01—Abstract
Summary
Summary of the 10-K filed February 14, 2011. Cited figures are marked; the original filing is the authoritative source.
SYNNEX Corporation, a Fortune 500 business process services company headquartered in Fremont, California, reported fiscal 2010 (year ended November 30, 2010) revenue of $8.61 billiona, up from $7.72 billion in fiscal 2009, with net income attributable to SYNNEX of $127.9 million, or $3.58 per diluted share, compared with $89.7 million, or $2.64 per diluted share, the prior year.
Gross profit rose to $491.6 millionb (5.71% of revenue), and income from continuing operations before non-operating items, income taxes and noncontrolling interest increased to $199.2 million (2.31% of revenue). The company operates two segments: distribution services, which generated $8.53 billion of revenue, and global business services (GBS), which generated $112.4 million. North America accounted for about 98% of revenue, and HP products represented approximately 38% of total revenue.
Cash flow from operations was negative $65.9 millionc in fiscal 2010, driven mainly by a $240.1 million increase in inventory and a $156.8 million increase in accounts receivable, partly offset by a $220.2 million increase in accounts payable. Total borrowings were $386.3 million at year-end, of which $245.3 million was variable-rate. Cash and cash equivalents rose to $88.0 million, and total equity was $992.8 million.
The company also reported acquisitions of Jack of All Games, Aspire Technology Limited and Encover, Inc. during fiscal 2010, and disclosed subsequent events including the December 1, 2010 acquisition of 70% of Marubeni Infotec Corporation (now SYNNEX Infotec Corporation) and the first-quarter fiscal 2011 acquisition of e4e, Inc. for $23.0 milliond. MiTAC International and its affiliates beneficially owned approximately 29% of common stock, giving them significant influence over stockholder votes, and the company's HP U.S. Business Development Partner Agreement is set to expire on May 31, 2011. The company has not paid cash dividends since inception.
02—Key points
Key Highlights
- Revenue rose to $8.61 billion in fiscal 2010 from $7.72 billion in fiscal 2009, with distribution revenue at $8.53 billion and GBS revenue at $112.4 million.
- Net income attributable to SYNNEX was $127.9 million, or $3.58 per diluted share, versus $89.7 million, or $2.64 per diluted share, in fiscal 2009.
- Gross profit was $491.6 million (5.71% of revenue) and income from continuing operations before non-operating items and taxes was $199.2 million (2.31% of revenue).
- Operating cash flow was negative $65.9 million, driven by a $240.1 million inventory increase and a $156.8 million accounts receivable increase.
- Total borrowings were $386.3 million at November 30, 2010, with $245.3 million in variable-rate obligations.
- HP products accounted for approximately 38% of total revenue, and the HP U.S. Business Development Partner Agreement expires May 31, 2011.
- MiTAC International and affiliates owned approximately 29% of common stock, and executive officers, directors and principal stockholders together owned approximately 31%.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2010, TD Synnex kept $0.01.
- Revenue$8.61B100.0%
- Cost of revenue−$8.12B94.3%
- Gross profit$491.6M5.7%
- Operating costs−$292.5M3.4%
- Operating income$199.2M2.3%
- Interest, other & tax−$71.2M0.8%
- Net income$127.9M1.5%
Where FY2010 revenue went
$8.61B- Cost of revenue: $8.12B, 94% of revenue
- Net income: $127.9M, 1.5% of revenue
- SG&A: $292.5M, 3.4% of revenue
- Interest, other & tax: $71.2M, 0.8% of revenue
Kept 1.5% as net incomeNet income $127.9M · 1.5%
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2010filed February 14, 2011Financial Statements
FY2010 against FY2009
| Line item | FY2010FY2009 | Change |
|---|---|---|
| Revenue | $8.61B$7.72B | +11.6% |
| Cost of Revenue | $8.12B$7.30B | +11.3% |
| Gross Profit | $491.62M$423.03M | +16.2% |
| SG&A Expenses | $292.47M$273.38M | +7.0% |
| Operating Income | $199.15M$149.65M | +33.1% |
| Interest Expense | $22.59M$25.92M | −12.9% |
| Net Income | $127.95M$89.67M | +42.7% |
| EPS (Basic) | $3.68$2.74 | +34.3% |
| EPS (Diluted) | $3.58$2.64 | +35.6% |
| Shares Outstanding (Basic) | 34.74M32.71M | +6.2% |
| Shares Outstanding (Diluted) | 35.76M34.01M | +5.1% |
05—Questions
Frequently Asked Questions
What drove the increase in revenue and earnings in fiscal 2010?
The filing states that distribution revenue increased because of improved overall market conditions in the US and Canada following the fiscal 2009 recession, along with the Jack of All Games acquisition, new vendors and sales initiatives. Networking product sales rose 37%, system component sales rose 24%, systems sales rose 19% and peripheral sales rose 12%. Diluted earnings per share increased to $3.58 from $2.64, and the company attributed the higher operating margin to improved distribution gross margins and lower SG&A as a percentage of revenue.
Why was operating cash flow negative in fiscal 2010?
The filing attributes the $65.9 million of net cash used in operating activities mainly to a $240.1 million increase in inventory as business levels rose and a $156.8 million increase in accounts receivable from higher U.S. and Canadian sales. These uses were partially offset by a $220.2 million increase in accounts payable and net income of $128.1 million.
How concentrated are SYNNEX's customers and suppliers?
HP products represented approximately 38% of fiscal 2010 revenue, and one customer accounted for 11% of total revenue. The filing says the HP U.S. Business Development Partner Agreement expires May 31, 2011, and that either party may terminate on 30 days written notice. The company states that it has historically renewed the agreement before expiration.
How much control do MiTAC International and related parties have?
As of November 30, 2010, executive officers, directors and principal stockholders owned approximately 31% of common stock, and MiTAC International and its affiliates owned approximately 29%. The filing states this concentration could allow them to influence all matters requiring stockholder approval and could delay or prevent a change in control. It also notes that Synnex Technology International Corp., a Taiwan-based affiliate, could compete with the company.
What debt and liquidity obligations did SYNNEX have at year end?
Total borrowings were $386.3 million as of November 30, 2010, including $209.1 million under the U.S. securitization arrangement, $131.3 million of carrying value of 4.0% Convertible Senior Notes due 2018 with $143.8 million principal, and $36.2 million under the Canadian revolving arrangement. The company stated it was in compliance with all material covenants and believes its unused credit line capacity is sufficient to support operating activities.
06—Continue