01—Abstract
Summary
Summary of the 10-K filed February 13, 2008. Cited figures are marked; the original filing is the authoritative source.
SYNNEX Corporation, a Fortune 500 business process services company, reported fiscal 2007 (year ended November 30, 2007) revenue of $7.00 billiona, up from $6.34 billion in fiscal 2006, with the filing stating a 10.4% increase.
Gross profit rose to $355.4 millionb (5.07% of revenue, versus 4.50% in fiscal 2006), and net income increased to $63.1 million, or $1.93 diluted EPS, from $51.4 million, or $1.61 diluted EPS. The company attributed growth to U.S. and Canadian business, increased demand, sales efforts and contributions from acquisitions including Link2Support, PC Wholesale, HiChina Web Solutions and the Redmond Group of Companies. The balance sheet expanded considerably over the year.
Total assets rose to $1.89 billionc from $1.38 billion, and borrowings under securitization, term loans and lines of credit reached $351.1 million current plus $37.5 million long-term. Net cash used in operating activities was $152.7 million, driven mainly by a $321.9 million increase in accounts receivable, which the filing ties to a change in the terms of the U.S. securitization arrangement that moved those receivables on-balance sheet. Cash from financing activities was $309.3 million.
Investors should weigh the company's concentration and dependencies: HP accounted for approximately 28%d of fiscal 2007 revenue, about 97% of revenue came from North America, and MiTAC International and affiliates owned approximately 44% of common stock. The filing also discloses low gross and operating margins, reliance on securitization and revolving credit facilities, and a HP agreement expiring May 31, 2009.
02—Key points
Key Highlights
- Revenue of $7,004,120 thousand in fiscal 2007, up 10.4% from $6,343,514 thousand in fiscal 2006
- Gross profit of $355,382 thousand (5.07% of revenue) versus $285,359 thousand (4.50%) in fiscal 2006; SG&A rose to $243,235 thousand, up 28.6%
- Net income of $63,127 thousand, or $1.93 diluted EPS, compared with $51,385 thousand, or $1.61 diluted EPS, in fiscal 2006
- Net cash used in operating activities of $152.7 million, primarily due to a $321.9 million increase in accounts receivable tied to a change in the U.S. securitization arrangement
- Total assets of $1,887,103 thousand at November 30, 2007, up from $1,382,734 thousand, including goodwill of $96,350 thousand after several acquisitions
- Concentrated supplier and ownership base: HP represented approximately 28% of revenue, and MiTAC International and affiliates held approximately 44% of common stock
- Approximately $504.6 million in variable-rate borrowings and securitization obligations outstanding at November 30, 2007, with covenant restrictions on dividends
03—Questions
Frequently Asked Questions
How did SYNNEX perform financially in fiscal 2007?
Revenue grew 10.4% to $7.00 billion, gross profit rose to $355.4 million (5.07% of revenue), and net income increased to $63.1 million, or $1.93 per diluted share, from $51.4 million, or $1.61 per diluted share, in fiscal 2006.
Why was operating cash flow negative in fiscal 2007?
Net cash used in operating activities was $152.7 million, mainly because of a $321.9 million increase in accounts receivable. The filing attributes this primarily to a change in terms of the U.S. securitization arrangement in the first quarter of fiscal 2007, which classified those receivables as on-balance sheet rather than off-balance sheet.
How concentrated is SYNNEX's business?
HP accounted for approximately 28% of fiscal 2007 revenue, and no reseller customer exceeded 10% of revenue. About 97% of total revenue came from North America, and the HP U.S. Business Development Partner Agreement remains in effect until May 31, 2009, though either party may terminate on 30 days' notice.
What acquisitions did SYNNEX complete during fiscal 2007?
The company acquired Link2Support, Inc. for approximately $25.0 million in cash, the assets of PC Wholesale for $28.9 million, approximately 86% of China Civilink (HiChina Web Solutions) for $30.0 million, and substantially all assets of the Redmond Group of Companies for approximately $29.3 million in cash, net of assumed debt.
What is the ownership structure and related-party exposure?
As of November 30, 2007, executive officers, directors and principal stockholders owned approximately 46% of common stock, with MiTAC International and affiliates owning approximately 44%. Purchases from MiTAC International and affiliates were approximately $297.3 million in fiscal 2007, and the relationship is informal, without long-term pricing or capacity commitments.
04—Continue