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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 August 31, 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)

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 September 27, 2019

Common Stock, $0.001 par value

 

51,075,206

 

 


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 August 31, 2019 and November 30, 2018

3

 

Consolidated Statements of Operations (unaudited) for the Three and Nine Months Ended August 31, 2019 and 2018

4

 

Consolidated Statements of Comprehensive Income (unaudited) for the Three and Nine Months Ended August 31, 2019 and 2018

5

 

Consolidated Statements of Stockholders’ Equity (unaudited) for the Three and Nine Months Ended August 31, 2019 and 2018

6

 

Consolidated Statements of Cash Flows (unaudited) for the Nine Months Ended August 31, 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

41

Item 1A.

Risk Factors

41

Item 6.

Exhibits

42

Signatures

 

43

 

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)

 

 

 

August 31, 2019

 

 

November 30, 2018

 

 

 

 

 

 

 

(As adjusted)

 

ASSETS

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

262,279

 

 

$

454,694

 

Accounts receivable, net

 

 

3,452,976

 

 

 

3,640,496

 

Receivables from vendors, net

 

 

338,315

 

 

 

351,744

 

Inventories

 

 

2,787,159

 

 

 

2,392,559

 

Other current assets

 

 

361,759

 

 

 

323,323

 

Total current assets

 

 

7,202,488

 

 

 

7,162,817

 

Property and equipment, net

 

 

552,904

 

 

 

571,326

 

Goodwill

 

 

2,214,115

 

 

 

2,203,316

 

Intangible assets, net

 

 

1,208,308

 

 

 

1,377,305

 

Deferred tax assets

 

 

89,692

 

 

 

76,508

 

Other assets

 

 

158,819

 

 

 

152,227

 

Total assets

 

$

11,426,327

 

 

$

11,543,498

 

 

 

 

 

 

 

 

 

 

LIABILITIES AND EQUITY

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Borrowings, current

 

$

571,718

 

 

$

833,216

 

Accounts payable

 

 

2,932,046

 

 

 

3,048,102

 

Accrued compensation and benefits

 

 

366,761

 

 

 

358,352

 

Other accrued liabilities

 

 

694,778

 

 

 

672,635

 

Income taxes payable

 

 

13,379

 

 

 

41,322

 

Total current liabilities

 

 

4,578,681

 

 

 

4,953,627

 

Long-term borrowings

 

 

2,757,021

 

 

 

2,622,782

 

Other long-term liabilities

 

 

299,311

 

 

 

325,119

 

Deferred tax liabilities

 

 

189,504

 

 

 

206,916

 

Total liabilities

 

 

7,824,517

 

 

 

8,108,444

 

Commitments and contingencies (Note 16)

 

 

 

 

 

 

 

 

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, 52,942 and 52,861 shares issued as of August 31, 2019 and November 30, 2018, respectively

 

 

53

 

 

 

53

 

Additional paid-in capital

 

 

1,534,743

 

 

 

1,512,201

 

Treasury stock, 2,337 and 2,167 shares as of August 31, 2019 and November 30, 2018, respectively

 

 

(165,710

)

 

 

(149,533

)

Accumulated other comprehensive income (loss)

 

 

(235,070

)

 

 

(126,288

)

Retained earnings

 

 

2,467,795

 

 

 

2,198,621

 

Total stockholders’ equity

 

 

3,601,810

 

 

 

3,435,054

 

Total liabilities and equity

 

$

11,426,327

 

 

$

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 per share amounts)

(unaudited)

 

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

 

August 31, 2019

 

 

August 31, 2018

 

 

August 31, 2019

 

 

August 31, 2018

 

 

 

 

 

 

 

(As adjusted)

 

 

 

 

 

 

(As adjusted)

 

Revenue:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Products

 

$

5,047,968

 

 

$

4,334,755

 

 

$

13,695,725

 

 

$

12,746,591

 

Services

 

 

1,155,690

 

 

 

487,513

 

 

 

3,480,275

 

 

 

1,477,308

 

Total revenue

 

 

6,203,659

 

 

 

4,822,268

 

 

 

17,176,000

 

 

 

14,223,898

 

Cost of revenue:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Products

 

 

(4,746,197

)

 

 

(4,083,829

)

 

 

(12,876,410

)

 

 

(12,024,111

)

Services

 

 

(731,472

)

 

 

(308,322

)

 

 

(2,196,212

)

 

 

(926,998

)

Gross profit

 

 

725,990

 

 

 

430,117

 

 

 

2,103,379

 

 

 

1,272,790

 

Selling, general and administrative expenses

 

 

(517,135

)

 

 

(316,274

)

 

 

(1,557,906

)

 

 

(923,449

)

Operating income

 

 

208,855

 

 

 

113,843

 

 

 

545,473

 

 

 

349,341

 

Interest expense and finance charges, net

 

 

(42,945

)

 

 

(20,058

)

 

 

(127,695

)

 

 

(53,884

)

Other income (expense), net

 

 

(1,087

)

 

 

(872

)

 

 

19,764

 

 

 

(3,497

)

Income before income taxes

 

 

164,823

 

 

 

92,913

 

 

 

437,542

 

 

 

291,960

 

Provision for income taxes

 

 

(41,691

)

 

 

(25,973

)

 

 

(112,831

)

 

 

(107,181

)

Net income

 

$

123,132

 

 

$

66,940

 

 

$

324,711

 

 

$

184,779

 

Earnings per common share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

2.41

 

 

$

1.69

 

 

$

6.35

 

 

$

4.64

 

Diluted

 

$

2.40

 

 

$

1.68

 

 

$

6.32

 

 

$

4.61

 

Weighted-average common shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

50,601

 

 

 

39,254

 

 

 

50,661

 

 

 

39,483

 

Diluted

 

 

50,845

 

 

 

39,475

 

 

 

50,903

 

 

 

39,730

 

 

(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

 

 

Nine Months Ended

 

 

 

August 31, 2019

 

 

August 31, 2018

 

 

August 31, 2019

 

 

August 31, 2018

 

 

 

 

 

 

 

(As adjusted)

 

 

 

 

 

 

(As adjusted)

 

Net income

 

$

123,132

 

 

$

66,940

 

 

$

324,711

 

 

$

184,779

 

Other comprehensive income (loss):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Change in unrealized (losses) gains of defined benefit plans, net of taxes of $0 for the three and nine months ended August 31, 2019 and 2018

 

 

 

 

 

(224

)

 

 

307

 

 

 

(224

)

Unrealized gains (losses) on cash flow hedges during the period, net of taxes of $8,722 and $24,605 for the three and nine months ended August 31, 2019, respectively, and $(275) and $(2,200) for the three and nine months ended August 31, 2018, respectively

 

 

(23,744

)

 

 

770

 

 

 

(71,414

)

 

 

6,186

 

Reclassification of net (gains) losses on cash flow hedges to net income, net of tax expense (benefit) of $1,121 and $3,241 for the three and nine months ended August 31, 2019, respectively, and $(6) and $709 for the three and nine months ended August 31, 2018, respectively

 

 

(3,371

)

 

 

16

 

 

 

(9,387

)

 

 

(1,724

)

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

 

 

(27,115

)

 

 

786

 

 

 

(80,801

)

 

 

4,462

 

Foreign currency translation adjustments, net of taxes of $(31) and $(55) for the three and nine months ended August 31, 2019, respectively, and $12 and $98 for the three and nine months ended August 31, 2018, respectively

 

 

(19,395

)

 

 

(37,018

)

 

 

(26,334

)

 

 

(69,040

)

Other comprehensive income (loss)

 

 

(46,510

)

 

 

(36,456

)

 

 

(106,828

)

 

 

(64,802

)

Comprehensive income

 

$

76,622

 

 

$

30,484

 

 

$

217,883

 

 

$

119,977

 

 

(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

 

 

Nine Months Ended

 

 

 

August 31, 2019

 

 

August 31, 2018

 

 

August 31, 2019

 

 

August 31, 2018

 

 

 

 

 

 

 

(As adjusted)

 

 

 

 

 

 

(As adjusted)

 

Total Stockholders' equity, beginning balance

 

$

3,537,053

 

 

$

2,314,791

 

 

$

3,435,054

 

 

$

2,287,297

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common stock and additional paid-in capital:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Beginning balance

 

 

1,527,436

 

 

 

481,602

 

 

 

1,512,254

 

 

 

467,989

 

Share-based compensation

 

 

6,430

 

 

 

5,791

 

 

 

19,515

 

 

 

16,516

 

Common stock issued for employee benefit plans

 

 

929

 

 

 

1,186

 

 

 

3,134

 

 

 

4,074

 

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

 

 

 

 

 

 

 

 

(107

)

 

 

 

Ending balance

 

 

1,534,796

 

 

 

488,579

 

 

 

1,534,796

 

 

 

488,579

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Treasury stock:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Beginning balance

 

 

(165,601

)

 

 

(124,801

)

 

 

(149,533

)

 

 

(77,133

)

Repurchases of common stock for tax withholdings on equity awards

 

 

(109

)

 

 

(39

)

 

 

(994

)

 

 

(1,722

)

Repurchases of common stock

 

 

 

 

 

(10,000

)

 

 

(15,184

)

 

 

(55,985

)

Ending balance

 

 

(165,710

)

 

 

(134,841

)

 

 

(165,710

)

 

 

(134,841

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Retained earnings:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Beginning balance

 

 

2,363,779

 

 

 

2,048,255

 

 

 

2,198,621

 

 

 

1,958,360

 

Net income

 

 

123,132

 

 

 

66,940

 

 

 

324,711

 

 

 

184,779

 

Cash dividends declared

 

 

(19,116

)

 

 

(13,886

)

 

 

(57,491

)

 

 

(41,832

)

Cumulative effect of changes in accounting principles

 

 

 

 

 

 

 

 

1,955

 

 

 

 

Ending balance

 

 

2,467,795

 

 

 

2,101,309

 

 

 

2,467,795

 

 

 

2,101,309

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated other comprehensive income (loss):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Beginning balance

 

 

(188,561

)

 

 

(90,265

)

 

 

(126,288

)

 

 

(61,919

)

Other comprehensive income (loss)

 

 

(46,510

)

 

 

(36,456

)

 

 

(106,828

)

 

 

(64,802

)

Cumulative effect of changes in accounting principles

 

 

 

 

 

 

 

 

(1,955

)

 

 

 

Ending balance

 

 

(235,070

)

 

 

(126,721

)

 

 

(235,070

)

 

 

(126,721

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total stockholders' equity, ending balance

 

$

3,601,810

 

 

$

2,328,326

 

 

$

3,601,810

 

 

$

2,328,326

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash dividends declared per share

 

$

0.375

 

 

$

0.350

 

 

$

1.125

 

 

$

1.050

 

 

(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)

 

 

 

Nine Months Ended

 

 

 

August 31, 2019

 

 

August 31, 2018

 

 

 

 

 

 

 

(As adjusted)

 

Cash flows from operating activities:

 

 

 

 

 

 

 

 

Net income

 

$

324,711

 

 

$

184,779

 

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

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

281,392

 

 

 

146,214

 

Share-based compensation

 

 

19,515

 

 

 

16,516

 

Provision for doubtful accounts

 

 

25,496

 

 

 

6,434

 

Deferred income taxes

 

 

(16,789

)

 

 

(28,573

)

Contingent consideration

 

 

(19,034

)

 

 

 

Unrealized foreign exchange (gains) losses

 

 

(4,115

)

 

 

3,279

 

Other