TD SYNNEX CORP 10-Q

ITEM 1. Financial Statements TD SYNNEX CORPORATION CONSOLIDATED BALANCE SHEETS (currency and share amounts in thousands, except par value) (unaudited) August 31, 2022 November 30, 2021 ASSETS Current assets: Cash and cash equivalents $ 350,810 $ 993,973 Accounts receivable, net 8,114,004 8,310,032 Receivables from vendors, net 942,111 1,118,963 Inventories 9,755,228 6,642,915 Other current assets 720,298 668,261 Total current assets 19,882,451 17,734,144 Property and equipment, net 412,305 483,443 Goodwill 3,775,145 3,917,276 Intangible assets, net 4,455,198 4,913,124 Other assets, net 566,969 618,393 Total assets $ 29,092,068 $ 27,666,380 LIABILITIES AND EQUITY Current liabilities: Borrowings, current $ 252,190 $ 181,256 Accounts payable 13,718,980 12,034,946 Other accrued liabilities 1,959,717 2,017,253 Total current liabilities 15,930,887 14,233,455 Long-term borrowings 3,882,247 3,955,176 Other long-term liabilities 496,038 556,134 Deferred tax liabilities 1,011,242 1,015,640 Total liabilities 21,320,414 19,760,405 Commitments and contingencies ( Note 14 ) Stockholders’ equity: Preferred stock, $ 0.001 par value, 5,000 shares authorized, no shares issued or outstanding — — Common stock, $ 0.001 par value, 200,000 shares authorized, 98,475 and 98,204 shares issued as of August 31, 2022 and November 30, 2021, respectively 98 98 Additional paid-in capital 7,339,802 7,271,337 Treasury stock, 3,511 and 2,633 shares as of August 31, 2022 and November 30, 2021, respectively ( 290,161 ) ( 201,139 ) Accumulated other comprehensive loss ( 793,878 ) ( 336,194 ) Retained earnings 1,515,793 1,171,873 Total stockholders' equity 7,771,654 7,905,975 Total liabilities and equity $ 29,092,068 $ 27,666,380 (Amounts may not add due to rounding) The accompanying Notes are an integral part of these Consolidated Financial Statements (unaudited). 3 Table of Contents TD 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, 2022 August 31, 2021 August 31, 2022 August 31, 2021 Revenue $ 15,356,085 $ 5,207,064 $ 46,095,853 $ 16,002,904 Cost of revenue ( 14,440,055 ) ( 4,894,442 ) ( 43,255,373 ) ( 15,056,539 ) Gross profit 916,030 312,622 2,840,480 946,365 Selling, general and administrative expenses ( 628,078 ) ( 160,285 ) ( 1,951,503 ) ( 498,443 ) Acquisition, integration and restructuring costs ( 46,418 ) ( 4,133 ) ( 172,266 ) ( 10,068 ) Operating income 241,534 148,204 716,711 437,853 Interest expense and finance charges, net ( 52,119 ) ( 26,365 ) ( 142,430 ) ( 71,766 ) Other (expense) income, net ( 1,852 ) 4,796 ( 12,375 ) 2,707 Income before income taxes 187,563 126,635 561,906 368,794 Provision for income taxes ( 38,728 ) ( 31,931 ) ( 131,830 ) ( 93,165 ) Net income $ 148,835 $ 94,705 $ 430,076 $ 275,628 Earnings per common share: Basic $ 1.55 $ 1.82 $ 4.48 $ 5.32 Diluted $ 1.55 $ 1.81 $ 4.47 $ 5.27 Weighted-average common shares outstanding: Basic 95,115 51,275 95,355 51,204 Diluted 95,407 51,766 95,648 51,679 (Amounts may not add due to rounding) The accompanying Notes are an integral part of these Consolidated Financial Statements (unaudited). 4 Table of Contents TD SYNNEX CORPORATION CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME (currency in thousands) (unaudited) Three Months Ended Nine Months Ended August 31, 2022 August 31, 2021 August 31, 2022 August 31, 2021 Net income $ 148,835 $ 94,705 $ 430,076 $ 275,628 Other comprehensive (loss) income: Unrealized gains on cash flow hedges during the period, net of tax (expense) benefit of ($ 2,621 ) and ($ 184 ) for the three months ended August 31, 2022 and 2021, respectively, and ($ 9,043 ) and $ 357 for the nine months ended August 31, 2022 and 2021, respectively 8,024 500 27,654 1,696 Reclassification of net losses on cash flow hedges to net income, net of tax (benefit) of ($ 1,367 ) and ($ 2,636 ) for the three months ended August 31, 2022, and 2021, respectively, and ($ 6,051 ) and ($ 7,796 ) for the nine months ended August 31, 2022 and 2021, respectively 4,185 8,084 18,499 23,908 Total change in unrealized gains on cash flow hedges, net of taxes 12,209 8,584 46,153 25,604 Foreign currency translation adjustments, net of tax benefit (expense) of $ 22 and $ 308 for the three months ended August 31, 2022 and 2021, respectively, and ($ 84 ) and ($ 936 ) for the nine months ended August 31, 2022 and 2021, respectively ( 336,271 ) ( 20,194 ) ( 503,837 ) 8,375 Other comprehensive (loss) income ( 324,062 ) ( 11,610 ) ( 457,684 ) 33,979 Comprehensive (loss) income $ ( 175,227 ) $ 83,095 $ ( 27,608 ) $ 309,607 (Amounts may not add due to rounding) The accompanying Notes are an integral part of these Consolidated Financial Statements (unaudited). 5 Table of Contents TD SYNNEX CORPORATION CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (currency in thousands, except per share amounts) (unaudited) Three Months Ended Nine Months Ended August 31, 2022 August 31, 2021 August 31, 2022 August 31, 2021 Total Stockholders' equity, beginning balance $ 7,981,665 $ 2,255,668 $ 7,905,975 $ 4,338,860 Common stock and additional paid-in capital: Beginning balance 7,315,762 1,605,730 7,271,435 1,591,590 Share-based compensation 19,554 6,509 59,809 18,147 Common stock issued for employee benefit plans 1,944 3,503 6,016 6,006 Purchase of noncontrolling interest 2,640 — 2,640 — Ending balance 7,339,900 1,615,742 7,339,900 1,615,742 Treasury stock: Beginning balance ( 259,800 ) ( 192,171 ) ( 201,139 ) ( 191,216 ) Repurchases of common stock for tax withholdings on equity awards ( 105 ) ( 145 ) ( 5,986 ) ( 1,100 ) Repurchases of common stock ( 30,256 ) — ( 83,036 ) — Ending balance ( 290,161 ) ( 192,316 ) ( 290,161 ) ( 192,316 ) Retained earnings: Beginning balance 1,395,519 987,277 1,171,873 3,133,058 Separation of Concentrix — — — ( 2,305,982 ) Net income 148,835 94,705 430,076 275,628 Cash dividends declared ( 28,561 ) ( 10,340 ) ( 86,156 ) ( 31,062 ) Ending balance 1,515,793 1,071,642 1,515,793 1,071,642 Accumulated other comprehensive loss: Beginning balance ( 469,816 ) ( 145,169 ) ( 336,194 ) ( 194,572 ) Separation of Concentrix — — — 3,813 Other comprehensive (loss) income ( 324,062 ) ( 11,610 ) ( 457,684 ) 33,979 Ending balance ( 793,878 ) ( 156,779 ) ( 793,878 ) ( 156,779 ) Total stockholders' equity, ending balance $ 7,771,654 $ 2,338,290 $ 7,771,654 $ 2,338,290 Cash dividends declared per share $ 0.30 $ 0.20 $ 0.90 $ 0.60 (Amounts may not add due to rounding) The accompanying Notes are an integral part of these Consolidated Financial Statements (unaudited). 6 Table of Contents TD SYNNEX CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS (currency in thousands) (unaudited) Nine Months Ended August 31, 2022 August 31, 2021 Cash flows from operating activities: Net income $ 430,076 $ 275,628 Adjustments to reconcile net income to net cash (used in) provided by operating activities: Depreciation and amortization 356,643 46,794 Share-based compensation 59,809 18,147 Provision for doubtful accounts 26,270 2,679 Other 6,988 1,847 Changes in operating assets and liabilities, net of the impact of Concentrix separation: Accounts receivable, net ( 272,668 ) 571,746 Receivables from vendors, net 113,467 24,747 Inventories ( 3,353,991 ) ( 183,777 ) Accounts payable 2,220,907 ( 533,945 ) Other operating assets and liabilities 60,706 24,926 Net cash (used in) provided by operating activities ( 351,793 ) 248,791 Cash flows from investing activities: Purchases of property and equipment ( 78,522 ) ( 14,111 ) Other 1,541 11,241 Net cash used in investing activities ( 76,981 ) ( 2,870 ) Cash flows from financing activities: Dividends paid ( 86,156 ) ( 31,062 ) Repurchases of common stock ( 83,036 ) — Net borrowings (repayments) on revolving credit loans 81,992 ( 64,481 ) Principal payments on long term debt ( 71,411 ) — Proceeds from issuance of common stock 6,016 6,006 Repurchases of common stock for tax withholdings on equity awards ( 5,986 ) ( 1,100 ) Other ( 665 ) — Net transfer of cash and cash equivalents to Concentrix — ( 149,948 ) Proceeds from issuance of Bonds — 2,500,000 Debt issuance cost — ( 26,759 ) Net cash (used in) provided by financing activities ( 159,246 ) 2,232,658 Effect of exchange rate changes on cash, cash equivalents and restricted cash ( 55,916 ) 3,479 Net (decrease) increase in cash, cash equivalents and restricted cash ( 643,936 ) 2,482,057 Cash, cash equivalents and restricted cash at beginning of period 994,913 1,568,870 Cash, cash equivalents and restricted cash at end of period $ 350,977 $ 4,050,929 Supplemental disclosure of non-cash financing activities: Net assets transferred to Concentrix $ — $ 2,322,598 (Amounts may not add due to rounding) The accompanying Notes are an integral part of these Consolidated Financial Statements (unaudited). 7 Table of Contents TD SYNNEX CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS For the three and nine months ended August 31, 2022 and 2021 ( Except per share amounts or as otherwise indicated, currency and share amounts in thousands ) (unaudited) NOTE 1— ORGANIZATION AND BASIS OF PRESENTATION: TD SYNNEX Corporation (together with its subsidiaries, herein referred to as “SYNNEX”, "TD SYNNEX" or the “Company”) is a leading global distributor and solutions aggregator for the information technology ("IT") ecosystem, headquartered in Fremont, California and Clearwater, Florida and has operations in North and South America, Europe and Asia-Pacific and Japan. On December 1, 2020, the Company completed the previously announced separation of its customer experience services business (the “Separation”), in a tax-free transaction for federal income tax purposes, which was accomplished by the distribution of one hundred percent of the outstanding common stock of Concentrix Corporation (“Concentrix”). SYNNEX stockholders received one share of Concentrix common stock for every share of SYNNEX common stock held at the close of business on the record date. The Company distributed 51.6 million shares of Concentrix common stock to its stockholders. Concentrix is now an independent public company trading under the symbol “CNXC” on the Nasdaq Stock Market. After the Separation, the Company does not beneficially own any shares of Concentrix’ common stock. Beginning December 1, 2020, the Company no longer consolidates Concentrix within its financial results or reflects the financial results of Concentrix within its continuing results of operations. In connection with the Separation, the Company and Concentrix entered into a separation and distribution agreement as well as various other agreements that provide a framework for the relationships between the parties going forward, including among others an employee matters agreement, a tax matters agreement, and a commercial agreement, pursuant to which Concentrix will continue to provide certain limited services to the Company following the Separation. On March 22, 2021, SYNNEX entered into an agreement and plan of merger (the “Merger Agreement”) which provided that legacy SYNNEX Corporation would acquire legacy Tech Data Corporation, a Florida corporation ("Tech Data") through a series of mergers, which would result in Tech Data becoming an indirect subsidiary of TD SYNNEX Corporation (collectively, the "Merger"). On September 1, 2021, pursuant to the terms of the Merger Agreement, the Company acquired all the outstanding shares of common stock of Tiger Parent (AP) Corporation, the parent corporation of Tech Data, for consideration of $ 1.61 billion in cash ($ 1.11 billion in cash after giving effect to a $ 500 million equity contribution by Tiger Parent Holdings, L.P., Tiger Parent (AP) Corporation's sole stockholder and an affiliate of Apollo Global Management, Inc., to Tiger Parent (AP) Corporation prior to the effective time of the Merger) and 44 million shares of common stock of SYNNEX valued at approximately $ 5.61 billion. The combined company is referred to as TD SYNNEX. References to the "Company" indicate TD SYNNEX for periods after the Merger and SYNNEX for periods prior to the Merger. The Consolidated Financial Statements include the accounts of the Company, its wholly-owned subsidiaries, majority-owned subsidiaries in which no substantive participating rights are held by minority stockholders and variable interest entities if the Company is the primary beneficiary. All intercompany accounts and transactions have been eliminated. The Company operates on a fiscal year that ends on November 30. The accompanying interim unaudited Consolidated Financial Statements as of August 31, 2022 and for the three and nine months ended August 31, 2022 and 2021 have been prepared by the Company, without audit, in accordance with the rules and regulations of the United States ("U.S.") Securities and Exchange Commission ("SEC"). 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, 2021. 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. 8 Table of Contents TD SYNNEX CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS For the three and nine months ended August 31, 2022 and 2021 ( Except per share amounts or as otherwise indicated, currency and share amounts in thousands ) (unaudited) 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, 2021. Accounting pronouncements adopted during the nine months ended August 31, 2022 are discussed below. Use of Estimates The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenue and expense during the reporting period. The Company evaluates these estimates on a regular basis and bases them on historical experience and on various assumptions that the Company believes are reasonable. The COVID-19 pandemic has negatively impacted the global economy, disrupted global supply chains and work force participation and created volatility and disruption of financial markets. Despite improvements in the global economy since the onset of the pandemic, resurgences of COVID-19 variants and the related impacts bring uncertainty to continued economic recovery. As a result, the Company cannot at this time accurately predict what effects these conditions will have on its operations and financial condition, including due to the uncertainties relating to the severity and duration of the pandemic, the effect on its customers and customer demand and the length of the restrictions and closures imposed by various governments, including recent restrictions and closures within the Asia-Pacific region. Consequently, many of the estimates and assumptions required increased judgment and carry a higher degree of variability and volatility. As events continue to evolve and additional information becomes available, these estimates may change in future periods. Actual results could differ from the estimates. 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. The Company has not experienced any material 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. 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 expected credit losses. In estimating the required allowances, the Company takes into consideration the overall quality and aging of its receivable portfolio, the existence of credit insurance and specifically identified customer and vendor risks. The Company also considers risks attributed to COVID-19 in establishing the required allowances. The following table provides revenue generated from products purchased from vendors that exceeded 10% of our consolidated revenue for the periods indicated (as a percent of consolidated revenue): Three Months Ended Nine Months Ended August 31, 2022 August 31, 2021 August 31, 2022 August 31, 2021 Apple, Inc. 12 % N/A (1) 11 % N/A (1) HP Inc. 10 % 13 % 10 % 13 % ( 1) Revenue generated from products purchased from this vendor was less than 10% of consolidated revenue during the period presented. 9 Table of Contents TD SYNNEX CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS For the three and nine months ended August 31, 2022 and 2021 ( Except per share amounts or as otherwise indicated, currency and share amounts in thousands ) (unaudited) One customer accounted for 12 % of the Company's total revenue during the three months ended August 31, 2022. No single customer accounted for more than 10% of the Company's total revenue during the nine months ended August 31, 2022. One customer accounted for 23 % and 29 % of the Company’s total revenue during the three and nine months ended August 31, 2021, respectively. As of August 31, 2022 and November 30, 2021, no single customer comprised more than 10% of the consolidated accounts receivable balance. Accounts Receivable The Company maintains an allowance for doubtful accounts as an estimate to cover the future expected credit losses resulting from uncertainty regarding collections from customers or OEM vendors to make payments for outstanding balances. In estimating the required allowance, the Company takes into consideration historical credit losses, current conditions and reasonable and supportable forecasts. Adjustments to historical loss information are made for differences in current conditions as well as changes in forecasted macroeconomic conditions, such as changes in unemployment rates or gross domestic product growth. Expected credit losses are estimated on a pool basis when similar risk characteristics exist using an age-based reserve model. Receivables that do not share risk characteristics are evaluated on an individual basis. The Company has uncommitted supply-chain financing programs with global financial institutions under which trade accounts receivable of certain customers and their affiliates may be acquired, without recourse, by the financial institutions. Available capacity under these programs is dependent on the level of the Company’s trade accounts receivable with these customers and the financial institutions’ willingness to purchase such receivables. In addition, certain of these programs also require that the Company continue to service, administer and collect the sold accounts receivable. As of August 31, 2022 and November 30, 2021, accounts receivable sold to and held by the financial institutions under these programs were $ 1.35 billion and $ 759.9 million, respectively. Discount fees related to the sale of trade accounts receivable under these facilities are included in “Interest expense and finance charges, net” in the Consolidated Statements of Operations. Discount fees for these programs totaled $ 5.0 million and $ 11.9 million in the three and nine months ended August 31, 2022, respectively, and $ 0.6 million and $ 1.8 million in the three and nine months ended August 31, 2021, respectively. 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 projects and integration-based completed systems. Work-in-process inventories are not material to the Consolidated Financial Statements. Segments Operating segments are based on components of the Company that engage in business activities that earn revenues and incur expenses (a) whose operating results are regularly reviewed by the Company’s chief operating decision maker to make decisions about resource allocation and performance and (b) for which discrete financial information is available. Prior to the Separation, the Company had two reportable segments: Technology Solutions and Concentrix. After giving effect to the Separation of the Concentrix segment, the Company operated with one reportable segment: Technology Solutions. After completion of the Merger, the Company reviewed its reportable segments as there was a change in its chief executive officer, who is also the Company’s chief operating decision maker. The Company’s chief operating decision maker has a leadership structure aligned with the geographic regions of the Americas, Europe and Asia-Pacific and Japan (“APJ”) and reviews and allocates resources based on these geographic regions. As a result, as of September 1, 2021 the Company began operating in three reportable segments based on its geographic regions: the Americas, Europe and APJ. Seasonality The Company's operating results are affected by the seasonality of the IT products industry. The Company has historically experienced higher sales in the first and fourth fiscal quarters due to patterns in capital budgeting, government spending and purchasing cycles of its customers and end-users. These historical patterns may not be repeated in subsequent periods. 10 Table of Contents TD SYNNEX CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS For the three and nine months ended August 31, 2022 and 2021 ( Except per share amounts or as otherwise indicated, currency and share amounts in thousands ) (unaudited) Revenue Recognition The Company generates revenue primarily from the sale of various IT products. 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. 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. 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. 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 software products. 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 products. Revenue is presented net of taxes collected from customers and remitted to government authorities. The Company generally invoices a customer upon shipment, or in accordance with specific contractual provisions. Payments are due as per contract terms and do not contain a significant financing component. Service revenues represents less than 10 % of the total revenue for the periods presented. 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. The Company considers shipping and handling activities as costs to fulfill the sale of products. Shipping revenue is included in revenue when control of the product is transferred to the customer, and the related shipping and handling costs are included in cost of revenue. Reclassifications Certain reclassifications have been made to prior period amounts in the Consolidated Financial Statements to conform to the current period presentation. These reclassifications did not have a material impact on previously reported amounts. Recently Adopted Accounting Pronouncements In December 2019, the Financial Accounting Standards Board ("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 adoption of this new guidance did not have a material impact on the Company's Consolidated Financial Statements. In October 2021, the FASB issued new guidance which requires contract assets and contract liabilities acquired in a business combination to be recognized and measured by the acquirer on the acquisition date in accordance with Accounting Standards Codification ("ASC") 606, “Revenue from Contracts with Customers.” Generally, this new guidance will result in the acquirer recognizing contract assets and contract liabilities at the same amounts recorded by the acquiree. Historically, such amounts were recognized by the acquirer at fair value in acquisition accounting. The guidance is effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years (the fiscal 11 Table of Contents TD SYNNEX CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS For the three and nine months ended August 31, 2022 and 2021 ( Except per share amounts or as otherwise indicated, currency and share amounts in thousands ) (unaudited) quarter ending February 28, 2023 for the Company), and should be applied prospectively to acquisitions occurring on or after the effective date. Early adoption is permitted. The Company adopted this standard during the fiscal quarter ended February 28, 2022 and will apply the guidance prospectively to future acquisitions. Recently Issued Accounting Pronouncements In March 2020, 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, and subject to a proposed extension to December 31, 2024. The Company does not currently expect any material impacts from the adoption of this new guidance. NOTE 3— ACQUISITIONS: Tech Data Merger On September 1, 2021, pursuant to the terms of the Merger Agreement, the Company acquired all the outstanding shares of common stock of Tiger Parent (AP) Corporation, the parent corporation of Tech Data, for an aggregate purchase price of $ 7.22 billion, comprised of $ 1.61 billion in cash ($ 1.11 billion in cash after giving effect to a $ 500 million equity contribution by Tiger Parent Holdings, L.P., Tiger Parent (AP) Corporation’s sole stockholder and an affiliate of Apollo Global Management, Inc., to Tiger Parent (AP) Corporation prior to the effective time of the Merger) and 44 million shares of common stock of SYNNEX, valued at approximately $ 5.61 billion based on the closing price of the Company’s common stock on September 1, 2021. The Merger created a leading global distributor and solutions aggregator for the IT ecosystem. The Company used the net proceeds from the issuance of new Senior Notes, borrowings under its new credit agreement and cash on hand to fund the above payments. Additionally, the Company repaid the majority of Tech Data's outstanding debt after the Merger, including approximately $ 2.4 billion outstanding under Tech Data’s existing Asset-Based Credit Agreement and approximately $ 0.2 billion of outstanding Tech Data Senior Notes. The Company has accounted for the Merger as a business combination and allocated the purchase price to the fair values of Tiger Parent (AP) Corporation’s assets acquired and liabilities assumed. As of August 31, 2022, the Company has completed its evaluation of assets acquired and liabilities assumed and finalized all related estimates. During the nine months ended August 31, 2022, the Company updated the fair values of certain assets acquired and liabilities assumed, including an increase in goodwill of $ 44 million, an increase in deferred tax liabilities of $ 38 million, a decrease in net vendor receivables of $ 21 million and an increase in inventory of $ 9 million. As the measurement period has concluded, the impact of any future adjustments to the assets acquired and liabilities assumed will be recorded in the Consolidated Statement of Operations in the period such change occurs. 12 Table of Contents TD SYNNEX CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS For the three and nine months ended August 31, 2022 and 2021 ( Except per share amounts or as otherwise indicated, currency and share amounts in thousands ) (unaudited) The allocation of the purchase price is as follows: Cash and cash equivalents $ 702,907 Accounts receivable, net 5,156,809 Receivables from vendors, net 709,629 Inventories 3,002,641 Other current assets 397,807 Property and equipment 347,532 Goodwill 3,588,317 Intangible assets 4,933,900 Other assets 473,194 Total assets 19,312,736 Borrowings, current 493,076 Accounts payable 6,613,664 Other accrued liabilities 1,251,049 Long-term borrowings 2,218,672 Other long-term liabilities 412,526 Deferred tax liabilities 1,099,349 Total liabilities 12,088,336 Purchase consideration $ 7,224,400 The allocation of the value of identifiable intangible assets is as follows: Fair value Weighted average useful life Customer relationships $ 3,860,200 14 years Trade name 1,073,700 Indefinite lived Total intangibles acquired $ 4,933,900 Goodwill is the excess of the consideration transferred over the net assets recognized and primarily represents future economic benefits arising from assets acquired that are not individually identified and separately recognized, including synergies inherent in the acquired business, of which approximately $ 500 million is expected to be deductible for tax purposes. Included within the Company’s Consolidated Statement of Operations are revenues for the nine months ended August 31, 2022, of approximately $ 28 billion from Tech Data. As the Company began integrating certain sales and other functions after the closing of the acquisition, these amounts represent an estimate of the Tech Data revenues for the nine months ended August 31, 2022. It is not necessarily indicative of how the Tech Data operations would have performed on a stand-alone basis. As a result of certain integration activities subsequent to the date of acquisition, it is impracticable to disclose net income from Tech Data for the period subsequent to the acquisition date. 13 Table of Contents TD SYNNEX CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS For the three and nine months ended August 31, 2022 and 2021 ( Except per share amounts or as otherwise indicated, currency and share amounts in thousands ) (unaudited) The following table presents unaudited supplemental pro forma information as if the Merger had occurred at the beginning of fiscal 2020, after giving effect to certain adjustments related to the transaction. The pro forma results exclude any benefits that may result from potential cost savings and certain non-recurring costs. As a result, the pro forma information below does not purport to present what actual results would have been had the Merger been consummated on the date indicated and it is not necessarily indicative of the results of operations that may result in the future. Three Months Ended Nine Months Ended August 31, 2021 August 31, 2021 Revenue $ 14,339,201 $ 45,012,301 Net income $ 111,215 $ 355,919 Adjustments reflected in the pro forma results include the following: • Amortization of acquired intangible assets • Interest costs associated with the Merger • Tax effects of adjustments based on an estimated statutory tax rate NOTE 4— ACQUISITION, INTEGRATION AND RESTRUCTURING COSTS: Acquisition, integration and restructuring costs are primarily comprised of costs related to the Merger and costs related to the Global Business Optimization 2 Program initiated by Tech Data prior to the Merger (the “GBO 2 Program”). The Merger The Company incurred acquisition, integration and restructuring costs related to the completion of the Merger, including professional services costs, personnel and other costs, long-lived assets charges and stock-based compensation expense. Professional services costs are primarily comprised of IT and other consulting services, as well as legal expenses. Personnel and other costs are primarily comprised of costs related to retention and other bonuses, as well as severance and duplicative labor costs. Long-lived assets charges are primarily comprised of accelerated depreciation and amortization expense of $ 57.3 million recorded during the nine months ended August 31, 2022 due to changes in asset useful lives in conjunction with the consolidation of certain IT systems, as well as impairment charges. Stock-based compensation expense primarily relates to costs associated with the conversion of certain Tech Data performance-based equity awards issued prior to the Merger into restricted shares of TD SYNNEX (refer to Note 5 - Share-Based Compensation for further information) and expenses for certain restricted stock awards issued in conjunction with the Merger. During the three and nine months ended August 31, 2022 and August 31, 2021, acquisition and integration expenses related to the Merger were composed of the following: Three Months Ended Nine Months Ended August 31, 2022 August 31, 2021 August 31, 2022 August 31, 2021 Professional services costs $ 6,514 $ 3,114 $ 20,455 $ 7,109 Personnel and other costs 11,699 1,019 27,047 2,959 Long-lived assets charges 8,693 — 61,564 — Stock-based compensation 12,911 — 39,376 — Total $ 39,817 $ 4,133 $ 148,442 $ 10,068 GBO 2 Program Prior to the Merger, Tech Data implemented its GBO 2 Program that includes investments to optimize and standardize processes and apply data and analytics to be more agile in a rapidly evolving environment, increasing productivity, profitability and optimizing net-working capital. TD SYNNEX continued this program in conjunction with the Company’s integration activities. Acquisition, integration and restructuring expenses related to the GBO 2 Program are primarily comprised of restructuring costs and other costs. Restructuring costs are comprised of severance costs and other 14 Table of Contents TD SYNNEX CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS For the three and nine months ended August 31, 2022 and 2021 ( Except per share amounts or as otherwise indicated, currency and share amounts in thousands ) (unaudited) associated exit costs, including certain consulting costs. Other costs are primarily comprised of personnel costs, facilities costs and certain professional services fees not related to restructuring activities. Acquisition, integration and restructuring costs under the GBO 2 Program for fiscal 2022 included the following: Three Months Ended Nine Months Ended August 31, 2022 August 31, 2022 Restructuring costs $ 4,654 $ 15,438 Other costs 1,947 8,386 Total $ 6,601 $ 23,824 Restructuring costs under the GBO 2 Program for fiscal 2022 were composed of the following: Three Months Ended Nine Months Ended August 31, 2022 August 31, 2022 Severance $ 2,099 $ 3,200 Other exit costs 2,555 12,238 Total $ 4,654 $ 15,438 Restructuring costs related to the GBO 2 Program by segment are as follows: Three Months Ended Nine Months Ended August 31, 2022 August 31, 2022 Americas $ 1,354 $ 4,776 Europe 3,248 10,193 APJ 52 469 Total 4,654 $ 15,438 Restructuring activity during the nine months ended August 31, 2022 related to the GBO 2 Program is as follows: Severance and Benefits Other Exit Costs Total Accrued balance as of November 30, 2021 $ 4,918 $ 1,591 $ 6,509 Expenses 3,200 12,238 15,438 Cash payments ( 4,956 ) ( 12,898 ) ( 17,854 ) Foreign currency translation ( 29 ) ( 429 ) ( 458 ) Accrued balance as of August 31, 2022 $ 3,133 $ 502 $ 3,635 15 Table of Contents TD SYNNEX CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS For the three and nine months ended August 31, 2022 and 2021 ( Except per share amounts or as otherwise indicated, currency and share amounts in thousands ) (unaudited) NOTE 5— SHARE-BASED COMPENSATION: Overview of TD SYNNEX Stock Incentive Plans The Company recognizes share-based compensation expense for all share-based awards made to employees and directors, including employee stock options, restricted stock awards ("RSAs"), restricted stock units ("RSUs"), performance-based RSUs and employee stock purchases, based on estimated fair values. The following tables summarize the Company's share-based awards activity for TD SYNNEX stock incentive plans during the nine months ended August 31, 2022. A summary of the changes in the Company's stock options is set forth below: Stock options Balances, November 30, 2021 689 Granted 9 Exercised ( 59 ) Balances, August 31, 2022 639 A summary of the changes in the Company's non-vested RSAs and RSUs is presented below: RSAs and RSUs Nonvested at November 30, 2021 1,066 Granted 257 Vested ( 172 ) Canceled ( 68 ) Nonvested at August 31, 2022 1,083 A summary of share-based compensation expense in the Consolidated Statements of Operations for TD SYNNEX stock incentive plans is presented below: Three Months Ended Nine Months Ended August 31, 2022 August 31, 2021 August 31, 2022 August 31, 2021 Selling, general and administrative expenses $ 6,643 $ 6,509 $ 20,431 $ 18,147 Acquisition, integration and restructuring costs (on awards issued in connection with the Merger ) 1,511 — 4,910 — Total share-based compensation expense $ 8,154 $ 6,509 $ 25,341 $ 18,147 Tech Data Equity Awards Prior to the Merger, certain of Tech Data’s employees were granted performance-based equity awards in Tiger Parent Holdings L.P., a partnership entity that was the parent company of Tiger Parent (AP) Corporation and Tech Data, that were unvested at the time of the closing of the Merger. Upon closing of the Merger, the unvested performance-based equity awards were converted into restricted shares of TD SYNNEX that vest over two years . 16 Table of Contents TD SYNNEX CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS For the three and nine months ended August 31, 2022 and 2021 ( Except per share amounts or as otherwise indicated, currency and share amounts in thousands ) (unaudited) The following table summarizes the activity related to these restricted shares during the nine months ended August 31, 2022: Restricted shares Nonvested at November 30, 2021 751 Vested ( 6 ) Canceled ( 32 ) Nonvested at August 31, 2022 713 The restricted shares had a fair value of $ 127.60 per share upon closing of the Merger which is being recorded as share-based compensation expense on a straight-line basis over the vesting period in “Acquisition, integration, and restructuring costs” in the Consolidated Statement of Operations. The Company recorded $ 11.4 million and $ 34.5 million of share-based compensation expense related to these restricted shares in “Acquisition, integration, and restructuring costs” during the three and nine months ended August 31, 2022, respectively. As of August 31, 2022, there was $ 45.5 million of total unamortized share-based compensation expense related to these restricted shares to be recognized over a weighted-average amortization period of 1 year. An additional 357 shares vested on September 1, 2022, one year after the date of the Merger. 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 August 31, 2022 November 30, 2021 Cash and cash equivalents $ 350,810 $ 993,973 Restricted cash included in other current assets 167 940 Cash, cash equivalents and restricted cash $ 350,977 $ 994,913 Accounts receivable, net: As of August 31, 2022 November 30, 2021 Accounts receivable $ 8,237,588 $ 8,424,868 Less: Allowance for doubtful accounts ( 123,584 ) ( 114,836 ) Accounts receivable, net $ 8,114,004 $ 8,310,032 Receivables from vendors, net: As of August 31, 2022 November 30, 2021 Receivables from vendors $ 954,525 $ 1,130,091 Less: Allowance for doubtful accounts ( 12,414 ) ( 11,128 ) Receivables from vendors, net $ 942,111 $ 1,118,963 17 Table of Contents TD SYNNEX CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS For the three and nine months ended August 31, 2022 and 2021 ( Except per share amounts or as otherwise indicated, currency and share amounts in thousands ) (unaudited) Allowance for doubtful trade receivables: Balance at November 30, 2021 $ 114,836 Additions 26,270 Write-offs, reclassifications and foreign exchange translation ( 17,522 ) Balance at August 31, 2022 $ 123,584 Allowance for doubtful receivables from vendors: Balance at November 30, 2021 $ 11,128 Additions 2,344 Write-offs, reclassifications and foreign exchange translation ( 1,058 ) Balance at August 31, 2022 $ 12,414 Accumulated other comprehensive loss: The components of accumulated other comprehensive loss (“AOCI”), net of taxes, were as follows: Unrealized gains (losses) on cash flow hedges, net of taxes Foreign currency translation adjustment and other, net of taxes Total Balance as of November 30, 2021 $ ( 48,803 ) $ ( 287,391 ) $ ( 336,194 ) Other comprehensive income (loss) before reclassification 27,654 ( 503,837 ) ( 476,183 ) Reclassification of losses from accumulated other comprehensive loss 18,499 — 18,499 Balance as of August 31, 2022 $ ( 2,650 ) $ ( 791,228 ) $ ( 793,878 ) Refer to Note 7 - Derivative Instruments for the location of gains and losses reclassified from AOCI to the Consolidated Statements of Operations. 18 Table of Contents TD SYNNEX CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS For the three and nine months ended August 31, 2022 and 2021 ( Except per share amounts or as otherwise indicated, currency and share amounts in thousands ) (unaudited) NOTE 7— DERIVATIVE INSTRUMENTS: In the ordinary course of business, the Company is exposed to foreign currency risk, interest rate risk, equity risk, commodity price changes and credit risk. The Company enters into transactions, and owns monetary assets and liabilities, that are denominated in currencies other than the legal entity’s functional currency. The Company may enter into forward contracts, option contracts, swaps, or other derivative instruments to offset a portion of the risk on expected future cash flows, earnings, net investments in certain international subsidiaries and certain existing assets and liabilities. However, the Company may choose not to hedge certain exposures for a variety of reasons including, but not limited to, accounting considerations and the prohibitive economic cost of hedging particular exposures. There can be no assurance the hedges will offset more than a portion of the financial impact resulting from movements in foreign currency exchange or interest rates. The Company does not use derivative instruments to cover equity risk and credit risk. The Company’s hedging program is not used for trading or speculative purposes. All derivatives are recognized on the balance sheet at their fair value. Changes in the fair value of derivatives are recorded in the Consolidated Statements of Operations, or as a component of AOCI in the Consolidated Balance Sheets, as discussed below. Cash Flow Hedges The Company uses interest rate swap derivative contracts to economically convert a portion of its variable-rate debt to fixed-rate debt. The swaps have maturities at various dates through October 2023 . Gains and losses on cash flow hedges are recorded in AOCI until the hedged item is recognized in earnings. Deferred gains and losses associated with cash flow hedges of interest payments are recognized in “Interest expense and finance charges, net” in the same period as the related expense is recognized. Derivative instruments designated as cash flow hedges must be de-designated as hedges when it is probable the forecasted hedged transaction will not occur in the initially identified time period or within a subsequent two-month time period. Deferred gains and losses in AOCI associated with such derivative instruments are reclassified into earnings in the period of de-designation. Any subsequent changes in fair value of such derivative instruments are recorded in earnings unless they are re-designated as hedges of other transactions. Non-Designated Derivatives The Company uses short-term forward contracts to offset the foreign exchange risk of assets and liabilities denominated in currencies other than the functional currency of the respective entities. These contracts, which are not designated as hedging instruments, mature or settle within twelve months . Derivatives that are not designated as hedging instruments are adjusted to fair value through earnings in the financial statement line item to which the derivative relates. 19 Table of Contents TD SYNNEX CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS For the three and nine months ended August 31, 2022 and 2021 ( Except per share amounts or as otherwise indicated, currency and share amounts in thousands ) (unaudited) Fair Values of Derivative Instruments in the Consolidated Balance Sheets The fair values of the Company’s derivative instruments are disclosed in Note 8 - Fair Value Measurements and summarized in the table below: Value as of Balance Sheet Line Item August 31, 2022 November 30, 2021 Derivative instruments not designated as hedging instruments: Foreign exchange forward contracts (notional value) $ 1,645,291 $ 1,217,595 Other current assets 21,910 13,764 Other accrued liabilities 10,715 2,992 Derivative instruments designated as cash flow hedges: Interest rate swaps (notional value) $ 1,100,000 $ 1,500,000 Other current assets 6,690 — Other assets, net 1,157 — Other accrued liabilities — 38,670 Other long-term liabilities — 24,151 The Company terminated interest rate swaps with a notional value of $ 400 million in December 2021. Cumulative losses on the terminated interest rate swaps of $ 16 million will be reclassified from AOCI to “Interest expense and finance charges, net” over the period through September 2023 . Volume of Activity The notional amounts of foreign exchange forward contracts represent the gross amounts of foreign currency, including, principally, the Australian dollar, Brazilian real, British pound, Canadian dollar, Chinese yuan, Czech koruna, Danish krone, Euro, Indian rupee, Indonesian rupiah, Japanese yen, Mexican peso, Norwegian krone, Philippine peso, Polish zloty, Singapore dollar, Swedish krona, Swiss franc and Turkish lira that will be bought or sold at maturity. The notional amounts for outstanding derivative instruments provide one measure of the transaction volume outstanding and do not represent the amount of the Company’s exposure to credit or market loss. The Company’s exposure to credit loss and market risk will vary over time as currency and interest rates change. 20 Table of Contents TD SYNNEX CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS For the three and nine months ended August 31, 2022 and 2021 ( Except per share amounts or as otherwise indicated, currency and share amounts in thousands ) (unaudited) The Effect of Derivative Instruments on AOCI and the Consolidated Statements of Operations The following table shows the gains and losses, before taxes, of the Company’s derivative instruments designated as cash flow hedges in Other Comprehensive Income (“OCI”) and not designated as hedging instruments in the Consolidated Statements of Operations for the periods presented: Three Months Ended Nine Months Ended Location of Gains (Losses) in Income August 31, 2022 August 31, 2021 August 31, 2022 August 31, 2021 Derivative instruments designated as cash flow hedges: Gains recognized in OCI on interest rate swaps $ 10,645 $ 684 $ 36,696 $ 1,339 Losses on interest rate swaps reclassified from AOCI into income Interest expense and finance charges, net $ ( 5,552 ) $ ( 10,721 ) $ ( 24,550 ) $ ( 31,704 ) Derivative instruments not designated as hedging instruments: Gains recognized from foreign exchange forward contracts, net (1) Cost of revenue $ 36,804 $ — $ 40,922 $ — (Losses) gains recognized from foreign exchange forward contracts, net (1) Other (expense) income, net ( 3,285 ) 1,782 $ ( 4,444 ) $ ( 7,347 ) Losses recognized from interest rate swaps, net Interest expense and finance charges, net — — — ( 128 ) Total $ 33,519 $ 1,782 $ 36,478 $ ( 7,475 ) ____________________________ (1) The gains and losses largely offset the currency gains and losses that resulted from changes in the assets and liabilities denominated in nonfunctional currencies. There were no material gain or loss amounts excluded from the assessment of effectiveness. Existing net losses in AOCI that are expected to be reclassified into earnings in the normal course of business within the next twelve months are $ 2 million. Credit exposure for derivative financial instruments is limited to the amounts, if any, by which the counterparties’ obligations under the contracts exceed the Company’s obligations to the counterparties. The Company manages the potential risk of credit losses through careful evaluation of counterparty credit standing and selection of counterparties from a limited group of financial institutions. On September 20, 2022, the Company entered into foreign currency forward contracts with an aggregate notional value of $ 524 million to hedge a portion of its net investment in Euro denominated foreign operations which are designated as net investment hedges. The Company entered into the net investment hedges to offset the risk of change in the U.S. dollar value of the Company's investments in Euro functional subsidiaries due to fluctuating foreign exchange rates. Beginning in the fourth quarter of fiscal year 2022, the gains and losses on net investment hedges will be recorded in other comprehensive income (loss) until the sale or substantially complete liquidation of the underlying assets of the Company's investment. The initial fair value of hedge components excluded from the assessment of effectiveness will be recognized in the Consolidated Statement of Operations under a systematic and rational method over the life of the hedging instrument. 21 Table of Contents TD SYNNEX CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS For the three and nine months ended August 31, 2022 and 2021 ( Except per share amounts or as otherwise indicated, currency and share amounts in thousands ) (unaudited) NOTE 8— FAIR VALUE MEASUREMENTS: The Company’s fair value measurements are classified and disclosed in one of the following three categories: Level 1: Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities; Level 2: Quoted prices in markets that are not active, or inputs which are observable, either directly or indirectly, for substantially the full term of the asset or liability; and Level 3: Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (i.e., supported by little or no market activity). The following table summarizes the valuation of the Company’s investments and financial instruments that are measured at fair value on a recurring basis: As of August 31, 2022 As of November 30, 2021 Fair value measurement category Fair value measurement category Total Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3 Assets: Forward foreign currency exchange contracts $ 21,910 $ — $ 21,910 $ — $ 13,764 $ — $ 13,764 $ — Interest rate swaps 7,847 — 7,847 — — — — — Liabilities: Forward foreign currency exchange contracts $ 10,715 $ — $ 10,715 $ — $ 2,992 $ — $ 2,992 $ — Interest rate swaps — — — — 62,821 — 62,821 — The fair values of forward exchange contracts are measured based on the foreign currency spot and forward rates quoted by the banks or foreign currency dealers. Fair values of interest rate swaps are measured using standard valuation models using inputs that are readily available in public markets, or can be derived from observable market transactions, including LIBOR spot and forward rates. The effect of nonperformance risk on the fair value of derivative instruments was not material as of August 31, 2022 and November 30, 2021. The carrying values of accounts receivable, accounts payable and short-term debt approximate fair value due to their short maturities and interest rates which are variable in nature. The carrying value of the Company’s term loans approximate their fair value since they bear interest rates that are similar to existing market rates. The estimated fair value of the Senior Notes was approximately $ 2.16 billion and $ 2.45 billion at August 31, 2022 and November 30, 2021, respectively. During the nine months ended August 31, 2022, there were no transfers between the fair value measurement category levels. 22 Table of Contents TD SYNNEX CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS For the three and nine months ended August 31, 2022 and 2021 ( Except per share amounts or as otherwise indicated, currency and share amounts in thousands ) (unaudited) NOTE 9— BORROWINGS: Borrowings consist of the following: As of August 31, 2022 November 30, 2021 Committed and uncommitted revolving credit facilities and borrowings $ 177,190 $ 106,256 Current portion of TD SYNNEX term loan 75,000 75,000 Borrowings, current $ 252,190 $ 181,256 TD SYNNEX term loan $ 1,368,750 $ 1,425,000 TD SYNNEX Senior Notes 2,500,000 2,500,000 Other credit agreements and long-term debt 49,579 72,258 Long-term borrowings, before unamortized debt discount and issuance costs $ 3,918,329 $ 3,997,258 Less: unamortized debt discount and issuance costs ( 36,082 ) ( 42,082 ) Long-term borrowings $ 3,882,247 $ 3,955,176 TD SYNNEX United States Accounts Receivable Securitization Arrangement In the United States, the Company has an accounts receivable securitization program to provide additional capital for its operations (the “U.S. AR Arrangement”). U nder the terms of the U.S. AR Arrangement, the Company and its subsidiaries that are party to the U.S. AR Arrangement can borrow up to a maximum of $ 1.5 billion based upon eligible trade accounts receivable. The U.S. AR Arrangement has a maturity date of December 2024. The effective borrowing cost under the U.S. AR Arrangement is a blended rate based upon the composition of the lenders, that includes prevailing dealer commercial paper rates and a rate based upon SOFR. In addition, a program fee payable on the used portion of the lenders’ commitment accrues at 0.75 % per annum. A facility fee is payable on the adjusted commitment of the lenders, to accrue at different tiers ranging between 0.30 % per annum and 0.40 % per annum depending on the amount of outstanding advances from time to time. Under the terms of the U.S. AR Arrangement, the Company and certain of its U.S. subsidiaries sell, on a revolving basis, their receivables (other than certain excluded receivables) to a wholly-owned, bankruptcy-remote subsidiary. Such receivables, which are recorded in the Consolidated Balance Sheet, totaled approximately $ 2.9 billion as of August 31, 2022. The borrowings are funded by pledging all of the rights, title and interest in the receivables acquired by the Company's bankruptcy-remote subsidiary as security. Any amounts received under the U.S. AR Arrangement are recorded as debt on the Company's Consolidated Balance Sheets. There were no amounts outstanding under the U.S. AR Arrangement at August 31, 2022 or November 30, 2021. TD SYNNEX Credit Agreement The Company is party to a credit agreement, dated as of April 16, 2021 (the “TD SYNNEX Credit Agreement”) with the lenders party thereto and Citibank, N.A., as agent, pursuant to which the Company received commitments for the extension of a senior unsecured revolving credit facility not to exceed an aggregate principal amount of $ 3.5 billion, which revolving credit facility (the “TD SYNNEX revolving credit facility”) may, at the request of the Company but subject to the lenders’ discretion, potentially be increased by up to an aggregate amount of $ 500.0 million. There were no amounts outstanding under the TD SYNNEX revolving credit facility at August 31, 2022 or November 30, 2021. The TD SYNNEX Credit Agreement also includes a fully funded senior unsecured term loan (the “TD SYNNEX term loan” and, together with the TD SYNNEX revolving credit facility, the “TD SYNNEX credit facilities”) that had an original aggregate principal amount of $ 1.5 billion and has begun amortizing as described below. The borrower under the TD SYNNEX credit facilities is the Company. There are no guarantors of the TD SYNNEX credit facilities. The maturity of the TD SYNNEX credit facilities is on the fifth anniversary of the September 2021 closing date, to occur in September 2026, 23 Table of Contents TD SYNNEX CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS For the three and nine months ended August 31, 2022 and 2021 ( Except per share amounts or as otherwise indicated, currency and share amounts in thousands ) (unaudited) subject in the case of the revolving credit facility, to two one-year extensions upon the Company’s prior notice to the lenders and the agreement of the lenders to extend such maturity date. The outstanding principal amount of the TD SYNNEX term loan is payable in quarterly installments in an amount equal to 1.25 % of the original $ 1.5 billion principal balance, with the outstanding principal amount of the term loans due in full on the maturity date. Loans borrowed under the TD SYNNEX Credit Agreement bear interest, in the case of LIBOR (or successor) rate loans, at a per annum rate equal to the applicable LIBOR (or successor) rate, plus the applicable margin, which may range from 1.125 % to 1.75 %, based on the Company’s public debt rating (as defined in the TD SYNNEX Credit Agreement). The applicable margin on base rate loans is 1.00 % less than the corresponding margin on LIBOR (or successor rate) based loans. In addition to these borrowing rates, there is a commitment fee which ranges from 0.125 % to 0.300 % on any unused commitment under the TD SYNNEX revolving credit facility based on the Company’s public debt rating. The effective interest rate for the TD SYNNEX term loan was 3.91 % and 1.49 % as of August 31, 2022 and November 30, 2021, respectively. The TD SYNNEX Credit Agreement contains various loan covenants that are customary for similar facilities for similarly rated borrowers that restricts the ability of the Company and its subsidiaries to take certain actions. The TD SYNNEX Credit Agreement also contains financial covenants which require compliance with a maximum debt to EBITDA ratio and a minimum interest coverage ratio, in each case tested on the last day of each fiscal quarter commencing with the first full fiscal quarter to occur after the closing date of the TD SYNNEX credit facilities. The TD SYNNEX Credit Agreement also contains various customary events of default, including with respect to a change of control of the Company. TD SYNNEX Senior Notes On August 9, 2021, the Company completed its offering of $ 2.5 billion aggregate principal amount of senior unsecured notes, consisting of $ 700.0 million of 1.25 % senior notes due August 9, 2024 , $ 700.0 million of 1.75 % senior notes due August 9, 2026 , $ 600.0 million of 2.375 % senior notes due August 9, 2028 , and $ 500.0 million of 2.65 % senior notes due August 9, 2031 (collectively, the “Senior Notes,” and such offering, the “Senior Notes Offering”). The Company incurred $ 19.6 million towards issuance costs on the Senior Notes. The Company pays interest semi-annually on the notes on each of February 9 and August 9. The net proceeds from this offering were used to fund a portion of the aggregate cash consideration payable in connection with the Merger, refinance certain of the Company's existing indebtedness and pay related fees and expenses and for general purposes. The interest rate payable on each series of the Senior Notes will be subject to adjustment from time to time if the credit rating assigned to such series of Senior Notes is downgraded (or downgraded and subsequently upgraded). The Company may redeem the Senior Notes, at any time in whole or from time to time in part, prior to (i) August 9, 2022 (the “2024 Par Call Date”) in the case of the 2024 Senior Notes, (ii) July 9, 2026 (the “2026 Par Call Date”) in the case of the 2026 Senior Notes, (iii) June 9, 2028 (the “2028 Par Call Date”) in the case of the 2028 Senior Notes, and (iv) May 9, 2031 in the case of the 2031 Senior Notes (the “2031 Par Call Date” and, together with the 2024 Par Call Date, the 2026 Par Call Date and the 2028 Par Call Date, each, a “Par Call Date” and together, the “Par Call Dates”), at a redemption price equal to the greater of (x) 100 % of the aggregate principal amount of the applicable Senior Notes to be redeemed and (y) the sum of the present values of the remaining scheduled payments of the principal and interest on the Senior Notes, discounted to the date of redemption on a semi-annual basis at a rate equal to the sum of the applicable treasury rate plus 15 basis points for the 2024 Senior Notes, 20 basis points for the 2026 Senior Notes and 25 basis points for the 2028 Senior Notes and 2031 Senior Notes, plus in each case, accrued and unpaid interest thereon to, but excluding, the redemption date. The Company may also redeem the Senior Notes of any series at its option, at any time in whole or from time to time in part, on or after the applicable Par Call Date, at a redemption price equal to 100 % of the principal amount of the Senior Notes to be redeemed. On June 14, 2022, the Company commenced an offer to exchange (the "Exchange Offer") its outstanding unregistered Senior Notes for new registered notes (the "Exchange Notes"). The purpose of the Exchange Offer was to fulfill the Company's obligations under the applicable registration rights agreement entered into in connection with the issuance of the Senior Notes. The Company did not receive any proceeds from the Exchange Offer, and the aggregate principal amount of Exchange Notes that were issued was equal to the aggregate principal amount of Senior Notes that were surrendered pursuant to the Exchange Offer. The terms of the Exchange Notes are substantially identical to the terms 24 Table of Contents TD SYNNEX CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS For the three and nine months ended August 31, 2022 and 2021 ( Except per share amounts or as otherwise indicated, currency and share amounts in thousands ) (unaudited) of the respective series of the Senior Notes, except that the Exchange Notes are registered under the Securities Act, and certain transfer restrictions, registration rights, and additional interest provisions relating to the Senior Notes do not apply to the Exchange Notes. The Exchange Offer expired on July 14, 2022 and settlement occurred on July 15, 2022. Other Borrowings and Term Debt The Company has various other committed and uncommitted lines of credit with financial institutions, accounts receivable securitization arrangements, finance leases, short-term loans, term loans, credit facilities and book overdraft facilities, totaling approximately $ 585.0 million as of August 31, 2022. Interest rates and other terms of borrowing under these lines of credit vary by country, depending on local market conditions. There was $ 177.2 million outstanding on these facilities at August 31, 2022, at a weighted average interest rate of 6.42 %, and there was $ 106.3 million outstanding at November 30, 2021, at a weighted average interest rate of 4.59 %. Borrowings under certain of these lines of credit facilities are guaranteed by the Company or secured by eligible accounts receivable. At August 31, 2022, the Company was also contingently liable for reimbursement obligations with respect to issued standby letters of credit in the aggregate outstanding amount of $ 86.6 million. These letters of credit typically act as a guarantee of payment to certain third parties in accordance with specified terms and conditions. The maximum commitment amounts for local currency credit facilities have been translated into United States Dollars at August 31, 2022 exchange rates. Covenant Compliance The Company's credit facilities have a number of covenants and restrictions that require the Company to maintain specified financial ratios. The covenants also limit the Company’s ability to incur additional debt, create liens, enter into agreements with affiliates, modify the nature of the Company’s business and merge or consolidate. As of August 31, 2022, the Company was in compliance with the financial covenant requirements for the above arrangements. 25 Table of Contents TD SYNNEX CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS For the three and nine months ended August 31, 2022 and 2021 ( Except per share amounts or as otherwise indicated, currency and share amounts in thousands ) (unaudited) NOTE 10— EARNINGS PER COMMON SHARE: The following table sets forth the computation of basic and diluted earnings per common share for the periods indicated: Three Months Ended Nine Months Ended August 31, 2022 August 31, 2021 August 31, 2022 August 31, 2021 Basic earnings per common share: Net income attributable to common stockholders (1) $ 147,885 $ 93,512 $ 427,418 $ 272,322 Weighted-average number of common shares - basic 95,115 51,275 95,355 51,204 Basic earnings per common share $ 1.55 $ 1.82 $ 4.48 $ 5.32 Diluted earnings per common share: Net income attributable to common stockholders (1) $ 147,887 $ 93,522 $ 427,425 $ 272,348 Weighted-average number of common shares - basic 95,115 51,275 95,355 51,204 Effect of dilutive securities: Stock options and RSUs 292 491 293 475 Weighted-average number of common shares - diluted 95,407 51,766 95,648 51,679 Diluted earnings per common share $ 1.55 $ 1.81 $ 4.47 $ 5.27 Anti-dilutive shares excluded from diluted earnings per share calculation 235 — 241 7 ____________________________ (1) RSAs granted by the Company are considered participating securities. Income available to participating securities was immaterial in all periods presented. 26 Table of Contents TD SYNNEX CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS For the three and nine months ended August 31, 2022 and 2021 ( Except per share amounts or as otherwise indicated, currency and share amounts in thousands ) (unaudited) NOTE 11— SEGMENT INFORMATION: Segment results for all prior periods have been restated for comparability to the Company’s current reportable segments (see Note 1 – Organization and Basis of Presentation for further discussion). Summarized financial information related to the Company’s reportable business segments for the periods presented is shown below: Americas Europe APJ Consolidated Three Months Ended August 31, 2022 Revenue $ 9,900,779 $ 4,681,797 $ 773,509 $ 15,356,085 Operating income 180,471 44,260 16,803 241,534 Three Months Ended August 31, 2021 Revenue $ 4,609,909 $ 252,478 $ 344,677 $ 5,207,064 Operating income 132,053 10,171 5,980 148,204 Nine Months Ended August 31, 2022 Revenue $ 28,751,985 $ 14,914,196 $ 2,429,672 $ 46,095,853 Operating income 511,813 150,117 54,781 716,711 Nine Months Ended August 31, 2021 Revenue $ 14,006,109 $ 688,474 $ 1,308,321 $ 16,002,904 Operating income 373,101 33,973 30,779 437,853 Americas Europe APJ Consolidated Total Assets As of: August 31, 2022 $ 17,483,227 $ 9,938,152 $ 1,670,689 $ 29,092,068 November 30, 2021 15,708,483 10,657,886 1,300,011 27,666,380 27 Table of Contents TD SYNNEX CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS For the three and nine months ended August 31, 2022 and 2021 ( Except per share amounts or as otherwise indicated, currency and share amounts in thousands ) (unaudited) NOTE 12— RELATED PARTY TRANSACTIONS: The Company has a business relationship with MiTAC Holdings Corporation (“MiTAC Holdings”), a publicly-traded company in Taiwan, which began in 1992 when MiTAC Holdings became one of the Company's primary investors through its affiliates. As of August 31, 2022 and November 30, 2021, MiTAC Holdings and its affiliates beneficially owned approximately 9.6 % and 9.5 % of the Company’s outstanding common stock, respectively. Mr. Matthew Miau, Chairman Emeritus of the Company’s Board of Directors and a director, is the Chairman of MiTAC Holdings and a director or officer of MiTAC Holdings’ affiliates. Beneficial Ownership of the Company’s Common Stock by MiTAC Holdings As noted above, MiTAC Holdings and its affiliates in the aggregate beneficially owned approximately 9.6 % of the Company’s outstanding common stock as of August 31, 2022. These shares are owned by the following entities: As of August 31, 2022 MiTAC Holdings (1) 5,300 Synnex Technology International Corp. (2) 3,860 Total 9,160 _________________________ (1) Shares are held via Silver Star Developments Ltd., a wholly-owned subsidiary of MiTAC Holdings. Excludes 194 shares held directly by Mr. Miau, 217 shares indirectly held by Mr. Miau through a charitable remainder trust, and 190 shares held by his spouse. (2) Synnex Technology International Corp. (“Synnex Technology International”) is a separate entity from the Company and is a publicly-traded corporation in Taiwan. Shares are held via Peer Development Ltd., a wholly-owned subsidiary of Synnex Technology International. MiTAC Holdings owns a noncontrolling interest of 14.1 % in MiTAC Incorporated, a privately-held Taiwanese company, which in turn holds a noncontrolling interest of 15.7 % in Synnex Technology International. Neither MiTAC Holdings nor Mr. Miau is affiliated with any person(s), entity, or entities that hold a majority interest in MiTAC Incorporated. The following table presents the Company's transactions with MiTAC Holdings and its affiliates for the periods indicated: Three Months Ended Nine Months Ended August 31, 2022 August 31, 2021 August 31, 2022 August 31, 2021 Purchases of inventories and services $ 85,113 $ 46,393 $ 186,163 $ 136,152 Sale of products to MiTAC Holdings and affiliates 115 69 1,251 529 Payments made for rent and overhead costs for use of facilities of MiTAC Holdings and affiliates, net 20 38 101 118 The following table presents the Company’s receivable from and payable to MiTAC Holdings and its affiliates for the periods presented: August 31, 2022 November 30, 2021 Receivable from related parties (included in Accounts receivable, net) $ 4,426 $ 21,841 Payable to related parties (included in Accounts payable) 34,510 32,802 28 Table of Contents TD SYNNEX CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS For the three and nine months ended August 31, 2022 and 2021 ( Except per share amounts or as otherwise indicated, currency and share amounts in thousands ) (unaudited) NOTE 13— EQUITY: Share Repurchase Program In June 2020, the Board of Directors authorized a three-year $ 400 million share repurchase program, effective July 1, 2020, pursuant to which the Company may repurchase its outstanding common stock from time to time in the open market or through privately negotiated transactions. As of August 31, 2022, the Company had $ 317.0 million available for future repurchases of its common stock under the authorized share repurchase program. The Company's common share repurchase activity for the nine months ended August 31, 2022 is summarized as follows: Shares Weighted-average price per share Treasury stock balance at November 30, 2021 2,633 $ 76.40 Shares of treasury stock repurchased under share repurchase program 820 101.23 Shares of treasury stock repurchased for tax withholdings on equity awards 58 102.66 Treasury stock balance at August 31, 2022 3,511 $ 82.64 Dividends On September 27, 2022 , the Company announced that its Board of Directors declared a quarterly cash dividend of $ 0.30 per common share payable on October 28, 2022 to stockholders of record as of the close of business on October 14, 2022 . Future dividends are subject to continued capital availability and declaration by the Board of Directors that the dividend is in the best interest of the Company’s stockholders. NOTE 14— COMMITMENTS AND CONTINGENCIES: As is customary in the technology industry, to encourage certain customers to purchase products from us, the Company also has other financing agreements with financial institutions to provide inventory financing facilities to the Company’s customers and allow certain customers of the Company to finance their purchases directly with the financial institutions. The Company is contingently liable to repurchase inventory sold under these agreements in the event of any default by its customers under the agreement and such inventory being repossessed by the financial institutions. As the Company does not have access to information regarding the amount of inventory purchased from the Company still on hand with the customer at any point in time, the Company’s repurchase obligations relating to inventory cannot be reasonably estimated. Losses, if any, would be the difference between the repossession cost and the resale value of the inventory. Repurchases under these arrangements have been insignificant to date and the Company is not aware of any pending customer defaults or repossession obligations. The Company believes that, based on historical experience, the likelihood of a material loss pursuant to these inventory repurchase obligations is remote. The French Autorité de la Concurrence (“Competition Authority”) began in 2013 an investigation into the French market for certain products of Apple, Inc. ("Apple") for which the Company is a distributor. In March 2020, the Competition Authority imposed fines on Tech Data, on another distributor, and on Apple, finding that Tech Data entered into an anticompetitive agreement with Apple regarding volume allocations of Apple products. The fine imposed on Tech Data was € 76 million (approximate ly $ 76 million as o f August 31, 2022). The Company has vigorously contested the arguments of the Competition Authority, and the Company has appealed its determination to the French courts, seeking to set aside or reduce the fine. Although the Company believes it has strong arguments on appeal, the Company has determined that the best estimate of probable loss related to this matter as of August 31, 2022 is € 36 million (approximately $ 36 million as of August 31, 2022). Under French law, the pendency of the Company’s appeal does not suspend the obligation to pay the fine. Tech Data agreed with the French authorities to make eight equal installment payments in relation to the fine assessed for a total amount of € 22.8 million on a quarterly basis from January 2021 through October 2022 . As of August 31, 2022, the Company has an accrued liability for this matter of € 16.0 million ($ 16.0 million as of August 31, 2022) that represents the total estimate of probable loss less installment payments made to date. If the appeal 29 Table of Contents TD SYNNEX CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS For the three and nine months ended August 31, 2022 and 2021 ( Except per share amounts or as otherwise indicated, currency and share amounts in thousands ) (unaudited) process is not completed prior to the end of December 2022, the Company may be required to pay further amounts towards the full fine assessed by the Competition Authority before the Company’s appeal is finally determined. However, any additional amounts that may need to be paid have not yet been determined. Additionally, the Company has provided a third-party surety bond to the Competition Authority to guarantee the payment of the amount of the fine and interest, if applicable. A civil lawsuit related to this matter, alleging anticompetitive actions in association with the established distribution networks for Apple, Tech Data and another distributor was filed by eBizcuss. The Company is currently evaluating this matter and cannot currently estimate the probability or amount of any potential loss. From time to time, the Company receives notices from third parties, including customers and suppliers, seeking indemnification, payment of money or other actions in connection with claims made against them. Also, from time to time, the Company has been involved in various bankruptcy preference actions where the Company was a supplier to the companies now in bankruptcy. In addition, the Company is subject to various other claims, both asserted and unasserted, that arise in the ordinary course of business. The Company evaluates these claims and records the related liabilities. It is possible that the ultimate liabilities could differ from the amounts recorded. Under the Separation and Distribution agreement with Concentrix that was entered into in connection with the Separation, SYNNEX agreed to indemnify Concentrix, each of its subsidiaries and each of their respective directors, officers and employees from and against all liabilities relating to, arising out of or resulting from, among other matters, the liabilities allocated to SYNNEX as part of the Separation. Similarly, Concentrix agreed to indemnify SYNNEX, each of its subsidiaries and each of their respective directors, officers and employees from and against all liabilities relating to, arising out of or resulting from, among other matters, the liabilities allocated to Concentrix as part of the Separation. The Company expects Concentrix to fully perform under the terms of the Separation and Distribution agreement. Under the Separation and Distribution agreement, SYNNEX and Concentrix agreed to cooperate with each other in managing litigation related to both companies' businesses. The Separation and Distribution agreement also included provisions that assign to each company responsibility for managing pending and future litigation related to the general corporate matters of SYNNEX arising prior to the Separation. The Company does not believe that the above commitments and contingencies will have a material adverse effect on the Company's results of operations, financial position or cash flows. 30 Table of contents