01—Abstract
Summary
Summary of the 10-K filed January 29, 2015. Cited figures are marked; the original filing is the authoritative source.
SYNNEX Corporation reported fiscal 2014 (year ended November 30, 2014) revenue of $13.84 billiona, up from $10.85 billion in fiscal 2013, driven largely by the acquisition of the customer relationship management (CRM) business of International Business Machines Corporation (IBM), which contributed approximately $900 million of revenue.
Net income attributable to SYNNEX Corporation was $180.0 millionb, or $4.57 per diluted share, compared with $152.2 million, or $3.02 per diluted share, in fiscal 2013. Gross margin improved to 7.94% from 6.04%, while selling, general and administrative expenses rose to $790.5 million from $414.1 million, including $43.2 million of acquisition and integration expenses and higher intangible asset amortization. The company operates two segments: Technology Solutions, the IT and consumer electronics distribution business, which generated $12.76 billion of revenue, and Concentrix, the business process services unit, which was expanded by the IBM CRM acquisition and generated $1.10 billion of revenue.
The IBM CRM acquisition had a preliminary purchase price of $418.3 millionc, funded by cash and 1,266,357 shares of common stock. Operating cash flow was negative $234.8 million, primarily reflecting increases in accounts receivable and inventory, while borrowings rose to $980.5 million.
Management stated it believes current cash balances and credit availability are sufficient to support operations for at least the next twelve months. The filing also highlights concentration and risk factors, including HP products representing approximately 25% of fiscal 2014 revenue, MiTAC Holdings Corporation owning approximately 25% of common stock, and the company's initiation of a quarterly cash dividend of $0.125d per share in fiscal 2014.
02—Key points
Key Highlights
- Revenue rose to $13.84 billion in fiscal 2014 from $10.85 billion in fiscal 2013, with the IBM CRM business contributing approximately $900 million.
- Net income attributable to SYNNEX Corporation was $180.0 million, or $4.57 per diluted share, versus $152.2 million, or $3.02 per diluted share, in fiscal 2013.
- Gross margin increased to 7.94% from 6.04%, mainly due to the change in business mix from the IBM CRM acquisition.
- Selling, general and administrative expenses increased to $790.5 million from $414.1 million, including $43.2 million of acquisition and integration expenses and $54.5 million of intangible asset amortization.
- Net cash used in operating activities was $234.8 million, driven by increases in accounts receivable of $527.9 million and inventory of $330.2 million.
- Total borrowings were $980.5 million as of November 30, 2014, versus $317.9 million a year earlier, after net financing inflows of $701.9 million.
- Concentration risk remains high: HP accounted for approximately 25% of total revenue, and MiTAC Holdings and its affiliates owned approximately 25% of common stock.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2014, TD Synnex kept $0.01.
- Revenue$13.84B100.0%
- Cost of revenue−$12.74B92.1%
- Gross profit$1.10B7.9%
- Operating costs−$790.5M5.7%
- Operating income$308.5M2.2%
- Interest, other & tax−$128.5M0.9%
- Net income$180.0M1.3%
Where FY2014 revenue went
$13.84B- Cost of revenue: $12.74B, 92% of revenue
- Net income: $180.0M, 1.3% of revenue
- SG&A: $790.5M, 5.7% of revenue
- Interest, other & tax: $128.5M, 0.9% of revenue
Kept 1.3% as net incomeNet income $180.0M · 1.3%Interest, other & tax $128.5M · 0.9%
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2014filed January 29, 2015Financial Statements
FY2014 against FY2013
| Line item | FY2014FY2013 | Change |
|---|---|---|
| Revenue | $13.84B$10.85B | +27.6% |
| Cost of Revenue | $12.74B$10.19B | +25.0% |
| Gross Profit | $1.10B$654.97M | +67.8% |
| SG&A Expenses | $790.50M$414.14M | +90.9% |
| Operating Income | $308.51M$240.83M | +28.1% |
| Interest Expense | $28.02M$20.44M | +37.1% |
| Net Income | $180.03M$152.24M | +18.3% |
| EPS (Basic) | $4.61$4.06 | +13.5% |
| EPS (Diluted) | $4.57$3.02 | +51.3% |
| Shares Outstanding (Basic) | 38.49M36.89M | +4.3% |
| Shares Outstanding (Diluted) | 38.84M37.63M | +3.2% |
05—Questions
Frequently Asked Questions
What drove the large increase in revenue and expenses in fiscal 2014?
The increase was primarily due to the acquisition of the CRM business of IBM, completed in phases from January 31, 2014 to September 30, 2014, for a preliminary aggregate purchase price of $418.3 million. The acquisition added approximately $900 million of revenue to fiscal 2014 results and was integrated into the Concentrix segment. Technology Solutions revenue also grew 19.6%, reflecting strong U.S. commercial and consumer electronics demand and growth in systems design and integration solutions.
How did the company finance the IBM CRM acquisition?
The purchase price was settled through a combination of cash and stock. The company issued 1,266,357 shares of common stock with a fair value of $71.1 million, and the remaining amount was paid in cash. As of November 30, 2014, the company was obligated to pay $40.0 million in cash and had a receivable of $85.1 million from IBM related to working capital and other post-closing adjustments. The cash component was funded largely by increased borrowings under the senior secured credit agreement and the accounts receivable securitization program.
Why was operating cash flow negative in fiscal 2014?
Net cash used in operating activities was $234.8 million, primarily due to an increase in accounts receivable of $527.9 million and an increase in inventory of $330.2 million, partially offset by net income of $180.2 million, an increase in accounts payable of $205.1 million and an increase in accrued expenses of $168.6 million. The filing attributes the working capital increases to higher business volumes, growth in systems design and integration solutions, and the IBM CRM acquisition.
How concentrated is the company's supplier and customer base?
HP is the largest OEM supplier, and sales of HP products and services represented approximately 25%, 31% and 36% of consolidated revenue in fiscal 2014, 2013 and 2012, respectively. The company states that no single customer accounted for 10% or more of consolidated revenue in those years. HP agreements are short-term and may be terminated without cause upon short notice. In addition, MiTAC Holdings and its affiliates owned approximately 25% of common stock as of November 30, 2014, giving them significant influence over stockholder matters.
What is the company's dividend and share repurchase position?
The company initiated a quarterly cash dividend of $0.125 per share in fiscal 2014, with the initial payment on October 31, 2014, and announced another $0.125 per share dividend on January 12, 2015, payable January 30, 2015. Dividends paid in fiscal 2014 totaled $4.9 million. A $65 million share repurchase program authorized in June 2011 expired in June 2014, with $11.3 million used to buy 361,451 shares. In June 2014, the Board authorized a three-year $100 million repurchase program, and no shares were repurchased under it during fiscal 2014.
06—Continue