Company Quick10K Filing
Quick10K
Synnex
Closing Price ($) Shares Out (MM) Market Cap ($MM)
$107.36 51 $5,500
10-Q 2019-02-28 Quarter: 2019-02-28
10-K 2018-11-30 Annual: 2018-11-30
10-Q 2018-08-31 Quarter: 2018-08-31
10-Q 2018-05-31 Quarter: 2018-05-31
10-Q 2018-02-28 Quarter: 2018-02-28
10-K 2017-11-30 Annual: 2017-11-30
10-Q 2017-08-31 Quarter: 2017-08-31
10-Q 2017-05-31 Quarter: 2017-05-31
10-Q 2017-02-28 Quarter: 2017-02-28
10-K 2016-11-30 Annual: 2016-11-30
10-Q 2016-08-31 Quarter: 2016-08-31
10-Q 2016-05-31 Quarter: 2016-05-31
10-Q 2016-02-29 Quarter: 2016-02-29
10-K 2015-11-30 Annual: 2015-11-30
10-Q 2015-08-31 Quarter: 2015-08-31
10-Q 2015-05-31 Quarter: 2015-05-31
10-Q 2015-02-28 Quarter: 2015-02-28
10-K 2014-11-30 Annual: 2014-11-30
10-Q 2014-08-31 Quarter: 2014-08-31
10-Q 2014-05-31 Quarter: 2014-05-31
10-Q 2014-02-28 Quarter: 2014-02-28
10-K 2013-11-30 Annual: 2013-11-30
8-K 2019-04-11 Officers, Exhibits
8-K 2019-03-15 Shareholder Vote
8-K 2019-02-01 Officers
8-K 2019-01-10 Earnings, Exhibits
8-K 2019-01-09 Other Events
8-K 2018-12-10 Earnings, Exhibits
8-K 2018-10-05 M&A, Off-BS Arrangement, Other Events, Exhibits
8-K 2018-10-05 Officers
8-K 2018-10-05 M&A, Off-BS Arrangement, Other Events, Exhibits
8-K 2018-10-03 Earnings, Shareholder Vote, Other Events, Exhibits
8-K 2018-09-25 Other Events, Exhibits
8-K 2018-09-25 Other Events, Exhibits
8-K 2018-08-09 Enter Agreement, Leave Agreement, Off-BS Arrangement, Other Events, Exhibits
8-K 2018-08-07 Enter Agreement, Off-BS Arrangement, Other Events, Exhibits
8-K 2018-06-28 Other Events, Exhibits
8-K 2018-06-28 Enter Agreement, Other Events, Exhibits
8-K 2018-06-28 Earnings, Exhibits
8-K 2018-06-28 Enter Agreement, Other Events, Exhibits
8-K 2018-05-07 Enter Agreement, Off-BS Arrangement, Exhibits
8-K 2018-03-29 Earnings, Exhibits
8-K 2018-03-20 Shareholder Vote
8-K 2018-02-14 Officers
8-K 2018-01-04 Earnings, Officers, Other Events, Exhibits
APLE Apple Hospitality REIT 3,690
ANAB Anaptysbio 2,090
RMAX RE/MAX 720
SOHU Sohu.com Limited 593
NHTC Natural Health Trends 137
VIVE Viveve Medical 27
USAQ USA Equities 0
ELRA Elray Resources 0
VCBD Vitalibis 0
ENJ Entergy New Orleans 0
SNX 2019-02-28
Part I - Financial Information
Item 1. Financial Statements
Note 1-Organization and Basis of Presentation:
Note 2-Summary of Significant Accounting Policies:
Note 3-Revenue From Contracts with Customers:
Note 4-Acquisition:
Note 5-Share-Based Compensation:
Note 6-Balance Sheet Components:
Note 7-Investments:
Note 8-Derivative Instruments:
Note 9-Fair Value Measurements:
Note 10-Accounts Receivable Arrangements:
Note 11-Borrowings:
Note 12-Earnings per Common Share:
Note 13-Segment Information:
Note 14-Related Party Transactions:
Note 15-Pension and Employee Benefits Plans:
Note 16-Equity:
Note 17-Commitments and Contingencies:
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_236.htm
EX-31.1 snx-ex311_10.htm
EX-31.2 snx-ex312_9.htm
EX-32.1 snx-ex321_8.htm

Synnex Earnings 2019-02-28

SNX 10Q Quarterly Report

Balance SheetIncome StatementCash Flow

10-Q 1 snx-10q_20190228.htm 10-Q snx-10q_20190228.htm

Table of Contents

 

 

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 28, 2019

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)

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 April 2, 2019

Common Stock, $0.001 par value

 

51,219,234

 

 

 


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 28, 2019 and November 30, 2018

3

 

Consolidated Statements of Operations (unaudited) for the Three Months Ended February 28, 2019 and 2018

4

 

Consolidated Statements of Comprehensive Income (unaudited) for the Three Months Ended February 28, 2019 and 2018

5

 

Consolidated Statements of Stockholders’ Equity (unaudited) for the Three Months Ended February 28, 2019 and 2018

6

 

Consolidated Statements of Cash Flows (unaudited) for the Three Months Ended February 28, 2019 and 2018

7

 

Notes to the Consolidated Financial Statements (unaudited)

8

Item 2.

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

28

Item 3.

Quantitative and Qualitative Disclosures about Market Risk

39

Item 4.

Controls and Procedures

39

 

 

 

PART II

OTHER INFORMATION

40

Item 1A.

Risk Factors

40

Item 6.

Exhibits

41

Signatures

 

42

 

2

 


Table of Contents

 

PART I - FINANCIAL INFORMATION

ITEM 1. Financial Statements

SYNNEX CORPORATION  

CONSOLIDATED BALANCE SHEETS

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

(unaudited)

 

 

 

February 28, 2019

 

 

November 30, 2018

 

 

 

 

 

 

 

(As adjusted)

 

ASSETS

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

249,301

 

 

$

461,820

 

Accounts receivable, net

 

 

3,167,301

 

 

 

3,640,496

 

Receivables from vendors, net

 

 

264,660

 

 

 

351,744

 

Inventories

 

 

2,430,392

 

 

 

2,392,559

 

Other current assets

 

 

317,500

 

 

 

316,197

 

Total current assets

 

 

6,429,154

 

 

 

7,162,817

 

Property and equipment, net

 

 

568,549

 

 

 

571,326

 

Goodwill

 

 

2,201,650

 

 

 

2,203,316

 

Intangible assets, net

 

 

1,328,801

 

 

 

1,377,305

 

Deferred tax assets

 

 

79,063

 

 

 

76,508

 

Other assets

 

 

154,119

 

 

 

152,227

 

Total assets

 

$

10,761,335

 

 

$

11,543,498

 

 

 

 

 

 

 

 

 

 

LIABILITIES AND EQUITY

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Borrowings, current

 

$

701,083

 

 

$

833,216

 

Accounts payable

 

 

2,187,706

 

 

 

3,048,102

 

Accrued compensation and benefits

 

 

320,023

 

 

 

358,352

 

Other accrued liabilities

 

 

606,678

 

 

 

672,635

 

Income taxes payable

 

 

64,989

 

 

 

41,322

 

Total current liabilities

 

 

3,880,479

 

 

 

4,953,627

 

Long-term borrowings

 

 

2,827,616

 

 

 

2,622,782

 

Other long-term liabilities

 

 

346,640

 

 

 

325,119

 

Deferred tax liabilities

 

 

196,160

 

 

 

206,916

 

Total liabilities

 

 

7,250,894

 

 

 

8,108,444

 

Commitments and contingencies (Note 17-Commitments and Contingencies)

 

 

 

 

 

 

 

 

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, 52,895 and 52,861 shares

   issued as of February 28, 2019 and November 30, 2018, respectively

 

 

53

 

 

 

53

 

Additional paid-in capital

 

 

1,519,523

 

 

 

1,512,201

 

Treasury stock, 2,175 and 2,167 shares as of February 28, 2019 and November 30, 2018,

   respectively

 

 

(150,242

)

 

 

(149,533

)

Accumulated other comprehensive income (loss)

 

 

(127,399

)

 

 

(126,288

)

Retained earnings

 

 

2,268,508

 

 

 

2,198,621

 

Total stockholders’ equity

 

 

3,510,442

 

 

 

3,435,054

 

Total liabilities and equity

 

$

10,761,335

 

 

$

11,543,498

 

 

(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 for per share amounts)

(unaudited)

 

 

 

Three Months Ended

 

 

 

February 28, 2019

 

 

February 28, 2018

 

 

 

 

 

 

 

(As adjusted)

 

Revenue:

 

 

 

 

 

 

 

 

Products

 

$

4,080,684

 

 

$

3,989,743

 

Services

 

 

1,168,769

 

 

 

503,607

 

Total revenue

 

 

5,249,453

 

 

 

4,493,350

 

Cost of revenue:

 

 

 

 

 

 

 

 

Products

 

 

(3,833,117

)

 

 

(3,765,512

)

Services

 

 

(737,415

)

 

 

(314,323

)

Gross profit

 

 

678,921

 

 

 

413,515

 

Selling, general and administrative expenses

 

 

(516,958

)

 

 

(302,019

)

Operating income

 

 

161,963

 

 

 

111,496

 

Interest expense and finance charges, net

 

 

(41,606

)

 

 

(17,451

)

Other income (expense), net

 

 

(695

)

 

 

(1,178

)

Income before income taxes

 

 

119,662

 

 

 

92,867

 

Provision for income taxes

 

 

(32,556

)

 

 

(68,769

)

Net income

 

$

87,106

 

 

$

24,098

 

Earnings per common share:

 

 

 

 

 

 

 

 

Basic

 

$

1.70

 

 

$

0.60

 

Diluted

 

$

1.69

 

 

$

0.60

 

Weighted-average common shares outstanding:

 

 

 

 

 

 

 

 

Basic

 

 

50,706

 

 

 

39,695

 

Diluted

 

 

50,927

 

 

 

39,978

 

 

(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 28, 2019

 

 

February 28, 2018

 

 

 

 

 

 

 

(As adjusted)

 

Net income

 

$

87,106

 

 

$

24,098

 

Other comprehensive income (loss):

 

 

 

 

 

 

 

 

Unrealized gains (losses) on available-for-sale securities, net of taxes of $0 for both the

   three months ended February 28,2019 and 2018

 

 

33

 

 

 

(142

)

Change in unrealized gains of defined benefit plans, net of taxes of $8 and $0 for the

   three months ended February 28, 2019 and 2018, respectively

 

 

307

 

 

 

 

Unrealized (losses) gains on cash flow hedges during the period, net of taxes of $5,595

   and $(1,914) for the three months ended February 28, 2019 and 2018, respectively

 

 

(17,016

)

 

 

5,386

 

Reclassification of net (gains) losses to net income, net of taxes of $888 and $(63) for

   the three months ended February 28, 2019 and 2018, respectively

 

 

(2,550

)

 

 

177

 

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

 

 

(19,566

)

 

 

5,563

 

Foreign currency translation adjustments, net of taxes of $(198) and $(23) for the three

   months ended February 28, 2019 and 2018, respectively

 

 

20,070

 

 

 

10,797

 

Other comprehensive income

 

 

844

 

 

 

16,218

 

Comprehensive income

 

$

87,950

 

 

$

40,316

 

 

(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)

(unaudited)

 

 

 

Three Months Ended

 

 

 

February 28, 2019

 

 

February 28, 2018

 

 

 

 

 

 

 

(As adjusted)

 

Total Stockholders' equity, beginning balance

 

$

3,435,054

 

 

$

2,287,297

 

 

 

 

 

 

 

 

 

 

Common stock and additional paid-in capital:

 

 

 

 

 

 

 

 

Beginning balance

 

 

1,512,254

 

 

 

467,989

 

Share-based compensation

 

 

6,607

 

 

 

5,101

 

Common stock issued for employee benefit plans

 

 

822

 

 

 

1,604

 

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

 

 

(107

)

 

 

 

Ending balance

 

 

1,519,576

 

 

 

474,694

 

 

 

 

 

 

 

 

 

 

Treasury stock:

 

 

 

 

 

 

 

 

Beginning balance

 

 

(149,533

)

 

 

(77,133

)

Repurchases of common stock for tax withholdings on equity awards

 

 

(709

)

 

 

(1,488

)

Repurchases of common stock

 

 

 

 

 

(154

)

Ending balance

 

 

(150,242

)

 

 

(78,775

)

 

 

 

 

 

 

 

 

 

Retained earnings:

 

 

 

 

 

 

 

 

Beginning balance

 

 

2,198,621

 

 

 

1,958,360

 

Net income

 

 

87,106

 

 

 

24,098

 

Cash dividends declared

 

 

(19,174

)

 

 

(13,971

)

Cumulative effect of changes in accounting principles

 

 

1,955

 

 

 

 

Ending balance

 

 

2,268,508

 

 

 

1,968,487

 

 

 

 

 

 

 

 

 

 

Accumulated other comprehensive income (loss):

 

 

 

 

 

 

 

 

Beginning balance

 

 

(126,288

)

 

 

(61,919

)

Other comprehensive income (loss)

 

 

844

 

 

 

16,218

 

Cumulative effect of changes in accounting principles

 

 

(1,955

)

 

 

 

Ending balance

 

 

(127,399

)

 

 

(45,701

)

 

 

 

 

 

 

 

 

 

Total stockholders' equity, ending balance

 

$

3,510,442

 

 

$

2,318,705

 

 

 

 

 

 

 

 

 

 

Cash dividends declared per share

 

$

0.375

 

 

$

0.350

 

 

(Amounts may not add due to rounding)

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

6

 


Table of Contents

 

SYNNEX CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

(currency in thousands)

(unaudited)

 

 

 

Three Months Ended

 

 

 

February 28, 2019

 

 

February 28, 2018

 

 

 

 

 

 

 

(As adjusted)

 

Cash flows from operating activities:

 

 

 

 

 

 

 

 

Net income

 

$

87,106

 

 

$

24,098

 

Adjustments to reconcile net income to net cash used in operating activities:

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

94,374

 

 

 

48,634

 

Share-based compensation

 

 

6,607

 

 

 

5,101

 

Provision for doubtful accounts

 

 

6,961

 

 

 

3,336

 

Deferred income taxes

 

 

(10,129

)

 

 

(26,023

)

Unrealized foreign exchange (gains) losses

 

 

1,322

 

 

 

(659

)

Other

 

 

6,736

 

 

 

562

 

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

 

 

 

 

 

 

 

 

Accounts receivable, net

 

 

487,937

 

 

 

196,978

 

Receivables from vendors, net

 

 

86,579

 

 

 

25,338

 

Inventories

 

 

(32,914

)

 

 

(139,642

)

Accounts payable

 

 

(875,761

)

 

 

(200,127

)

Other operating assets and liabilities

 

 

(17,119

)

 

 

56,730

 

Net cash used in operating activities

 

 

(158,300

)

 

 

(5,674

)

Cash flows from investing activities:

 

 

 

 

 

 

 

 

Purchases of property and equipment

 

 

(28,800

)

 

 

(22,360

)

Acquisition of businesses, net of refunds

 

 

(1,846

)

 

 

(5,922

)

Other

 

 

1,141

 

 

 

410

 

Net cash used in investing activities

 

 

(29,505

)

 

 

(27,872

)

Cash flows from financing activities:

 

 

 

 

 

 

 

 

Proceeds from borrowings

 

 

1,951,059

 

 

 

2,602,591

 

Repayments of borrowings

 

 

(1,964,353

)

 

 

(2,742,055

)

Dividends paid

 

 

(19,174

)

 

 

(13,971

)

Increase in book overdraft

 

 

5,375

 

 

 

7,081

 

Proceeds from issuance of common stock

 

 

822

 

 

 

1,604

 

Repurchases of common stock for tax withholdings on equity awards

 

 

(709

)

 

 

(1,488

)

Other

 

 

(107

)

 

 

(154

)

Net cash used in financing activities

 

 

(27,087

)

 

 

(146,392

)

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

 

 

2,390

 

 

 

1,401

 

Net decrease in cash, cash equivalents and restricted cash

 

 

(212,502

)

 

 

(178,537

)

Cash, cash equivalents and restricted cash at beginning of period

 

 

462,033

 

 

 

556,742

 

Cash, cash equivalents and restricted cash at end of period

 

$

249,531

 

 

$

378,205

 

Supplemental disclosure of non-cash investing activities:

 

 

 

 

 

 

 

 

Accrued costs for property and equipment purchases

 

$

5,066

 

 

$

1,998

 

 

(Amounts may not add due to rounding)

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

 

 

 

7

 


Table of Contents

 

SYNNEX CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the three months ended February 28, 2019 and 2018

(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-enabled strategic solutions and end-to-end global business outsourcing services focused on customer engagement, process optimization, technology innovation, front and back-office automation and business transformation to clients in ten industry verticals.

The accompanying interim unaudited Consolidated Financial Statements as of February 28, 2019 and for the three months ended February 28, 2019 and 2018 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, 2018 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, 2018.

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, 2018. Accounting pronouncements adopted during the three months ended February 28, 2019 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 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 28, 2019, the Company had not experienced any credit losses on such deposits and derivative instruments.  

Accounts receivable include amounts due from customers, including related party customers. Receivable 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 the receivable portfolio, the existence of a limited amount of credit insurance and specifically identified customer and vendor risks. Through February 28, 2019, such losses have been within management’s expectations.  

One customer accounted for 17% and 18% (as adjusted) of the Company's total revenue during the three months ended February 28, 2019 and 2018, respectively. Products purchased from the Company’s largest OEM supplier, HP Inc., accounted for approximately 11% and 13% (as adjusted) of total revenue during the three months ended February 28, 2019 and 2018, respectively.

As of February 28, 2019 and November 30, 2018, one customer comprised 13% and 11% (as adjusted), respectively, of the total 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.

8


Table of Contents

 

SYNNEX CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(continued)

For the three months ended February 28, 2019 and 2018

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

(unaudited)

 

Reclassifications

Certain reclassifications have been made to prior period amounts in the Consolidated Balance Sheets, the Consolidated Statements of Cash Flows and the notes thereto to conform to current period presentation. These reclassifications had no effect on total current assets, total assets, total current liabilities, total liabilities or cash flows from operating, investing or financing activities as previously reported. Refer below for impact of reclassifications due to adoption of new accounting pronouncements.

Recently adopted accounting pronouncements

In June 2018, the Financial Accounting Standard Board (the “FASB”) issued new guidance which simplifies the accounting for share-based compensation issued to non-employees by making the guidance substantially the same as the accounting for employee share-based compensation. The Company adopted the guidance during the three months ended February 28, 2019. The guidance did not have a material impact on the Company’s consolidated financial results for the three months ended February 28, 2019, nor is it likely to have a material impact for the remainder of the fiscal year.

In January 2016, the FASB issued new guidance which amends various aspects of the recognition, measurement, presentation, and disclosure of financial instruments. With respect to the Company’s consolidated financial statements, the most significant impact relates to the accounting for equity investments (other than those that are consolidated or accounted under the equity method) which will be measured at fair value through earnings. The Company adopted the guidance as of December 1, 2018, by means of a cumulative-effect adjustment to the balance sheet, with other amendments related specifically to equity securities without readily determinable fair values applied prospectively. This resulted in a reclassification of net unrealized gains of $1,955 from accumulated other comprehensive income (loss) (“AOCI”) to opening retained earnings. The Company has elected to use the measurement alternative for non-marketable equity securities, defined as cost adjusted for changes from observable transactions for identical or similar investments of the same issuer, less impairment. The adoption of this guidance increases the volatility of the other income (expense), net, as a result of the remeasurement of the equity securities; however, the adoption did not have a material impact on the Company’s consolidated financial results for the three months ended February 28, 2019, nor is it likely to have a material impact for the remainder of the fiscal year.

In May 2014, the FASB issued a comprehensive new revenue recognition standard for contracts with customers with amendments in 2015 and 2016, codified as Accounting Standards Codification Topic 606, Revenue from Contracts with Customers (“ASC Topic 606”). The Company adopted the guidance effective December 1, 2018 on a full retrospective basis, to ensure a consistent basis of presentation within the Company’s consolidated financial statements for all periods reported. In addition, the Company elected the one year practical expedient for contract costs.

The primary impact of adoption in the Technology Solutions segment relates to the application of gross versus net indicators. In addition, the Company is recognizing revenue earlier on certain arrangements with acceptance provisions due to the determination of when transfer of control occurs. Additionally, the Company reclassified certain amounts on the consolidated balance sheet related to sales returns and allowances from a reduction of accounts receivable to other accrued liabilities as these amounts represent refund liabilities to customers. Similarly, the Company reclassified certain amounts for the Company's right to recover assets from customers related to sales returns from inventories to other current assets. The Company also presented receivables from customers separately from other receivables. The impact of adoption is not material to the Concentrix segment and relates primarily to the capitalization of certain sales commissions that are assessed to be incremental for obtaining new contracts. Such costs are amortized over the period of expected benefit rather than being expensed as incurred as was the Company’s prior practice. Prior periods were not adjusted as the amounts were not material to the Company’s consolidated financial statements.

The effects of adoption on the Company’s Consolidated Balance Sheet as of November 30, 2018 and to the Company’s Consolidated Statements of Operations and Cash Flows for the three months ended February 28, 2018 were as follows:

 

 

 

As of November 30, 2018

 

Consolidated Balance Sheet Caption

 

As reported

 

 

Adjustments for

ASC Topic 606

 

 

As adjusted

 

Assets

 

 

 

 

 

 

 

 

 

 

 

 

Accounts receivable, net(1)

 

$

3,855,431

 

 

$

(215,000

)

 

$

3,640,431

 

Receivables from vendors, net

 

 

 

 

 

351,744

 

 

 

351,744

 

Inventories

 

 

2,518,319

 

 

 

(125,760

)

 

 

2,392,559

 

Other current assets(1)

 

 

261,536

 

 

 

52,080

 

 

 

313,616

 

Liabilities and Stockholders' Equity

 

 

 

 

 

 

 

 

 

 

 

 

Other accrued liabilities

 

$

613,449

 

 

$

59,186

 

 

$

672,635

 

Deferred tax liabilities

 

 

206,024

 

 

 

892

 

 

 

206,916

 

Retained earnings

 

 

2,195,635

 

 

 

2,986

 

 

 

2,198,621

 

 

 

(1)

Amounts “As adjusted” may not agree to the Consolidated balance sheet due to other reclassifications to conform to current period presentation.

 

 

9

 


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SYNNEX CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(continued)

For the three months ended February 28, 2019 and 2018

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

(unaudited)

 

 

 

 

For the three months ended February 28, 2018

 

Consolidated Statement of Operations

 

As reported

 

 

Adjustments for

ASC Topic 606

 

 

As adjusted

 

Revenue:

 

 

 

 

 

 

 

 

 

 

 

 

    Products

 

$

4,048,763

 

 

$

(59,020

)

 

$

3,989,743

 

    Services

 

 

503,607

 

 

 

 

 

 

503,607

 

Total revenue

 

 

4,552,370

 

 

 

(59,020

)

 

 

4,493,350

 

Cost of revenue:

 

 

 

 

 

 

 

 

 

 

 

 

    Products

 

 

(3,824,096

)

 

 

58,584

 

 

 

(3,765,512

)

    Services

 

 

(314,323

)

 

 

 

 

 

(314,323

)

Gross profit

 

 

413,951

 

 

 

(436

)

 

 

413,515

 

Selling, general and administrative expenses

 

 

(302,019

)

 

 

 

 

 

(302,019

)

Operating income

 

 

111,932

 

 

 

(436

)

 

 

111,496

 

Interest expense and finance charges, net

 

 

(17,451

)

 

 

 

 

 

(17,451

)

Other income (expense), net

 

 

(1,178

)

 

 

 

 

 

(1,178

)

Income before income taxes

 

 

93,303

 

 

 

(436

)

 

 

92,867

 

Provision for income taxes

 

 

(68,869

)

 

 

100

 

 

 

(68,769

)

Net income

 

$

24,434

 

 

$

(336

)

 

$

24,098

 

Earnings per common share:

 

 

 

 

 

 

 

 

 

 

 

 

    Basic

 

$

0.61

 

 

$

(0.01

)

 

$

0.60

 

    Diluted

 

$

0.61

 

 

$

(0.01

)

 

$

0.60

 

 

 

 

For the three months ended February 28, 2018

 

Consolidated Statement of Cash Flows Caption

 

As reported

 

 

Adjustments for

ASC Topic 606

 

 

As adjusted

 

Cash flows from operating activities:

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

$

24,434

 

 

$

(336

)

 

 

24,098

 

Adjustments to reconcile net income to cash used in operating activities:

 

 

 

 

 

 

 

 

 

 

 

 

Deferred income taxes

 

 

(25,923

)

 

 

(100

)

 

 

(26,023

)

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

 

 

 

 

 

 

 

 

 

 

 

 

Accounts receivables, net

 

 

236,437

 

 

 

(39,459

)

 

 

196,978

 

Receivables from vendors, net

 

 

 

 

 

25,338

 

 

 

25,338

 

Inventories

 

 

(154,745

)

 

 

15,103

 

 

 

(139,642

)

Other operating assets and liabilities

 

 

57,276

 

 

 

(546

)

 

 

56,730

 

Net cash used in operating activities

 

 

(5,674

)

 

 

 

 

 

(5,674

)

 

Refer to Note 3 for additional information, including changes in accounting policies relating to revenue recognition.

 

Recently issued accounting pronouncements  

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.

10

 


Table of Contents

 

SYNNEX CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(continued)

For the three months ended February 28, 2019 and 2018

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

(unaudited)

 

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 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.

In February 2016, the FASB issued a new standard which revises various aspects of accounting for leases. The most significant impact to the Company’s Consolidated Financial Statements relates to the recognition by a lessee of a right-of-use asset and a lease liability for virtually all of its leases other than short-term leases. The liability will be equal to the present value of lease payments. The asset will be based on the liability, subject to adjustment, such as for initial direct costs. Consistent with current guidance, the recognition, measurement, and presentation of expenses and cash flows arising from a lease by a lessee will primarily 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. This accounting standard will be applicable to the Company at the beginning of its first quarter of fiscal year 2020 using a modified retrospective approach and early adoption is permitted. The Company expects that most of its operating lease commitments will be subject to the new standard and be recognized as operating lease liabilities and right-of-use assets upon adoption. The Company is currently evaluating the impact of the adoption of this new standard on its Consolidated Financial Statements.

 

NOTE 3—REVENUE FROM CONTRACTS WITH CUSTOMERS:

Revenue Recognition

The Company generates revenue primarily from (i) the sale of various IT products through its Technology Solutions business unit and (ii) the provision of business outsourcing services focused on customer engagement through its Concentrix business unit. The Company accounts for a contract with a customer when it has written approval, the contract is committed, the rights of the parties, including payment terms, are identified, the contract has commercial substance and consideration is probable of collection. The Company generally invoices a customer upon shipment, after performance of services or in accordance with specific contractual provisions. Payments are due as per contract terms and do not contain a significant financing component. Revenue is presented net of taxes collected from customers and remitted to government authorities. All revenue is generated from contracts with customers.

Products revenue represents revenue from the Company’s Technology Solutions segment and services revenue represents revenue from the Company’s Concentrix segment.

Technology Solutions

The Company recognizes revenues from the sale of IT hardware and software as control is transferred to customers, which is at the point in time when the product is shipped or delivered. Products sold by the Company are delivered via shipment from the Company’s facilities, drop-shipment directly from the vendor, or by electronic delivery of keys for software products. Binding purchase orders from customers together with agreement to the Company's terms and conditions of sale by way of an executed agreement or other signed documents are considered to be the contract with a customer. In situations where arrangements include customer acceptance provisions, revenue is recognized when the Company can objectively verify the products comply with specifications underlying acceptance and the customer has control of the goods.  

Provisions for sales returns and allowances are estimated based on historical data and are recorded concurrently with the recognition of revenue. A liability is recorded at the time of sale for estimated product returns based upon historical experience and an asset is recognized for the amount expected to be recorded in inventory upon product return. These provisions are reviewed and adjusted periodically by the Company. Revenue is reduced for early payment discounts and volume incentive rebates offered to customers, which are considered variable consideration, at the time of sale based on an evaluation of the contract terms and historical experience. The Company recognizes revenue on a net basis on certain contracts, where the Company’s performance obligation is to arrange for the products or services to be provided by another party or the rendering of logistics services for the delivery of inventory for which the Company does not assume the risks and rewards of ownership, by recognizing the margins earned in revenue with no associated cost of revenue. Such arrangements include supplier service contracts, post-contract software support services and extended warranty contracts.

11

 


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SYNNEX CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(continued)

For the three months ended February 28, 2019 and 2018

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

(unaudited)

 

The Company considers shipping and handling activities as costs to fulfill the sale of products. Shipping revenue is included in net sales when control of the product is transferred to the customer, and the related shipping and handling costs are included in cost of products sold.

Concentrix

The Company recognizes revenue from services contracts over time as the promised services are delivered to customers for an amount that reflects the consideration to which the Company is entitled in exchange for those services. Service contracts may be based on a fixed price or on a fixed unit-price per transaction or other objective measure of output. The Company determines whether the services performed during the initial phases of an arrangement, such as setup activities, are distinct. In most cases, the arrangement is a single performance obligation comprised of a series of distinct services that are substantially the same and that have the same pattern of transfer (i.e., distinct days of service). The Company records deferred revenue attributable to certain process transition, setup activities where such activities do not represent separate performance obligations. Billings relating to such transition activities are classified under contract liabilities and subsequently recognized ratably over the period in which the related services are performed. The Company applies a measure of progress (typically time-based) to any fixed consideration and allocates variable consideration to the distinct periods of service based on usage. As a result, revenue is generally recognized over the period the services are provided on a usage basis. This results in revenue recognition that corresponds with the benefit to the customer of the services transferred to date relative to the remaining services promised. Revenue on fixed price contracts is recognized on a straight-line basis over the term of the contract as services are provided. Revenue on unit-price transactions is recognized using an objective measure of output including staffing hours or the number of transactions processed by service agents. Customer contract terms can range from less than one year to more than five years.

Certain customer contracts include incentive payments from the customer upon achieving certain agreed-upon service levels and performance metrics or service level agreements that could result in credits or refunds to the customer. Revenue relating to such arrangements is accounted for as variable consideration when the likely amount of revenue to be recognized can be estimated to the extent that it is probable that a significant reversal of any incremental revenue will not occur.

Deferred revenue contract liabilities and deferred costs to obtain or fulfill a contract are not material.

Refer to Note 13 – Segment Information for disaggregated revenue disclosure.

 

NOTE 4—ACQUISITION:

Fiscal Year 2018 acquisition

On October 5, 2018, the Company acquired 100% of Convergys Corporation ("Convergys"), an Ohio Corporation, a customer experience outsourcing company, for a purchase price of $2,269,527, pursuant to a merger agreement dated June 28, 2018. The acquisition is related to the Company's Concentrix segment and the Company believes the acquisition adds scale, diversifies the revenue base, expands the Company's service delivery footprint and strengthens the Company’s leadership position as a top global provider of customer engagement services.

During the three months ended February 28, 2019, the Company recorded measurement period adjustments of $1,079 to goodwill. These comprised an increase of $13,834 in tax liabilities and an increase of $14,913 to the fair value of other acquired net tangible assets.

Acquisition-related and integration expenses were $65,007, of which $27,517 was incurred during the three months ended February 28, 2019. These charges were recorded in "Selling, general and administrative expenses." The charges during the three months ended February 28, 2019 comprised legal and professional services, severance and lease termination payments and other costs incurred to complete the acquisition and retention payments to integrate the business.

 

 

NOTE 5—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.

12

 


Table of Contents

 

SYNNEX CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(continued)

For the three months ended February 28, 2019 and 2018

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

(unaudited)

 

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 28, 2019 and 2018, and the measurement-date fair value of those awards:

 

 

 

Three Months Ended

 

 

 

February 28, 2019

 

 

February 28, 2018

 

 

 

Shares

awarded

 

 

Fair value

of grants

 

 

Shares

awarded

 

 

Fair value

of grants

 

Stock options

 

 

17

 

 

$

500

 

 

 

 

 

$

 

Restricted stock awards

 

 

10

 

 

 

955

 

 

 

2

 

 

 

210

 

Restricted stock units

 

 

51

 

 

 

4,765

 

 

 

22

 

 

 

2,554

 

 

 

 

78

 

 

$

6,220

 

 

 

24

 

 

$

2,764

 

 

The Company recorded share-based compensation expense in the Consolidated Statements of Operations for the three months ended February 28, 2019 and 2018 as follows:

 

 

 

Three Months Ended

 

 

 

February 28, 2019

 

 

February 28, 2018

 

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

   administrative expenses)

 

$

6,651

 

 

$

5,135

 

Tax benefit recorded in the provision for income taxes

 

 

(1,809

)

 

 

(1,547

)

Net effect on net income

 

$

4,842

 

 

$

3,588

 

 

 

NOTE 6—BALANCE SHEET COMPONENTS:

Cash, cash equivalents and restricted cash:

The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the Consolidated Balance Sheets that sum to the total of the same amounts shown in the Consolidated Statements of Cash Flows:

 

 

 

As of

 

 

 

February 28, 2019

 

 

November 30, 2018

 

Cash and cash equivalents

 

$

243,605

 

 

$

454,694

 

Restricted cash

 

 

5,696

 

 

 

7,126

 

Cash and cash equivalents per Consolidated Balance Sheets

 

 

249,301

 

 

 

461,820

 

Restricted cash included in other assets

 

 

230

 

 

 

213

 

Cash, cash equivalents and restricted cash

 

$

249,531

 

 

$

462,033

 

 

Restricted cash balances relate primarily to temporary restrictions caused by the timing of lockbox collections under borrowing arrangements, the issuance of bank guarantees and a government grant.

Accounts receivable, net:

 

 

As of

 

 

 

February 28, 2019

 

 

November 30, 2018

 

 

 

 

 

 

 

(As adjusted)

 

Accounts receivable

 

$

3,179,966

 

 

$

3,648,975

 

Less: Allowance for doubtful accounts

 

 

(12,665

)

 

 

(8,479

)

Accounts receivable, net

 

$

3,167,301

 

 

$

3,640,496

 

 

13

 


Table of Contents

 

SYNNEX CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(continued)

For the three months ended February 28, 2019 and 2018

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

(unaudited)

 

Receivables from vendors, net:

 

 

As of

 

 

 

February 28, 2019

 

 

November 30, 2018

 

 

 

 

 

 

 

(As adjusted)

 

Receivables from vendors

 

$

269,619

 

 

$

357,930

 

Less: Allowance for doubtful accounts

 

 

(4,959

)

 

 

(6,186

)

Receivables from vendors, net

 

$

264,660

 

 

$

351,744

 

 

 

Property and equipment, net:

 

 

 

As of

 

 

 

February 28, 2019

 

 

November 30, 2018

 

Land

 

$

31,234

 

 

$

31,102

 

Equipment, computers and software

 

 

453,888

 

 

 

423,467

 

Furniture and fixtures

 

 

106,869

 

 

 

104,474

 

Buildings, building improvements and leasehold improvements

 

 

371,674

 

 

 

368,107

 

Construction-in-progress

 

 

20,869

 

 

 

29,021

 

Total property and equipment, gross

 

 

984,535

 

 

 

956,170

 

Less: Accumulated depreciation

 

 

(415,985

)

 

 

(384,844

)

Property and equipment, net

 

$

568,549

 

 

$

571,326

 

 

Depreciation expense was $41,517 and $21,924 for the three months ended February 28, 2019 and 2018, respectively.

 

Goodwill: 

 

 

 

Technology

Solutions

 

 

Concentrix

 

 

Total

 

Balance as of November 30, 2018

 

$

427,775

 

 

$

1,775,541

 

 

$

2,203,316

 

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