snx-10q_20200531.htm

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 May 31, 2020

☐

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 July 2, 2020
Common Stock, $0.001 par value		51,494,723

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 May 31, 2020 and November 30, 2019	3
	Consolidated Statements of Operations (unaudited) for the Three and Six Months Ended May 31, 2020 and 2019	4
	Consolidated Statements of Comprehensive Income (Loss) (unaudited) for the Three and Six Months Ended May 31, 2020 and 2019	5
	Consolidated Statements of Stockholders’ Equity (unaudited) for the Three and Six Months Ended May 31, 2020 and 2019	6
	Consolidated Statements of Cash Flows (unaudited) for the Six Months Ended May 31, 2020 and 2019	7
	Notes to the Consolidated Financial Statements (unaudited)	8
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	27
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	40
Item 4.	Controls and Procedures	40

PART II	OTHER INFORMATION	41
Item 1A.	Risk Factors	41
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	41
Item 6.	Exhibits	43
Signatures		44

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)

	May 31, 2020			November 30, 2019
ASSETS
Current assets:
Cash and cash equivalents	$	1,112,556		$	225,529
Accounts receivable, net		3,215,370			3,926,709
Receivables from vendors, net		310,993			368,505
Inventories		3,033,320			2,547,224
Other current assets		296,381			385,024
Total current assets		7,968,621			7,452,992
Property and equipment, net		563,346			569,899
Goodwill		2,234,068			2,254,402
Intangible assets, net		1,060,510			1,162,212
Deferred tax assets		117,621			97,539
Other assets, net		694,994			160,917
Total assets	$	12,639,159		$	11,697,960

LIABILITIES AND EQUITY
Current liabilities:
Borrowings, current	$	159,440		$	298,969
Accounts payable		3,405,317			3,149,443
Accrued compensation and benefits		373,539			402,771
Other accrued liabilities		1,281,969			723,716
Income taxes payable		9,031			32,223
Total current liabilities		5,229,297			4,607,122
Long-term borrowings		2,645,477			2,718,267
Other long-term liabilities		715,635			361,911
Deferred tax liabilities		214,370			222,210
Total liabilities		8,804,778			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, 53,305 and 53,154 shares issued as of May 31, 2020 and November 30, 2019, respectively		53			53
Additional paid-in capital		1,566,764			1,545,421
Treasury stock, 2,453 and 2,399 shares as of May 31, 2020 and November 30, 2019, respectively		(178,609	)		(172,627	)
Accumulated other comprehensive income (loss)		(337,276	)		(209,077	)
Retained earnings		2,783,449			2,624,680
Total stockholders' equity		3,834,381			3,788,450
Total liabilities and equity	$	12,639,159		$	11,697,960

(Amounts may not add due to rounding)

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

Table of Contents

SYNNEX CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS

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

(unaudited)

	Three Months Ended						Six Months Ended
	May 31, 2020			May 31, 2019			May 31, 2020			May 31, 2019
Revenue:
Products	$	4,470,928		$	4,567,072		$	8,551,952		$	8,647,757
Services		1,061,711			1,155,816			2,244,884			2,324,585
Total revenue		5,532,639			5,722,889			10,796,836			10,972,341
Cost of revenue:
Products		(4,196,312	)		(4,297,096	)		(8,022,232	)		(8,130,213	)
Services		(718,514	)		(727,324	)		(1,458,447	)		(1,464,739	)
Gross profit		617,812			698,468			1,316,157			1,377,389
Selling, general and administrative expenses		(506,088	)		(523,813	)		(1,015,778	)		(1,040,771	)
Operating income		111,724			174,655			300,379			336,618
Interest expense and finance charges, net		(33,921	)		(43,144	)		(70,297	)		(84,750	)
Other income (expense), net		1,466			21,546			3,847			20,851
Income before income taxes		79,270			153,057			233,929			272,719
Provision for income taxes		(22,310	)		(38,584	)		(54,385	)		(71,140	)
Net income	$	56,960		$	114,473		$	179,544		$	201,579
Earnings per common share:
Basic	$	1.11		$	2.24		$	3.49		$	3.94
Diluted	$	1.10		$	2.23		$	3.47		$	3.92
Weighted-average common shares outstanding:
Basic		50,849			50,675			50,832			50,691
Diluted		51,047			50,939			51,137			50,933

(Amounts may not add due to rounding)

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

Table of Contents

SYNNEX CORPORATION

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(currency in thousands)

(unaudited)

	Three Months Ended						Six Months Ended
	May 31, 2020			May 31, 2019			May 31, 2020			May 31, 2019
Net income	$	56,960		$	114,473		$	179,544		$	201,579
Other comprehensive income (loss):
Change in unrealized gains (losses) of defined benefit plans, net of taxes of $0 for the three and six months ended May 31, 2020 and 2019		—			—			217			307
Unrealized gains (losses) on cash flow hedges during the period, net of taxes of $6,210 and $16,174 for the three and six months ended May 31, 2020, respectively, and $10,288 and $15,884 for the three and six months ended May 31, 2019, respectively		(24,429	)		(30,654	)		(49,413	)		(47,670	)
Reclassification of net (gains) losses on cash flow hedges to net income, net of tax expense (benefit) of ($904) and ($557) for the three and six months ended May 31, 2020, respectively, and $1,231 and $2,120 for three and six months ended May 31, 2019, respectively		2,833			(3,466	)		1,638			(6,016	)
Total change in unrealized gains (losses) on cash flow hedges, net of taxes		(21,596	)		(34,119	)		(47,775	)		(53,686	)
Foreign currency translation adjustments, net of taxes of $148 and $294 for the three and six months ended May 31, 2020, respectively, and $174 and ($24) for the three and six months ended May 31, 2019, respectively		(61,723	)		(27,042	)		(80,641	)		(6,939	)
Other comprehensive income (loss)		(83,319	)		(61,161	)		(128,199	)		(60,318	)
Comprehensive income (loss)	$	(26,359	)	$	53,312		$	51,345		$	141,261

(Amounts may not add due to rounding)

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

Table of Contents

SYNNEX CORPORATION

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(currency in thousands, except per share amounts)

(unaudited)

	Three Months Ended						Six Months Ended
	May 31, 2020			May 31, 2019			May 31, 2020			May 31, 2019
Total Stockholders' equity, beginning balance	$	3,855,688		$	3,510,442		$	3,788,450		$	3,435,054

Common stock and additional paid-in capital:
Beginning balance		1,558,226			1,519,576			1,545,474			1,512,254
Share-based compensation		7,423			6,478			16,212			13,085
Common stock issued for employee benefit plans		1,168			1,383			5,131			2,205
Stock issuance costs (related to the Convergys acquisition in fiscal year 2018)		—		—				—			(107	)
Ending balance		1,566,817			1,527,436			1,566,817			1,527,436

Treasury stock:
Beginning balance		(175,107	)		(150,242	)		(172,627	)		(149,533	)
Repurchases of common stock for tax withholdings on equity awards		(97	)		(176	)		(2,577	)		(885	)
Repurchases of common stock		(3,405	)		(15,184	)		(3,405	)		(15,184	)
Ending balance		(178,609	)		(165,601	)		(178,609	)		(165,601	)

Retained earnings:
Beginning balance		2,726,525			2,268,508			2,624,680			2,198,621
Net income		56,960			114,473			179,544			201,579
Cash dividends declared		(36	)		(19,202	)		(20,775	)		(38,376	)
Cumulative effect of changes in accounting principles		—		—				—			1,955
Ending balance		2,783,449			2,363,779			2,783,449			2,363,779

Accumulated other comprehensive income (loss):
Beginning balance		(253,957	)		(127,399	)		(209,077	)		(126,288	)
Other comprehensive income (loss)		(83,319	)		(61,161	)		(128,199	)		(60,318	)
Cumulative effect of changes in accounting principles		—		—				—			(1,955	)
Ending balance		(337,276	)		(188,561	)		(337,276	)		(188,561	)

Total stockholders' equity, ending balance	$	3,834,381		$	3,537,053		$	3,834,381		$	3,537,053

Cash dividends declared per share	$	—		$	0.375		$	0.400		$	0.750

(Amounts may not add due to rounding)

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

Table of Contents

SYNNEX CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

(currency in thousands)

(unaudited)

	Six Months Ended
	May 31, 2020			May 31, 2019
Cash flows from operating activities:
Net income	$	179,544		$	201,579
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation and amortization		167,184			189,839
Share-based compensation		16,212			13,085
Provision for doubtful accounts		39,859			9,813
Deferred income taxes		(11,305	)		(14,222	)
Contingent consideration		—			(19,034	)
Unrealized foreign exchange (gains) losses		(4,240	)		3,552
Other		6,607			7,314
Changes in operating assets and liabilities, net of acquisition of businesses:
Accounts receivable, net		621,684			176,358
Receivables from vendors, net		59,919			1,525
Inventories		(495,572	)		(214,317	)
Accounts payable		227,221			(290,303	)
Other operating assets and liabilities		419,366			(112,570	)
Net cash provided by (used in) operating activities		1,226,481			(47,380	)
Cash flows from investing activities:
Purchases of property and equipment		(84,620	)		(60,412	)
Acquisition of businesses		(2,635	)		(6,235	)
Other		(4,704	)