordance with
GAAP.
Third Quarter Financial Highlights:
-- Income from operations, before restructuring charges, was
$27.3 million, or 1.55% of revenues, versus $23.5 million, or
1.48% of revenues in the prior year third quarter.
-- Depreciation and amortization were $2.6 million and $1.8
million, respectively.
-- Capital expenditures were $2.9 million.
-- Off-balance sheet borrowings under the Company's accounts
receivable securitization program totaled approximately $93.2
million as of August 31, 2007, compared to $243.7 million for
the quarter ended August 31, 2006 when both the U.S. and
Canadian securitization programs received off-balance sheet
accounting treatment. During the first quarter of fiscal 2007,
the Company amended the terms of its U.S. accounts receivable
securitization program, which resulted in the Company
accounting for this U.S. transaction as an on-balance sheet
borrowing, leaving only the SYNNEX Canada accounts receivable
securitization program as off-balance sheet borrowing under
GAAP.
Fourth Quarter Fiscal 2007 Outlook:
The following statements are based on the Company's current
expectations for the fourth quarter of fiscal 2007. These statements
are forward-looking and actual results may differ materially.
-- Revenues are expected to be in the range of $1.875 billion to
$1.925 billion.
-- Net income is expected to be in the range of $17.2 million to
$17.9 million.
-- Diluted earnings per share are expected to be in the range of
$0.52 to $0.54.
The calculation of diluted earnings per share for the fourth
quarter of fiscal 2007 is based on an approximate weighted-average
diluted share count of approximately 33.2 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 866-814-1916 in North America or 703-639-1360
outside North America. The confirmation code for the call is 1142508.
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 8, 2007.
About SYNNEX
Founded in 1980, SYNNEX Corporation, a Fortune 500 company, is a
leading business process services company offering a comprehensive
range of services to original equipment manufacturers, software
publishers and reseller customers worldwide. SYNNEX' service offering
includes product distribution, logistics services, business process
outsourcing and contract assembly. SYNNEX' vendor base includes 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
income from operations before non-operating items and income taxes,
non-GAAP income before income taxes and minority interest, non-GAAP
provision for income taxes, non-GAAP net income, and non-GAAP diluted
earnings per share, (in aggregate, termed non-GAAP statement of
operations.) These measures are non-GAAP. 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 Canadian
restructuring charges and benefit from the income tax audit, and the
non-GAAP measures, which excludes this information because of its
one-time nature, 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:
-- Canadian restructuring charges: The Company incurred
significant charges during the third quarter of fiscal 2007 in
connection with the acquisition of Canadian based RGC and the
closure and consolidation of several of its facilitates in
Canada that would not have otherwise been incurred. The
restructuring charges primarily consisted of facilities exit
expenses, employee termination benefits and other related
costs. 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
may incur these types of charges from time to time in
connection with future acquisitions and consolidations of
operations after extended periods of growth.
-- Canadian tax benefit: The Company excluded a one-time benefit
from its non-GAAP net income resulting from an income tax
audit of its subsidiary in Canada. This non-GAAP adjustment is
intended to exclude the tax benefit from the Company's net
income results thereby reducing its non-GAAP profitability.
The Company believes this exclusion helps investors to compare
and analyze the Company's current financial results and
specifically its effective income tax rate.
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 strategy to develop a successful BPO and
services business, expectations of our revenues, net income and
earnings per share for the fourth quarter of fiscal 2007, the
consolidation of our Canadian facilities and the related expenses and
impact on our earnings per share, 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; risks associated with
the consolidation, integration and performance of our recent
acquisitions and other risks and uncertainties detailed in our Form
10-Q for the fiscal quarter ended May 31, 2007 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)
August 31, November
2007 30, 2006
---------- ----------
Assets
Current assets:
Cash and cash equivalents $44,142 $27,881
Short-term investments 16,412 13,271
Accounts receivable, net 603,170 363,437
Receivable from vendors, net 95,846 95,080
Receivable from affiliates 9,553 1,855
Inventories 593,220 594,642
Deferred income taxes 18,729 17,994
Current deferred assets 14,314 13,990
Other current assets 12,141 9,887
---------- ----------
Total current assets 1,407,527 1,138,037
Property and equipment, net 58,521 36,698
Goodwill and intangible assets, net 115,430 48,588
Deferred income taxes 6,835 6,716
Long-term deferred assets 106,641 139,111
Other assets 18,362 13,584
---------- ----------
Total assets $1,713,316 $1,382,734
========== ==========
Liabilities and Stockholders' Equity
Current liabilities:
Borrowings under securitization, term loans
and lines of credit $257,715 $50,834
Accounts payable 545,591 462,480
Payable to affiliates 68,406 89,831
Accrued liabilities 100,941 81,818
Current deferred liabilities 35,511 29,516
Income taxes payable 7,921 6,693
---------- ----------
Total current liabilities 1,016,085 721,172
Long-term borrowings 41,603 47,967
Long-term liabilities 13,520 10,131
Long-term deferred liabilities 67,186 90,686
Deferred income taxes 1,127 1,232
---------- ----------
Total liabilities 1,139,521 871,188
---------- ----------
Minority interest in subsidiary 717 -
---------- ----------
Stockholders' equity:
Preferred stock - -
Common stock 31 30
Additional paid-in-capital 191,173 181,188
Accumulated other comprehensive income 22,603 13,999
Retained earnings 359,271 316,329
---------- ----------
Total stockholders' equity 573,078 511,546
---------- ----------
Total liabilities and stockholders'
equity $1,713,316 $1,382,734
========== ==========
SYNNEX Corporation
Consolidated Statements of Operations
(in thousands, except for per share amounts)
(unaudited)
Three Three Nine Nine
Months Months Months Months
Ended Ended Ended Ended
August August August August
31, 31, 31, 31,
2007 2006 2007 2006
--------------------- ---------- ----------
Revenue $1,760,360 $1,592,204 $5,033,444 $4,605,640
Cost of revenue 1,669,134 1,519,486 4,783,549 4,399,564
--------------------- ---------- ----------
Gross profit 91,226 72,718 249,895 206,076
Selling, general and
administrative expenses 63,960 49,205 171,874 137,920
Restructuring charges 2,744 - 2,744 -
--------------------- ---------- ----------
Income from operations
before non-operating
items and income taxes 24,522 23,513 75,277 68,156
Interest expense and
finance charges, net 3,472 2,743 10,225 12,935
Other (income) expense,
net 132 (265) (930) (56)
--------------------- ---------- ----------
Income before income taxes
and minority interest 20,918 21,035 65,982 55,277
Provision for income
taxes 6,452 7,015 22,908 19,257
Minority interest in
subsidiary 70 241 132 241
--------------------- ---------- ----------
Net income $14,396 $13,779 $42,942 $35,779
--------------------- ---------- ----------
Diluted earnings per
share $0.44 $0.43 $1.32 $1.13
--------------------- ---------- ----------
Diluted weighted-average
common shares outstanding 32,742 31,878 32,502 31,673
--------------------- ---------- ----------
CONTACT: SYNNEX Corporation
Laura Crowley, 510-668-3715
Director of Investor Relations and Public Relations
laurack@synnex.com
SOURCE: SYNNEX Corporation