Company Quick10K Filing
Synnex
Price94.52 EPS5
Shares51 P/E18
MCap4,815 P/FCF-32
Net Debt2,526 EBIT369
TEV7,341 TEV/EBIT20
TTM 2019-05-31, in MM, except price, ratios
10-Q 2020-02-29 Filed 2020-04-07
10-K 2019-11-30 Filed 2020-01-29
10-Q 2019-08-31 Filed 2019-10-04
10-Q 2019-05-31 Filed 2019-07-03
10-Q 2019-02-28 Filed 2019-04-09
10-K 2018-11-30 Filed 2019-01-28
10-Q 2018-08-31 Filed 2018-10-09
10-Q 2018-05-31 Filed 2018-07-06
10-Q 2018-02-28 Filed 2018-04-06
10-K 2017-11-30 Filed 2018-01-29
10-Q 2017-08-31 Filed 2017-10-03
10-Q 2017-05-31 Filed 2017-07-05
10-Q 2017-02-28 Filed 2017-04-04
10-K 2016-11-30 Filed 2017-01-26
10-Q 2016-08-31 Filed 2016-10-04
10-Q 2016-05-31 Filed 2016-07-05
10-Q 2016-02-29 Filed 2016-04-07
10-K 2015-11-30 Filed 2016-01-28
10-Q 2015-08-31 Filed 2015-10-05
10-Q 2015-05-31 Filed 2015-07-08
10-Q 2015-02-28 Filed 2015-04-07
10-K 2014-11-30 Filed 2015-01-29
10-Q 2014-08-31 Filed 2014-10-07
10-Q 2014-05-31 Filed 2014-07-08
10-Q 2014-02-28 Filed 2014-04-08
10-K 2013-11-30 Filed 2014-01-27
10-Q 2013-08-31 Filed 2013-10-08
10-Q 2013-02-28 Filed 2013-04-04
10-K 2012-11-30 Filed 2013-01-28
10-Q 2012-08-31 Filed 2012-10-05
10-Q 2012-05-31 Filed 2012-07-06
10-Q 2012-02-29 Filed 2012-04-06
10-K 2011-11-30 Filed 2012-01-27
10-Q 2011-08-31 Filed 2011-10-07
10-Q 2011-05-31 Filed 2011-07-08
10-Q 2011-02-28 Filed 2011-04-08
10-K 2010-11-30 Filed 2011-02-14
10-Q 2010-08-31 Filed 2010-10-08
10-Q 2010-05-31 Filed 2010-07-09
10-Q 2010-02-28 Filed 2010-04-09
10-K 2009-11-30 Filed 2010-02-05
8-K 2020-06-25
8-K 2020-05-26
8-K 2020-05-12
8-K 2020-04-10
8-K 2020-03-24
8-K 2020-03-17
8-K 2020-01-09
8-K 2019-09-24
8-K 2019-07-19
8-K 2019-05-31
8-K 2019-04-11
8-K 2019-03-27
8-K 2019-03-15
8-K 2019-02-01
8-K 2019-01-10
8-K 2019-01-09
8-K 2018-12-10
8-K 2018-10-05
8-K 2018-10-05
8-K 2018-10-05
8-K 2018-10-03
8-K 2018-09-25
8-K 2018-09-25
8-K 2018-08-09
8-K 2018-08-07
8-K 2018-06-28
8-K 2018-06-28
8-K 2018-06-28
8-K 2018-06-28
8-K 2018-05-07
8-K 2018-03-29
8-K 2018-03-20
8-K 2018-02-14
8-K 2018-01-04

SNX 10Q Quarterly Report

Part I - Financial Information
Item 1. Financial Statements
Note 1 - Organization and Basis of Presentation:
Note 2 - Summary of Significant Accounting Policies:
Note 3 - Share - Based Compensation:
Note 4 - Balance Sheet Components:
Note 5 - Derivative Instruments:
Note 6 - Fair Value Measurements:
Note 7 - Accounts Receivable Arrangements:
Note 8 - Borrowings:
Note 9 - Earnings per Common Share:
Note 10 - Segment Information:
Note 11 - Related Party Transactions:
Note 12 - Pension and Employee Benefits Plans:
Note 13 - Equity:
Note 14 - Leases:
Note 15 - Commitments and Contingencies:
Note 16 - Subsequent Event:
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Item 4. Controls and Procedures
Part II - Other Information
Item 1A. Risk Factors
Item 6. Exhibits
EX-10.1 snx-ex101_429.htm
EX-10.2 snx-ex102_613.htm
EX-31.1 snx-ex311_7.htm
EX-31.2 snx-ex312_6.htm
EX-32.1 snx-ex321_8.htm

Synnex Earnings 2020-02-29

Balance SheetIncome StatementCash Flow
151296302012201420172020
Assets, Equity
10.08.06.04.02.00.02012201420172020
Rev, G Profit, Net Income
0.60.40.1-0.1-0.4-0.62012201420172020
Ops, Inv, Fin

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

(Mark One)

 

 

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended February 29, 2020

OR

 

 

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from                      to                     

Commission File Number: 001-31892

 

SYNNEX CORPORATION

(Exact name of registrant as specified in its charter)

 

 

Delaware

 

94-2703333

(State or other jurisdiction of

incorporation or organization)

 

(IRS Employer

Identification No.)

 

 

 

44201 Nobel Drive

Fremont, California

 

94538

(Address of principal executive offices)

 

(Zip Code)

(510) 656-3333

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock, par value $0.001 per share

SNX

The New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes       No 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes       No  

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

 

Accelerated filer

Non-accelerated filer

 

Smaller reporting company

Emerging growth company

 

 

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to section 13(a) of the Exchange Act.    

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes       No    

Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date.

 

Class

 

Outstanding as of March 31, 2020

Common Stock, $0.001 par value

 

51,475,950

 


Table of Contents

 

SYNNEX CORPORATION

 

FORM 10-Q

INDEX

 

 

 

 

Page

PART I

FINANCIAL INFORMATION

3

Item 1.

Financial Statements

3

 

Consolidated Balance Sheets (unaudited) as of February 29, 2020 and November 30, 2019

3

 

Consolidated Statements of Operations (unaudited) for the Three Months Ended February 29, 2020 and February 28, 2019

4

 

Consolidated Statements of Comprehensive Income (unaudited) for the Three Months Ended February 29, 2020 and February 28, 2019

5

 

Consolidated Statements of Stockholders’ Equity (unaudited) for the Three Months Ended February 29, 2020 and February 28, 2019

6

 

Consolidated Statements of Cash Flows (unaudited) for the Three Months Ended February 29, 2020 and February 28, 2019

7

 

Notes to the Consolidated Financial Statements (unaudited)

8

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

26

Item 3.

Quantitative and Qualitative Disclosures about Market Risk

37

Item 4.

Controls and Procedures

37

 

 

 

PART II

OTHER INFORMATION

38

Item 1A.

Risk Factors

38

Item 6.

Exhibits

39

Signatures

 

40

 

2


Table of Contents

 

PART I - FINANCIAL INFORMATION

ITEM 1. Financial Statements

SYNNEX CORPORATION  

CONSOLIDATED BALANCE SHEETS

(currency and share amounts in thousands, except par value)

(unaudited)

 

 

 

February 29, 2020

 

 

November 30, 2019

 

ASSETS

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

296,193

 

 

$

225,529

 

Accounts receivable, net

 

 

3,294,218

 

 

 

3,926,709

 

Receivables from vendors, net

 

 

302,599

 

 

 

368,505

 

Inventories

 

 

2,710,251

 

 

 

2,547,224

 

Other current assets

 

 

344,195

 

 

 

385,024

 

Total current assets

 

 

6,947,456

 

 

 

7,452,992

 

Property and equipment, net

 

 

575,772

 

 

 

569,899

 

Goodwill

 

 

2,249,323

 

 

 

2,254,402

 

Intangible assets, net

 

 

1,113,141

 

 

 

1,162,212

 

Deferred tax assets

 

 

112,857

 

 

 

97,539

 

Other assets, net

 

 

728,504

 

 

 

160,917

 

Total assets

 

$

11,727,054

 

 

$

11,697,960

 

 

 

 

 

 

 

 

 

 

LIABILITIES AND EQUITY

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Borrowings, current

 

$

423,611

 

 

$

298,969

 

Accounts payable

 

 

2,589,888

 

 

 

3,149,443

 

Accrued compensation and benefits

 

 

328,256

 

 

 

402,771

 

Other accrued liabilities

 

 

834,615

 

 

 

723,716

 

Income taxes payable

 

 

50,782

 

 

 

32,223

 

Total current liabilities

 

 

4,227,152

 

 

 

4,607,122

 

Long-term borrowings

 

 

2,682,140

 

 

 

2,718,267

 

Other long-term liabilities

 

 

742,167

 

 

 

361,911

 

Deferred tax liabilities

 

 

219,908

 

 

 

222,210

 

Total liabilities

 

 

7,871,366

 

 

 

7,909,510

 

Commitments and contingencies (Note 15)

 

 

 

 

 

 

 

 

Stockholders’ equity:

 

 

 

 

 

 

 

 

Preferred stock, $0.001 par value, 5,000 shares authorized, no shares issued or outstanding

 

 

 

 

 

 

Common stock, $0.001 par value, 100,000 shares authorized, 53,273 and 53,154 shares issued as of February 29, 2020 and November 30, 2019, respectively

 

 

53

 

 

 

53

 

Additional paid-in capital

 

 

1,558,173

 

 

 

1,545,421

 

Treasury stock, 2,417 and 2,399 shares as of February 29, 2020 and November 30, 2019, respectively

 

 

(175,107

)

 

 

(172,627

)

Accumulated other comprehensive income (loss)

 

 

(253,957

)

 

 

(209,077

)

Retained earnings

 

 

2,726,525

 

 

 

2,624,680

 

Total stockholders’ equity

 

 

3,855,688

 

 

 

3,788,450

 

Total liabilities and equity

 

$

11,727,054

 

 

$

11,697,960

 

 

(Amounts may not add due to rounding)

The accompanying Notes are an integral part of these Consolidated Financial Statements (unaudited).

3


Table of Contents

 

SYNNEX CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS

(currency and share amounts in thousands, except per share amounts)

(unaudited)

 

 

 

Three Months Ended

 

 

 

 

February 29, 2020

 

 

February 28, 2019

 

 

Revenue:

 

 

 

 

 

 

 

 

 

Products

 

$

4,081,024

 

 

$

4,080,684

 

 

Services

 

 

1,183,173

 

 

 

1,168,769

 

 

Total revenue

 

 

5,264,198

 

 

 

5,249,453

 

 

Cost of revenue:

 

 

 

 

 

 

 

 

 

Products

 

 

(3,825,920

)

 

 

(3,833,117

)

 

Services

 

 

(739,934

)

 

 

(737,415

)

 

Gross profit

 

 

698,345

 

 

 

678,921

 

 

Selling, general and administrative expenses

 

 

(509,690

)

 

 

(516,958

)

 

Operating income

 

 

188,655

 

 

 

161,963

 

 

Interest expense and finance charges, net

 

 

(36,376

)

 

 

(41,606

)

 

Other income (expense), net

 

 

2,380

 

 

 

(695

)

 

Income before income taxes

 

 

154,659

 

 

 

119,662

 

 

Provision for income taxes

 

 

(32,075

)

 

 

(32,556

)

 

Net income

 

$

122,584

 

 

$

87,106

 

 

Earnings per common share:

 

 

 

 

 

 

 

 

 

Basic

 

$

2.38

 

 

$

1.70

 

 

Diluted

 

$

2.36

 

 

$

1.69

 

 

Weighted-average common shares outstanding:

 

 

 

 

 

 

 

 

 

Basic

 

 

50,815

 

 

 

50,706

 

 

Diluted

 

 

51,232

 

 

 

50,927

 

 

 

(Amounts may not add due to rounding)

The accompanying Notes are an integral part of these Consolidated Financial Statements (unaudited).

4


Table of Contents

 

SYNNEX CORPORATION

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(currency in thousands)

(unaudited)

 

 

 

Three Months Ended

 

 

 

February 29, 2020

 

 

February 28, 2019

 

Net income

 

$

122,584

 

 

$

87,106

 

Other comprehensive income (loss):

 

 

 

 

 

 

 

 

Change in unrealized gains (losses) of defined benefit plans, net of taxes of $0 and $8 for the three months ended February 29, 2020 and February 28, 2019, respectively

 

 

217

 

 

 

307

 

Unrealized gains (losses) on cash flow hedges during the period, net of taxes of $9,963 and $5,595 for the three months ended February 29, 2020 and February 28, 2019, respectively

 

 

(24,984

)

 

 

(17,016

)

Reclassification of net (gains) losses on cash flow hedges to net income, net of tax expense (benefit) of $347 and $888 for the three months ended February 29, 2020 and February 28, 2019, respectively

 

 

(1,194

)

 

 

(2,550

)

Total change in unrealized gains (losses) on cash flow hedges, net of taxes

 

 

(26,178

)

 

 

(19,566

)

Foreign currency translation adjustments, net of taxes of $(146) and $(198) for the three months ended February 29, 2020 and February 28, 2019, respectively

 

 

(18,919

)

 

 

20,103

 

Other comprehensive income (loss)

 

 

(44,880

)

 

 

844

 

Comprehensive income

 

$

77,704

 

 

$

87,950

 

 

(Amounts may not add due to rounding)

The accompanying Notes are an integral part of these Consolidated Financial Statements (unaudited).

5


Table of Contents

 

SYNNEX CORPORATION

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(currency in thousands, except per share amounts)

(unaudited)

 

 

 

Three Months Ended

 

 

 

February 29, 2020

 

 

February 28, 2019

 

Total Stockholders' equity, beginning balance

 

$

3,788,450

 

 

$

3,435,054

 

 

 

 

 

 

 

 

 

 

Common stock and additional paid-in capital:

 

 

 

 

 

 

 

 

Beginning balance

 

 

1,545,474

 

 

 

1,512,254

 

Share-based compensation

 

 

8,789

 

 

 

6,607

 

Common stock issued for employee benefit plans

 

 

3,963

 

 

 

822

 

Stock issuance costs (related to the Convergys acquisition in fiscal year 2018)

 

 

 

 

 

(107

)

Ending balance

 

 

1,558,226

 

 

 

1,519,576

 

 

 

 

 

 

 

 

 

 

Treasury stock:

 

 

 

 

 

 

 

 

Beginning balance

 

 

(172,627

)

 

 

(149,533

)

Repurchases of common stock for tax withholdings on equity awards

 

 

(2,480

)

 

 

(709

)

Ending balance

 

 

(175,107

)

 

 

(150,242

)

 

 

 

 

 

 

 

 

 

Retained earnings:

 

 

 

 

 

 

 

 

Beginning balance

 

 

2,624,680

 

 

 

2,198,621

 

Net income

 

 

122,584

 

 

 

87,106

 

Cash dividends declared

 

 

(20,740

)

 

 

(19,174

)

Cumulative effect of changes in accounting principles

 

 

 

 

 

1,955

 

Ending balance

 

 

2,726,525

 

 

 

2,268,508

 

 

 

 

 

 

 

 

 

 

Accumulated other comprehensive income (loss):

 

 

 

 

 

 

 

 

Beginning balance

 

 

(209,077

)

 

 

(126,288

)

Other comprehensive income (loss)

 

 

(44,880

)

 

 

844

 

Cumulative effect of changes in accounting principles

 

 

 

 

 

(1,955

)

Ending balance

 

 

(253,957

)

 

 

(127,399

)

 

 

 

 

 

 

 

 

 

Total stockholders' equity, ending balance

 

$

3,855,688

 

 

$

3,510,442

 

 

 

 

 

 

 

 

 

 

Cash dividends declared per share

 

$

0.400

 

 

$

0.375

 

 

(Amounts may not add due to rounding)

The accompanying Notes are an integral part of these Consolidated Financial Statements (unaudited).

6


Table of Contents

 

SYNNEX CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

(currency in thousands)

(unaudited)

 

 

 

Three Months Ended

 

 

 

February 29, 2020

 

 

February 28, 2019

 

Cash flows from operating activities:

 

 

 

 

 

 

 

 

Net income

 

$

122,584

 

 

$

87,106

 

Adjustments to reconcile net income to net cash provided by (used in) operating activities:

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

84,858

 

 

 

94,374

 

Share-based compensation

 

 

8,789

 

 

 

6,607

 

Provision for doubtful accounts

 

 

4,594

 

 

 

6,961

 

Deferred income taxes

 

 

(7,131

)

 

 

(10,129

)

Unrealized foreign exchange (gains) losses

 

 

(2,945

)

 

 

1,322

 

Other

 

 

2,846

 

 

 

6,736

 

Changes in operating assets and liabilities, net of acquisition of businesses:

 

 

 

 

 

 

 

 

Accounts receivable, net

 

 

619,254

 

 

 

487,937

 

Receivables from vendors, net

 

 

67,600

 

 

 

86,579

 

Inventories

 

 

(162,772

)

 

 

(32,914

)

Accounts payable

 

 

(613,821

)

 

 

(875,761

)

Other operating assets and liabilities

 

 

(65,717

)

 

 

(17,119

)

Net cash provided by (used in) operating activities

 

 

58,141

 

 

 

(158,300

)

Cash flows from investing activities:

 

 

 

 

 

 

 

 

Purchases of property and equipment

 

 

(51,900

)

 

 

(28,800

)

Acquisition of businesses, net of refunds

 

 

 

 

 

(1,846

)

Other

 

 

(2,403

)

 

 

1,141

 

Net cash used in investing activities

 

 

(54,304

)

 

 

(29,505

)

Cash flows from financing activities:

 

 

 

 

 

 

 

 

Proceeds from borrowings

 

 

2,091,077

 

 

 

1,951,059

 

Repayments of borrowings

 

 

(2,002,975

)

 

 

(1,964,353

)

Dividends paid

 

 

(20,740

)

 

 

(19,174

)

Increase (decrease) in book overdraft

 

 

(1,278

)

 

 

5,375

 

Proceeds from issuance of common stock

 

 

3,963

 

 

 

822

 

Repurchases of common stock for tax withholdings on equity awards

 

 

(2,480

)

 

 

(709

)

Other

 

 

 

 

 

(107

)

Net cash provided by (used in) financing activities

 

 

67,567

 

 

 

(27,087

)

Effect of exchange rate changes on cash, cash equivalents and restricted cash

 

 

(1,300

)

 

 

2,390

 

Net increase (decrease) in cash, cash equivalents and restricted cash

 

 

70,104

 

 

 

(212,502

)

Cash, cash equivalents and restricted cash at beginning of period

 

 

231,149

 

 

 

462,033

 

Cash, cash equivalents and restricted cash at end of period

 

$

301,256

 

 

$

249,531

 

Supplemental disclosure of non-cash investing activities:

 

 

 

 

 

 

 

 

Accrued costs for property and equipment purchases

 

$

6,262

 

 

$

5,066

 

 

(Amounts may not add due to rounding)

The accompanying Notes are an integral part of these Consolidated Financial Statements (unaudited).

 

 

 

7


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SYNNEX CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the three months ended February 29, 2020 and February 28, 2019

(currency and share amounts in thousands, except per share amounts)

(unaudited)

NOTE 1—ORGANIZATION AND BASIS OF PRESENTATION:  

SYNNEX Corporation (together with its subsidiaries, herein referred to as “SYNNEX” or the “Company”) is a business process services company headquartered in Fremont, California and has operations in North and South America, Asia-Pacific, Europe and Africa.

The Company has two reportable segments: Technology Solutions and Concentrix. The Technology Solutions segment distributes a broad range of information technology (“IT”) systems and products and also provides systems design and integration solutions. The Concentrix segment offers a portfolio of technology-infused strategic solutions and end-to-end global business outsourcing services focused on customer experience, process optimization, technology innovation, front and back-office automation and business transformation to clients in five primary industry verticals.

On January 9, 2020, the Company announced a plan to separate its Concentrix segment into an independent publicly-traded company. Refer to Note 16 for further details on the current status of this plan due to the impact of the COVID-19 pandemic.  

The accompanying interim unaudited Consolidated Financial Statements as of February 29, 2020 and for the three months ended February 29, 2020 and February 28, 2019 have been prepared by the Company in accordance with the rules and regulations of the Securities and Exchange Commission (“SEC”). The amounts as of November 30, 2019 have been derived from the Company’s annual audited financial statements. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles (“GAAP”) in the United States have been condensed or omitted in accordance with such rules and regulations. In the opinion of management, the accompanying unaudited Consolidated Financial Statements reflect all adjustments, consisting only of normal recurring adjustments, necessary to state fairly the financial position of the Company and its results of operations and cash flows as of and for the periods presented. These financial statements should be read in conjunction with the annual audited financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended November 30, 2019.

Interim results of operations are not necessarily indicative of financial results for a full year, and the Company makes no representations related thereto. Certain columns and rows may not add due to the use of rounded numbers.

NOTE 2—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:  

For a discussion of the Company’s significant accounting policies, refer to the discussion in the Company’s Annual Report on Form 10-K for the fiscal year ended November 30, 2019. Accounting pronouncements adopted during the three months ended February 29, 2020 are discussed below.

Concentration of credit risk

Financial instruments that potentially subject the Company to significant concentration of credit risk consist principally of cash and cash equivalents, accounts receivable, receivables from vendors and derivative instruments.

The Company’s cash and cash equivalents and derivative instruments are transacted and maintained with financial institutions with high credit standing, and their compositions and maturities are regularly monitored by management. Through February 29, 2020, the Company has not experienced any credit losses on such deposits and derivative instruments.  

Accounts receivable include amounts due from customers, including related party customers. Receivables from vendors, net, includes amounts due from original equipment manufacturer (“OEM”) vendors primarily in the technology industry. The Company performs ongoing credit evaluations of its customers’ financial condition and limits the amount of credit extended when deemed necessary, but generally requires no collateral. The Company also maintains allowances for potential credit losses. In estimating the required allowances, the Company takes into consideration the overall quality and aging of its receivable portfolio, the existence of a limited amount of credit insurance and specifically identified customer and vendor risks. Through February 29, 2020, such losses have been within management’s expectations.  

One customer accounted for 15% and 17% of the Company’s total revenue during the three months ended February 29, 2020 and February 28, 2019, respectively. Products purchased from the Company’s largest OEM supplier, HP Inc., accounted for approximately 11% of total revenue during both the three months ended February 29, 2020 and February 28, 2019.

As of both February 29, 2020 and November 30, 2019, one customer comprised 19% of the consolidated accounts receivable balance.

Inventories

Inventories are stated at the lower of cost and net realizable value. Cost is computed based on the weighted-average method. Inventories are comprised of finished goods and work-in-process. Finished goods include products purchased for resale, system components purchased for both resale and for use in the Company’s systems design and integration business and completed systems. Work-in-process inventories are not material to the Consolidated Financial Statements.

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SYNNEX CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(continued)

For the three months ended February 29, 2020 and February 28, 2019

(currency and share amounts in thousands, except per share amounts)

(unaudited)

 

Leases

The Company enters into leases as a lessee for property and equipment in the ordinary course of business. When procuring goods or services, or upon entering into a contract with its customers and clients, the company determines whether an arrangement contains a lease at its inception. As part of that evaluation, the Company considers whether there is an implicitly or explicitly identified asset in the arrangement and whether the company, as the lessee, or the client, if the company is the lessor, has the right to control the use of that asset. Effective December 1, 2019, when the Company is the lessee, all leases with a term of more than 12 months are recognized as right-of-use (“ROU”) assets and associated lease liabilities in the Consolidated Balance Sheet. Lease liabilities are measured at the lease commencement date and determined using the present value of the lease payments not yet paid, at the Company’s incremental borrowing rate, which approximates the rate at which the Company would borrow on a secured basis in the country where the lease was executed. The interest rate implicit in the lease is generally not determinable in transactions where the Company is the lessee. The ROU asset equals the lease liability adjusted for any initial direct costs, prepaid rent and lease incentives. The Company’s variable lease payments generally relate to payments tied to various indexes, non-lease components and payments above a contractual minimum fixed amount.

Operating leases are included in other assets, net, other accrued liabilities and other long-term liabilities in the Consolidated Balance Sheet. Finance leases are included in property and equipment, net, borrowings, current and long-term borrowings in the Consolidated Balance Sheet. Substantially all of the Company's leases are classified as operating leases. The lease term includes options to extend or terminate the lease when it is reasonably certain that the company will exercise that option. The Company made a policy election to not recognize leases with a lease term of 12 months or less in the Consolidated Balance Sheet. Lease expenses are recorded within selling, general, and administrative expenses in the Consolidated Statements of Operations. Operating lease payments are presented within “Cash flows from operating activities” in the Consolidated Statements of Cash Flows.

For all asset classes, the Company has elected the lessee practical expedient to combine lease and non-lease components (e.g., maintenance services) and account for the combined unit as a single lease component. Variable lease payments are recognized in the period in which the obligation for those payments is incurred.

Recently adopted accounting pronouncements

In February 2018, the FASB issued guidance that permits the Company to reclassify disproportionate tax effects in accumulated other comprehensive income caused by the Tax Cuts and Jobs Act of 2017 to retained earnings. The guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018, with early adoption permitted. The adoption of this new guidance did not have a material impact on the Company’s Consolidated Financial Statements.

In February 2016, the FASB issued a new standard which revises various aspects of accounting for leases, with amendments in 2018 and 2019 codified as Accounting Standards Codification Topic 842, Leases (“ASC Topic 842”). The Company adopted the guidance effective December 1, 2019, applying the optional transition method, which allows an entity to apply the new standard at the adoption date with a cumulative effect adjustment to the opening balance of retained earnings in the period of adoption. In addition, the Company elected the package of practical expedients not to reassess prior conclusions related to contracts containing leases, lease classification and initial direct costs and the lessee practical expedient to combine lease and non-lease components for all asset classes. The Company made a policy election to not recognize ROU assets and lease liabilities for short-term leases for all asset classes. The most significant impact of adoption to the Company’s Consolidated Financial Statements relates to the recognition of a right-of-use asset and a lease liability for virtually all of its leases other than short-term leases. The liability was equal to the present value of lease payments. The asset is based on the liability, and subject to adjustment, such as for initial direct costs. The recognition, measurement, and presentation of expenses and cash flows arising from a lease by a lessee primarily will depend on its classification. For income statement purposes, operating leases will result in a straight-line expense while finance leases will result in a front-loaded expense pattern. Upon adoption, the Company recorded $591,129 of ROU assets and of $642,567 of liabilities relating to its operating leases on its Consolidated Balance Sheet. The adoption did not have an impact on the Company’s consolidated statements of operations or its consolidated statements of cash flows.  

 

Recently issued accounting pronouncements  

In March 2020, the Financial Accounting Standard Board (the “FASB”) issued optional guidance for a limited time to ease the potential burden in accounting for or recognizing the effects of reference rate reform, particularly, the risk of cessation of the London Interbank Offered Rate (“LIBOR”) on financial reporting. The guidance provides optional expedients and exceptions for applying GAAP to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met. The amendments are elective and are effective upon issuance for all entities through December 31, 2022. The Company is currently evaluating the impact of the new guidance.

In December 2019, the FASB issued new guidance that simplifies the accounting for income taxes. The guidance is effective for annual reporting periods beginning after December 15, 2020, and interim periods within those reporting periods. Certain amendments should be applied prospectively, while other amendments should be applied retrospectively to all periods presented. The Company is currently evaluating the impact of the new guidance.

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SYNNEX CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(continued)

For the three months ended February 29, 2020 and February 28, 2019

(currency and share amounts in thousands, except per share amounts)

(unaudited)

 

In August 2018, the FASB issued new guidance to add, remove, and clarify disclosure requirements related to defined benefit pension and other postretirement plans. The amendment requires the Company to disclose the weighted-average interest crediting rates used in cash balance pension plans. It also requires the Company to disclose the reasons for significant changes in the benefit obligation or plan assets including significant gains and losses affecting the benefit obligation for the period. This standard is effective for fiscal years ending after December 15, 2020, and early adoption is permitted. The adoption is not expected to have a material impact on the Company's Consolidated Financial Statements.

In August 2018, the FASB issued guidance to improve the effectiveness of fair value measurement disclosures by removing or modifying certain disclosure requirements and adding other requirements. The guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019, with early adoption permitted. Certain amendments should be applied prospectively, while all other amendments should be applied retrospectively to all periods presented. The Company is currently evaluating the impact of the new guidance.

In June 2016, the FASB issued a new credit loss standard that replaces the incurred loss impairment methodology in current GAAP. The new impairment model requires immediate recognition of estimated credit losses expected to occur for most financial assets and certain other instruments. It is effective for annual reporting periods beginning after December 15, 2019 and interim periods within those annual periods. Early adoption for fiscal years beginning after December 15, 2018 is permitted. Entities will apply the standard’s provisions as a cumulative-effect adjustment to retained earnings as of the beginning of the first effective reporting period. The Company is currently evaluating the impact of the new guidance.

   

NOTE 3—SHARE-BASED COMPENSATION:  

The Company recognizes share-based compensation expense for all share-based awards made to employees and directors, including employee stock options, restricted stock awards, restricted stock units, performance-based restricted stock units and employee stock purchases, based on estimated fair values.

The following table summarizes the number of share-based awards granted under the Company’s 2013 Stock Incentive Plan, as amended, during the three months ended February 29, 2020 and February 28, 2019, and the measurement-date fair value of those awards:

 

 

 

Three Months Ended

 

 

 

February 29, 2020

 

 

February 28, 2019

 

 

 

Shares

awarded

 

 

Fair value

of grants

 

 

Shares

awarded

 

 

Fair value

of grants

 

Stock options

 

 

 

 

$

 

 

 

17

 

 

$

500

 

Restricted stock awards

 

 

6

 

 

 

844

 

 

 

10

 

 

 

955

 

Restricted stock units

 

 

0

 

*

 

25

 

 

 

51

 

 

 

4,765

 

 

 

 

6

 

 

$

869

 

 

 

78

 

 

$

6,220

 

* Less than a thousand units.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The Company recorded share-based compensation expense in the Consolidated Statements of Operations for the three months ended February 29, 2020 and February 28, 2019 as follows:

 

 

 

Three Months Ended

 

 

 

 

February 29, 2020

 

 

February 28, 2019

 

 

Total share-based compensation (recorded in selling, general and

   administrative expenses)

 

$

8,861

 

 

$

6,651

 

 

Tax benefit recorded in the provision for income taxes