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TD Synnex Annual Report, Year Ended Nov 30, 2005

Filing Date
Filed February 13, 2006
Period End
November 30, 2005
Security
SNX
In the record · 2016–202610-K1110-Q338-K163

SNX filed 11 annual reports (10-K), 33 quarterly reports (10-Q) and 163 current reports (8-K) between 2016 and 2026.

  1. Deal closed8-K · Sep ’17Sep ’17
  2. Leadership change8-K · Jul ’19Jul ’19
  3. Leadership change8-K · Sep ’21Sep ’21
  4. Material agreement8-K · Oct ’25Oct ’25

01—Abstract

Summary

Summary of the 10-K filed February 13, 2006. Cited figures are marked; the original filing is the authoritative source.

SYNNEX Corporation, now TD SYNNEX Corporation, is a global information technology supply chain services company offering product distribution, logistics, contract assembly and demand generation marketing to IT OEMs and reseller customers.

For fiscal 2005 (ended November 30, 2005), revenue rose to $5.64 billiona, up 9.5% from $5.15 billion, driven by distribution revenue growth of 12.0%, while contract assembly revenue fell 9.9% on lower demand from Sun Microsystems. Gross profit was $238.6 million (4.23% of revenue), SG&A was $159.6 million, and net income increased to $52.8 million, or $1.70 per diluted share, which includes a $12.7 million after-tax gain on the sale of SYNNEX K.K. in Japan. The filing highlights concentration and control risks.

HP accounted for approximately 28% of revenue, and the HP U.S. agreement expires May 31, 2006. MiTAC International and affiliates owned approximately 57% of common stock, and MiTAC supplies subassemblies for Sun Microsystems, the primary contract assembly customer, under informal arrangements. Operating cash flow was only $7.3 millionb, as working capital needs rose, and the company relies on a $275.0 million U.S. receivables securitization program and other credit facilities, with $29.7 million in borrowings outstanding at year-end.

Investors should weigh the solid revenue growth and improved gross margin against thin operating margins of roughly 1.4%, heavy dependence on a few OEMs and customers, the controlling shareholder's influence, and the reliance on receivables financing. Pending litigation, including the Seanix trademark suit and an appeal of a $4.2 millionc judgment against a former EMJ subsidiary, is not expected by management to have a material adverse effect.

02—Key points

Key Highlights

  1. Revenue increased 9.5% to $5.64 billion in fiscal 2005, with distribution revenue up 12.0% to $5.12 billion and contract assembly revenue down 9.9% to $519.9 million.
  2. Net income rose to $52.8 million ($1.70 diluted EPS), including a $12.7 million after-tax gain on the sale of SYNNEX K.K. to MCJ Company Limited.
  3. Gross profit was $238.6 million, or 4.23% of revenue, and SG&A expenses were $159.6 million, or 2.83% of revenue.
  4. HP products represented approximately 28% of fiscal 2005 revenue, and the U.S. Business Development Partner Agreement with HP expires May 31, 2006.
  5. MiTAC International and its affiliates owned approximately 57% of common stock, giving them control over matters requiring stockholder approval.
  6. Sun Microsystems accounted for approximately $486 million, or 93%, of contract assembly revenue in fiscal 2005.
  7. Operating cash flow was $7.3 million, and the company had $13.6 million in cash, $29.7 million in borrowings and $274.8 million of receivables sold under its securitization program.

03—Questions

Frequently Asked Questions

  1. How did SYNNEX perform financially in fiscal 2005?

    Revenue grew 9.5% to $5.64 billion and net income rose to $52.8 million, or $1.70 per diluted share, from $46.6 million the prior year. Income from continuing operations before non-operating items was $78.9 million, and the net income figure includes a $12.7 million gain on the sale of the Japanese subsidiary.

  2. What are the main customer and supplier concentration risks?

    HP accounted for about 28% of total revenue in fiscal 2005, and IBM for about 5%. Sun Microsystems represented roughly 93% of contract assembly revenue. The HP agreement expires May 31, 2006, and either party may terminate on 30 days' notice.

  3. Who controls SYNNEX and what are the implications for minority investors?

    MiTAC International and its affiliates owned approximately 57% of common stock as of November 30, 2005, and can control matters submitted to stockholders, including any acquisition or sale of the company. The relationship with MiTAC is informal, and pricing is negotiated case by case, which the filing notes may not be as favorable as arm's-length terms.

  4. How does SYNNEX finance its working capital?

    The company relies heavily on floor plan financing, a U.S. accounts receivable securitization program of up to $275.0 million, and a one-year Canadian program of up to C$100.0 million. At November 30, 2005, $274.8 million of U.S. receivables were sold under the U.S. program, and borrowings under term loans and lines of credit totaled $29.7 million. Operating cash flow was only $7.3 million in fiscal 2005, as inventory and receivables increased.

  5. What material legal matters are pending?

    The company faces a Canadian trademark infringement suit brought by Seanix Technology Inc. and a California civil suit by Acropolis Systems and Tony Yeh seeking about $2.0 million in damages. It is also appealing a $4.2 million judgment against Daisytek (Canada), Inc., a former EMJ subsidiary. Management believes these proceedings will not have a material adverse effect on results, financial position or cash flows.

04—Continue

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