Income Taxes

12 Months Ended

Nov. 30, 2021

Income Tax Disclosure [Abstract]

Income Taxes

NOTE 17—INCOME TAXES:

The components of pretax income from continuing operations are as follows:

	Fiscal Years Ended November 30,
	2021		2020		2019
United States	$	246,331	$	276,237	$	326,535
Foreign		220,154		159,910		146,752
	$	466,485	$	436,146	$	473,287

Significant components of the provision for income taxes are as follows:

	Fiscal Years Ended November 30,
	2021			2020			2019
Current tax provision:
Federal	$	(8,838	)	$	56,355		$	63,580
State		13,916			19,537			20,681
Foreign		66,660			42,252			33,666
	$	71,738		$	118,144		$	117,927
Deferred tax provision (benefit):
Federal	$	13,597		$	(13,449	)	$	(10,647	)
State		(675	)		(3,990	)		(1,751	)
Foreign		(13,244	)		904			5,583
	$	(322	)	$	(16,535	)	$	(6,815	)
Total tax provision	$	71,416		$	101,609		$	111,113

The breakdown of net deferred tax assets and liabilities are as follows:

	As of November 30,
	2021			2020
Deferred tax assets	$	27,287		$	39,636
Deferred tax liabilities		(1,015,640	)		(5,836	)
Total net deferred tax assets (liabilities)	$	(988,353	)	$	33,800

The significant components of the Company’s deferred tax assets and liabilities are as follows:

	As of November 30,
	2021			2020
Assets:
Loss carryforwards	$	98,472		$	166
Lease liabilities		92,803			12,889
Accrued liabilities		60,897			8,905
Foreign tax credit carryforwards		54,807			3,485
Disallowed interest expense		34,472			-
Allowance for doubtful accounts and sales return reserves		28,463			27,518
Capitalized inventory costs		20,527			13,852
Unrealized losses on cash flow hedges		17,668			31,810
Acquisition and transaction related costs		17,808			-
Share-based compensation expense		10,855			5,752
Deferred revenue		5,742			2,997
Long-lived assets		4,891			(7,576	)
Other, net		6,303			12,526
		453,708			112,324
Less: valuation allowance		(123,435	)		(5,492	)
Total deferred tax assets	$	330,273		$	106,832
Liabilities:
Long-lived assets	$	(1,165,400	)	$	(61,146	)
Lease right-of-use assets		(99,033	)		(11,862	)
Deferred costs		(39,672	)		—
Capitalized marketing program costs		(4,977	)		—
Other, net		(9,544	)		(24	)
Total deferred tax liabilities	$	(1,318,626	)	$	(73,032	)
Net deferred tax (liability) asset	$	(988,353	)	$	33,800

The increase in the Company's overall deferred tax liability position is primarily due to the increase in the Company's identified intangible assets recorded as a result of the Merger. The net change in the deferred tax valuation allowances in fiscal 2021was an increase of $117.9 million primarily resulting from the Merger.

The valuation allowance at November 30, 2021 primarily relates to carryforwards for foreign net operating losses and foreign tax credits in the United States. The valuation allowance at November 30, 2020 relates primarily to certain state and foreign net operating loss carryforwards and state credits. The Company considers all positive and negative evidence available in determining the potential of realizing deferred tax assets. To the extent that the Company generates consistent taxable income within those operations with valuation allowances, the Company may reduce the valuation allowances, thereby reducing income tax expense and increasing net income in the period the determination is made.

The Company’s net operating loss carryforwards totaled $430.2 million at November 30, 2021. The majority of the net operating losses have an indefinite carryforward period with the remaining portion expiring in fiscal years 2022 through 2038. In addition, the Company has an immaterial net amount of state net operating losses. The Company’s foreign tax credit carryforwards in the United States totaled $54.8 million at November 30, 2021. The foreign tax credits have a ten-year carryforward period, and the majority is set to expire in fiscal year 2028.

The reconciliation of the statutory United States federal income tax rate to the Company’s effective income tax rate is as follows: 

	Fiscal Years Ended November 30,
	2021			2020			2019
United States federal statutory income tax rate		21.0	%		21.0	%		21.0	%
State income taxes, net of federal income tax benefit		2.5			2.4			3.0
Global intangible low taxed income		0.6			0.3			0.5
Tax on foreign earnings different than US federal rate		1.6			1.7			1.8
Net changes in deferred tax valuation allowances		(0.4	)		—			—
Adjustments related to the Tax Cuts and Jobs Act	—				—			(3.1	)
Interest not subject to tax, net		0.2			(1.8	)		1.0
Capital loss carryback		(9.6	)		—			—
Net changes in reserves for uncertain tax positions		(0.7	)		—			—
Other, net		0.1			(0.4	)		(0.8	)
Effective income tax rate		15.3	%		23.3	%		23.5	%

In connection with the Merger, the Company restructured its foreign financing structure, as well as select legal entities in anticipation of legally integrating legacy Tech Data and SYNNEX foreign operations. In addition to the treasury efficiencies, these restructurings resulted in a one-time domestic capital loss which would offset certain domestic capital gains when carried back under United States tax law to tax year 2020, resulting in a tax benefit of approximately $45 million.

The Company’s United States business has sufficient cash flow and liquidity to fund its operating requirements and the Company expects and intends that profits earned outside the United States will be fully utilized and reinvested outside of the United States.

As of November 30, 2021, the Company had approximately $619.7 million of undistributed earnings of its non-U.S. subsidiaries for which it has not provided for non-U.S. withholding taxes and state taxes because such earnings are intended to be reinvested indefinitely in international operations. It is not practicable to determine the amount of applicable taxes that would be due if such earnings were distributed. Accordingly, the Company has not provisioned United States state taxes and foreign withholding taxes on non-U.S. subsidiaries for which the earnings are permanently reinvested.

The Company has been granted tax holidays in certain jurisdictions, primarily, China. The tax holidays provide for lower rates of taxation and require various thresholds of investment and business activities in those jurisdictions. Certain tax holidays begin to expire in fiscal year 2021. The tax benefits from the above tax holidays for fiscal years 2021, 2020 and 2019 were not material.   

The estimates and assumptions used by the Company in computing the income taxes reflected in the Company’s consolidated financial statements could differ from the actual results reflected in the income tax returns filed during the subsequent year. Adjustments are recorded based on filed returns when such returns are finalized or the related adjustments are identified.

The aggregate changes in the balances of gross unrecognized tax benefits, excluding accrued interest and penalties, during fiscal years 2021, 2020 and 2019 were as follows:

For the year ended November 30:	2021			2020			2019
Gross unrecognized tax benefits at beginning of period	$	12,513		$	22,445		$	17,812
Increases (decreases) in tax positions for prior years and acquisitions		17,579			(880	)		2,367
Decreases in tax positions for prior years		-			(3,097	)	-
Increases in tax positions for current year		827			1,999			4,816
Expiration of statutes of limitation		(3,768	)		(7,486	)		(2,535	)
Changes due to translation of foreign currencies		(821	)		(468	)		(15	)
Gross unrecognized tax benefits at end of period	$	26,330		$	12,513		$	22,445

As of November 30, 2021, the amount of unrecognized tax benefits that, if recognized, would impact the effective tax rate was $26.3 million. Unrecognized tax benefits that have a reasonable possibility of significantly decreasing within the 12 months following November 30, 2021 would not have a material impact on the tax rate. The Company recognizes interest and penalties related to unrecognized tax benefits in the provision for income taxes. The Company’s accrued interest and penalties at November 30, 2021, would not have a material impact on the effective tax rate if reversed. The provision for income taxes for each of the fiscal years ended November 30, 2021, 2020 and 2019 includes interest expense on unrecognized income tax benefits for current and prior years which is not significant to the Company’s Consolidated Statement of Income. The change in the balance of accrued interest for fiscal

2021, 2020 and 2019, includes the current year end accrual, an interest benefit resulting from the expiration of statutes of limitation, and the translation adjustments on foreign currencies.   

The Company conducts business primarily in the Americas, Europe and APJ, and as a result, one or more of its subsidiaries files income tax returns in the U.S. federal, various state, local and foreign tax jurisdictions. In the normal course of business, the Company is subject to examination by taxing authorities. The Company is no longer subject to examinations by the Internal Revenue Service for years before fiscal 2018. The Company is no longer subject to foreign or state income tax audits for returns covering years through 2003, and fiscal year 2010, respectively.

In preparation of the Separation, SYNNEX entered into a Tax Matters Agreement with Concentrix effective on December 1, 2020 that governs the rights and obligations of SYNNEX and Concentrix for certain pre-Separation tax liabilities. The Tax Matters Agreement provides that SYNNEX and Concentrix will share certain pre-Separation income tax liabilities that arise from adjustments made by tax authorities to SYNNEX and Concentrix’ U.S. and certain non-U.S. income tax returns. In certain jurisdictions SYNNEX and Concentrix have joint and several liability for past income tax liabilities and accordingly, SYNNEX could be legally liable under applicable tax law for such liabilities and required to make additional tax payments.

In addition, if the distribution of Concentrix' common shares to the SYNNEX stockholders is determined to be taxable, Concentrix and SYNNEX would share the tax liability equally, unless the taxability of the distribution is the direct result of action taken by either Concentrix or SYNNEX subsequent to the distribution in which case the party causing the distribution to be taxable would be responsible for any taxes imposed on the distribution.