EXHIBIT 99.1
Syntax Brillian Corporation Reports Fourth-Quarter
and Full Year Financial Results
Record Revenue, Increased Gross Margins, and a Swing to
Profitability Are among the Milestones Achieved During Fiscal 2007
TEMPE, Ariz.--(BUSINESS WIRE)--Sept. 12, 2007--Syntax-Brillian
Corporation (Nasdaq:BRLC), a leading designer, developer, and
distributor of LCD and LCoS(TM) HDTVs and digital imaging products,
today announced financial results for its fiscal 2007 fourth quarter
and full year ended June 30, 2007.
For the quarter ended June 30, 2007, Syntax-Brillian reported
revenue of $205.3 million, up 243% from revenue of $59.8 million in
the year-ago quarter. Full year revenue was $697.6 million, up 261%
from revenue of $193.0 million for the year ended June 30, 2006.
Net income in accordance with U.S. generally accepted accounting
principles, or GAAP, for the quarter was $8.4 million compared with a
net loss of $5.5 million for the fourth quarter of fiscal 2006. GAAP
net income for the year ended June 30, 2007 was $29.8 million compared
with a net loss of $18.9 million for the previous year.
GAAP diluted net income per share was $0.11 for the fourth quarter
of fiscal 2007 compared with a diluted net loss per share of $0.11 for
the fourth quarter of fiscal 2006. Full year diluted net income per
share was $0.48 compared with a diluted net loss per share of $0.46
for the fiscal year ended June 30, 2006.
Adjusted EBITDA (as discussed below) for the fourth quarter of
fiscal 2007 was $26.3 million compared with negative $580,000 for the
fourth quarter of fiscal 2006. Adjusted EBITDA for the year ended June
30, 2007 was $75.6 million compared with negative $131,000 for the
prior year.
"We are extremely pleased with the company's performance for
fiscal 2007," said Vincent F. Sollitto, Jr., Chairman and CEO of
Syntax-Brillian. "The Olevia brand enjoys an outstanding reputation in
performance and quality, and demand continues to exceed our sourcing
capabilities. In addition, the response to the Vivitar founding
sponsorship at the O2, an entertainment complex near the financial
district in London, promises to increase demand and profitability of
our digital camera products, especially in Europe. Unit shipments in
the fourth-quarter exceeded our expectations as we experienced strong
sell-through in our U.S. channels, aided in part by new retail
partners as well as continued acceptance of the Olevia brand by
consumers."
Consolidated gross margins of 20.2% for the quarter ended June 30,
2007 represented an 800 basis point improvement from the fourth
quarter of fiscal 2006. The gross margin improvement from the fiscal
2006 fourth quarter was a result of improvements in LCD gross margins
from 18.6% in the June 2006 quarter to 24.1% in the June 2007 quarter
as well as an overall increase in the amount of LCD revenue.
In conjunction with its year-end closing, the Company completed
its control assessment as required under section 404 of the
Sarbanes-Oxley Act. In doing so two items were identified and revised
on a year-to-date basis during the fourth quarter because their impact
on net income for each of the quarters during 2007 was not material in
total. We determined that our methodology to estimate warranty
accruals did not adequately reflect information that had recently
become available to better estimate the possible future exposure for
warranty costs related to units which had already been sold.
Using this newly available information resulted in the reversal of
approximately $7.4 million of warranty expense which had been recorded
in cost of sales through the third quarter of fiscal 2007. This
accounted for approximately 360 basis points of improvement in our
fourth quarter margins that may not be expected to recur in the
future. This reduction in our warranty accrual was the result of
lower-than-anticipated warranty claims, particularly in our national
retail channels, where lower returns and warranty claims reflect, we
believe, the ongoing improvement in the quality of our products.
In addition, we also determined that the tax impact of dividends
and accretion of discount on redeemable, convertible preferred stock,
which are reported as interest expense under GAAP, cannot be treated
as deductible in our income tax provision which resulted in
approximately $5.9 million of income tax that should have been
recorded through the third quarter of 2007 being recorded in the
fourth quarter. This incremental income tax expense will not recur in
future periods because at June 30, 2007 the redeemable, convertible
preferred stock had all been redeemed. The increase in income tax
expense, coupled with the decrease in warranty expense when taken on a
net-of-tax basis, had an immaterial impact on the reported net income
of prior quarters.
Additionally, Syntax-Brillian completed its acquisition of Vivitar
Corporation on November 21, 2006. Revenue for Vivitar for the three
and twelve months ended June 30, 2007 was $14.6 million and $41.4
million, respectively.
The merger of Syntax and Brillian was completed on November 30,
2005. Accordingly, the results of operations for the fiscal year ended
June 30, 2006 include only the operations of Syntax prior to the
merger.
Syntax-Brillian ended the June 30, 2007 quarter with cash, cash
equivalents, and short-term investments of $28.7 million; working
capital of $238.6 million; and stockholders' equity of $315.5 million.
At June 30, 2007, Syntax-Brillian had $78.1 million outstanding under
its revolving credit lines.
At June 30, 2007, accounts receivable and due from factor totaled
$210.1 million for total days sales outstanding ("DSOs") of 93.2. This
compares with 77.3 DSOs at June 30, 2006 and 124.8 DSOs at March 31,
2007. Included in accounts receivable at June 30, 2007 was $138.1
million of accounts receivable from South China House of Technology,
or SCHOT, our distributor in Asia. At June 30, 2007, there were no
invoices due from SCHOT that had been outstanding longer than the 120
day terms.
Accounts receivable and due from factor, excluding the Asian
receivables, totaled $72.0 million which represents approximately 60.5
DSOs at June 30, 2007 compared with 77.3 DSOs at June 30, 2006 and
46.7 DSOs at March 31, 2007.
Inventory balances totaled $34.5 million at June 30, 2007, down
from $39.8 million at March 31, 2007. At June 30, 2007, there were
19.2 days of cost of sales in inventory compared with 22.8 days at
June 30, 2006 and 27.4 days at March 31, 2007.
Accounts payable at June 30, 2007 totaled $71.6 million, which
represented approximately 39.8 days of cost of sales compared with 6.8
days at June 30, 2006 and 86.8 days at March 31, 2007.
Highlights for the quarter ended June 30, 2007
The highlights and accomplishments for the quarter ended June 30,
2007 include the following:
-- Fiscal fourth quarter revenue of $205.3 million, a 243%
increase over last year's comparable quarter.
-- Fiscal fourth quarter shipments of approximately 286,000
units, a 165% increase over the prior year comparable quarter.
-- Increased gross margins by 800 basis points to 20.2% over the
prior year period.
-- Adjusted EBITDA of $26.3 million and $75.6 million for the
three and twelve months ended June 30, 2007, respectively.
-- Raised $143 million via a public offering of common stock.
-- From the inception of our ESPN advertising campaign, brand
awareness among males 18-49 has increased 473% and purchase
consideration of non-HDTV owners who expect to purchase within
12 months has increased over 600%.
-- Olevia featured in Target commercials and four color boxes
will be featured on the retail floor.
-- Olevia will be featured in Sears' NFL advertising campaign
from August through December 2007.
Business Outlook
Syntax-Brillian also provided the following business outlook for
its quarter ending September 30, 2007 and the calendar year ending
December 31, 2007. The current business outlook is reflective of a
severe tightening of credit in Asia that has significantly impacted
the bank and other credit facilities of our supply chain partners. As
a result of the tighter credit environment in Asia, we believe that
the combined credit availability of our supply chain partners has been
reduced by over $200 million. The current business outlook also
reflects Syntax-Brillian's decision to take a more cautious approach
to sales in Asia.
For the quarter ending September 30, 2007, Syntax-Brillian
anticipates revenue in the range of $170 million to $180 million,
predominately from sales of LCD TVs on shipments of approximately
270,000 to 290,000 units. Gross margins for the quarter are
anticipated to be in the range of 15% to 17%.
For the calendar year ending December 31, 2007, Syntax-Brillian
anticipates revenue in the range of $1.0 billion to $1.1 billion, and
gross margins in the range of 16% to 18%.
Conference Call
Syntax-Brillian will host a conference call today, September 12,
to discuss its fourth-quarter financial results and future outlook.
The conference call may include forward-looking statements. The call
will be Web cast and is scheduled to begin at 1:30 p.m. PDT (4:30 p.m.
EDT). The live audio broadcast and replay of the conference call can
be accessed on Syntax-Brillian's Web site at www.syntaxbrillian.com
under the Investor Relations section. Syntax-Brillian will provide an
audio replay of this conference call on its Web site. No other audio
replay will be available.
About Syntax-Brillian Corporation
Syntax-Brillian Corporation (www.syntaxbrillian.com) is one of the
world's leading manufacturers and marketers of LCD and LCoS(TM) HDTVs,
digital cameras, and microdisplay entertainment products.
The company's lead products include its Olevia(TM) brand
(www.Olevia.com) high definition widescreen LCD and LCoS televisions
- -- one of the fastest growing global TV brands -- and Vivitar brand
(www.vivitar.com) digital still and video cameras. Syntax-Brillian has
built an Asian supply chain coupled with an international
manufacturing and distribution network to support worldwide retail
sales channels and position the company as a market leader in consumer
digital entertainment products.
Brillian, Vivitar, and LCoS are trademarks or registered
trademarks of Syntax-Brillian Corporation. All other trademarks are
the property of their respective owners.
Certain statements contained in this press release may be deemed
to be forward-looking statements under federal securities laws, and
Syntax-Brillian intends that such forward-looking statements be
subject to the safe harbor created thereby. Such forward-looking
statements include, but are not limited to, expectations regarding
revenue, unit shipments, and gross margins for the three months ending
September 30, 2007 and the calendar year ending December 31, 2007;
anticipated demand for and profitability of digital camera products;
and the anticipated effect of the credit environment in Asia on the
Company's business. Syntax-Brillian cautions that these statements are
qualified by important factors that could cause actual results to
differ materially from those reflected by the forward-looking
statements contained herein. Such factors include (a) changes in
markets for the Company's products; (b) changes in the market for
customers' products; (c) the failure of the Company's products to
deliver commercially acceptable performance; (d) the ability of the
Company's management, individually or collectively, to guide the
Company in a successful manner; and (e) other risks as detailed in
Syntax-Brillian's Annual Report on Form 10-K/A for the fiscal year
ended June 30, 2006 and subsequent filings with the Securities and
Exchange Commission.
SYNTAX-BRILLIAN CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
(in thousands, except per share data)
Three Months Ended Fiscal Year Ended
June 30, June 30,
------------------ ------------------
2007 2006 2007 2006
--------- ------- -------- --------
Total net sales $ 205,262 $59,807 $697,620 $192,990
Cost of sales 163,828 52,523 573,155 169,096
--------- ------- -------- --------
41,434 7,284 124,465 23,894
Operating expenses:
Selling, distribution and
marketing 5,160 2,867 19,796 8,319
General and administrative 10,952 4,477 32,464 18,124
Research and development 1,398 1,853 6,225 4,416
--------- ------- -------- --------
17,510 9,197 58,485 30,859
--------- ------- -------- --------
Operating income (loss) 23,924 (1,913) 65,980 (6,965)
Interest and other expense,
net (2,898) (3,585) (18,373) (11,914)
--------- ------- -------- --------
Income (loss) before income
taxes 21,026 (5,498) 47,607 (18,879)
Income tax expense 12,631 - 17,815 -
--------- ------- -------- --------
Net income (loss) $ 8,395 $(5,498) $ 29,792 $(18,879)
========= ======= ======== ========
Income (loss) per common
share:
Basic $ 0.12 $ (0.11) $ 0.51 $ (0.46)
========= ======= ======== ========
Diluted $ 0.11 $ (0.11) $ 0.48 $ (0.46)
========= ======= ======== ========
Weighted average number of
common shares:
Basic 71,874 48,580 58,685 40,978
========= ======= ======== ========
Diluted 74,620 48,580 63,108 40,978
========= ======= ======== ========
SYNTAX-BRILLIAN CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited)
(in thousands)
June 30, June 30,
2007 2006
-------- --------
ASSETS
- --------------------------------------------------
Current Assets:
Cash and cash equivalents $ 28,679 $ 7,375
Accounts receivable and due from factor, net 210,115 50,829
Inventories 34,499 13,151
Inventory deposits 78,253 -
Deferred tax asset, current portion 14,029 2,666
Tooling deposit 65,253 -
Other current assets 2,579 6,437
-------- --------
Total current assets 433,407 80,458
Property and equipment, net 13,921 16,703
Intangible assets, net 36,413 20,737
Goodwill 30,546 6,990
Deferred tax asset, long-term portion 23,141 -
Other assets 377 1,461
Investments 1,540 1,307
-------- --------
Total assets $ 539,345 $127,656
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
- --------------------------------------------------
Current Liabilities:
Loans payable, bank $ 78,139 $ 30,800
Notes payable - 650
Current portion of redeemable, convertible
preferred stock (net of $3,390 discount) - 3,432
Accounts payable 71,563 3,924
Accrued rebates payable - 4,043
Accrued warranty 12,492 4,551
Income taxes payable 18,460 96
Deferred income tax liability, current portion 232 -
Other current liabilities 13,903 5,540
-------- --------
Total current liabilities 194,789 53,036
-------- --------
Long-term debt (net of $2,635 discount) - 3,758
Redeemable convertible preferred stock (net of
$3,390 discount) - 3,432
Deferred tax liability, long-term portion 29,040 2,628
Commitments and Contingencies
Stockholders' Equity:
Common stock 90 49
Additional paid-in capital 304,929 84,489
Retained earnings (accumulated deficit) 10,056 (19,736)
Accumulated other comprehensive income, net of
tax 441 -
-------- --------
Total stockholders' equity 315,516 64,802
-------- --------
Total liabilities and stockholders' equity $ 539,345 $127,656
======== ========
Use of Non-GAAP Financial Measures
In addition to providing financial measurements based on generally
accepted accounting principles in the United States of America (GAAP),
Syntax-Brillian provides additional financial metrics that are not
prepared in accordance with GAAP (non-GAAP). Recent legislative and
regulatory changes discourage the use of and emphasis on non-GAAP
financial metrics and require companies to explain why non-GAAP
financial metrics are relevant to management and investors. The
Company believes that the inclusion of these non-GAAP financial
measures in this press release helps investors to gain a meaningful
understanding of our performance, consistent with how management
measures and forecasts our performance, especially when comparing such
results to previous periods or forecasts. The Company uses these
non-GAAP measures, in addition to GAAP financial measures, as the
basis for measuring its core operating performance and comparing such
performance to that of prior periods. This measure is also used by the
Company in its financial and operating decision-making. Non-GAAP
information is not prepared under a comprehensive set of accounting
rules and should only be used to supplement an understanding of our
operating results as reported under GAAP.
Syntax-Brillian defines "Adjusted EBITDA" as net income before
interest, taxes, depreciation, amortization, and share-based
compensation. Syntax-Brillian considers Adjusted EBITDA to be an
important indicator of the Company's operational strength and
performance of its business and a good measure of the Company's
historical operating trend.
Adjusted EBITDA should be considered in addition to, not as a
substitute for, the Company's operating income and net income, as well
as other measures of financial performance reported in accordance with
GAAP.
Reconciliation of Non-GAAP Financial Measures
In accordance with the requirements of Regulation G issued by the
Securities and Exchange Commission, the Company is presenting the most
directly comparable GAAP financial measure and reconciling the
non-GAAP financial metrics to the comparable GAAP measures.
SYNTAX-BRILLIAN CORPORATION
RECONCILIATION OF GAAP NET INCOME (LOSS) TO ADJUSTED EBITDA
(unaudited)
(in thousands)
Three Months Fiscal Year
Ended Ended
June 30, June 30,
--------------- ----------------
2007 2006 2007 2006
------ ------- ------ --------
Net income (loss) $ 8,395 $(5,498) $29,792 $(18,879)
Income tax expense 12,631 - 17,815 -
Interest and other, net 2,898 3,585 18,373 11,914
Depreciation and amortization 1,855 1,005 6,376 2,474
Share-based compensation 525 328 3,248 4,360
------ ------- ------ --------
Adjusted EBITDA 26,304 (580) 75,604 (131)
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CONTACT: Syntax-Brillian Corporation
Wayne Pratt
Executive Vice President, Chief Financial Officer
602-389-8797
wayne.pratt@syntaxbrillian.com