TD SYNNEX CORP 10-Q

ITEM 1. Financial Statements SYNNEX CORPORATION CONSOLIDATED BALANCE SHEETS (currency and share amounts in thousands, except par value) (unaudited) August 31, 2020 November 30, 2019 ASSETS Current assets: Cash and cash equivalents $ 1,452,273 $ 225,529 Accounts receivable, net 3,580,970 3,926,709 Receivables from vendors, net 323,027 368,505 Inventories 2,832,607 2,547,224 Other current assets 375,273 385,024 Total current assets 8,564,151 7,452,992 Property and equipment, net 583,951 569,899 Goodwill 2,257,292 2,254,402 Intangible assets, net 1,031,168 1,162,212 Deferred tax assets 116,263 97,539 Other assets, net 710,283 160,917 Total assets $ 13,263,107 $ 11,697,960 LIABILITIES AND EQUITY Current liabilities: Borrowings, current $ 244,114 $ 298,969 Accounts payable 3,655,215 3,149,443 Accrued compensation and benefits 447,661 402,771 Other accrued liabilities 1,257,160 723,716 Income taxes payable 27,998 32,223 Total current liabilities 5,632,148 4,607,122 Long-term borrowings 2,609,809 2,718,267 Other long-term liabilities 722,343 361,911 Deferred tax liabilities 205,225 222,210 Total liabilities 9,169,525 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, 53,380 and 53,154 shares issued as of August 31, 2020 and November 30, 2019, respectively 53 53 Additional paid-in capital 1,579,026 1,545,421 Treasury stock, 2,454 and 2,399 shares as of August 31, 2020 and November 30, 2019, respectively ( 178,775 ) ( 172,627 ) Accumulated other comprehensive income (loss) ( 224,628 ) ( 209,077 ) Retained earnings 2,917,906 2,624,680 Total stockholders' equity 4,093,582 3,788,450 Total liabilities and equity $ 13,263,107 $ 11,697,960 (Amounts may not add due to rounding) The accompanying Notes are an integral part of these Consolidated Financial Statements (unaudited). 3 Table of Contents SYNNEX CORPORATION CONSOLIDATED STATEMENTS OF OPERATIONS (currency and share amounts in thousands, except per share amounts) (unaudited) Three Months Ended Nine Months Ended August 31, 2020 August 31, 2019 August 31, 2020 August 31, 2019 Revenue: Products $ 5,306,361 $ 5,047,968 $ 13,858,313 $ 13,695,725 Services 1,158,421 1,155,690 3,403,305 3,480,275 Total revenue 6,464,782 6,203,659 17,261,619 17,176,000 Cost of revenue: Products ( 5,008,881 ) ( 4,746,197 ) ( 13,031,113 ) ( 12,876,410 ) Services ( 747,809 ) ( 731,472 ) ( 2,206,256 ) ( 2,196,212 ) Gross profit 708,092 725,990 2,024,249 2,103,379 Selling, general and administrative expenses ( 498,956 ) ( 517,135 ) ( 1,514,734 ) ( 1,557,906 ) Operating income 209,136 208,855 509,515 545,473 Interest expense and finance charges, net ( 28,749 ) ( 42,945 ) ( 99,046 ) ( 127,695 ) Other income (expense), net ( 567 ) ( 1,087 ) 3,280 19,764 Income before income taxes 179,819 164,823 413,748 437,542 Provision for income taxes ( 45,356 ) ( 41,691 ) ( 99,740 ) ( 112,831 ) Net income $ 134,464 $ 123,132 $ 314,008 $ 324,711 Earnings per common share: Basic $ 2.61 $ 2.41 $ 6.10 $ 6.35 Diluted $ 2.60 $ 2.40 $ 6.07 $ 6.32 Weighted-average common shares outstanding: Basic 50,890 50,601 50,851 50,661 Diluted 51,241 50,845 51,172 50,903 (Amounts may not add due to rounding) The accompanying Notes are an integral part of these Consolidated Financial Statements (unaudited). 4 Table of Contents SYNNEX CORPORATION CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (currency in thousands) (unaudited) Three Months Ended Nine Months Ended August 31, 2020 August 31, 2019 August 31, 2020 August 31, 2019 Net income $ 134,464 $ 123,132 $ 314,008 $ 324,711 Other comprehensive income (loss): Change in unrealized gains (losses) of defined benefit plans, net of taxes of $ 3,115 for the three and nine months ended August 31, 2020, and $ 0 for the three and nine months ended 2019 ( 8,985 ) — ( 8,768 ) 307 Unrealized gains (losses) on cash flow hedges during the period, net of taxes of $( 8,220 ) and $ 7,953 for the three and nine months ended August 31, 2020, respectively, and $ 8,722 and $ 24,605 for the three and nine months ended August 31, 2019, respectively 24,641 ( 23,744 ) ( 24,772 ) ( 71,414 ) Reclassification of net (gains) losses on cash flow hedges to net income, net of tax expense (benefit) of $( 563 ) and $( 1,120 ) for the three and nine months ended August 31, 2020, respectively, and $ 1,121 and $ 3,241 for three and nine months ended August 31, 2019, respectively 1,824 ( 3,371 ) 3,462 ( 9,387 ) Total change in unrealized gains (losses) on cash flow hedges, net of taxes 26,465 ( 27,115 ) ( 21,310 ) ( 80,801 ) Foreign currency translation adjustments, net of taxes of $( 345 ) and $( 51 ) for the three and nine months ended August 31, 2020, respectively, and $( 31 ) and $( 55 ) for the three and nine months ended August 31, 2019, respectively 95,168 ( 19,395 ) 14,526 ( 26,334 ) Other comprehensive income (loss) 112,648 ( 46,510 ) ( 15,552 ) ( 106,828 ) Comprehensive income $ 247,112 $ 76,622 $ 298,456 $ 217,883 (Amounts may not add due to rounding) The accompanying Notes are an integral part of these Consolidated Financial Statements (unaudited). 5 Table of Contents SYNNEX CORPORATION CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (currency in thousands, except per share amounts) (unaudited) Three Months Ended Nine Months Ended August 31, 2020 August 31, 2019 August 31, 2020 August 31, 2019 Total Stockholders' equity, beginning balance $ 3,834,381 $ 3,537,053 $ 3,788,450 $ 3,435,054 Common stock and additional paid-in capital: Beginning balance 1,566,817 1,527,436 1,545,474 1,512,254 Share-based compensation 8,829 6,430 25,041 19,515 Common stock issued for employee benefit plans 3,433 929 8,564 3,134 Stock issuance costs (related to the Convergys acquisition in fiscal year 2018) — — — ( 107 ) Ending balance 1,579,079 1,534,796 1,579,079 1,534,796 Treasury stock: Beginning balance ( 178,609 ) ( 165,601 ) ( 172,627 ) ( 149,533 ) Repurchases of common stock for tax withholdings on equity awards ( 166 ) ( 109 ) ( 2,743 ) ( 994 ) Repurchases of common stock — — ( 3,405 ) ( 15,184 ) Ending balance ( 178,775 ) ( 165,710 ) ( 178,775 ) ( 165,710 ) Retained earnings: Beginning balance 2,783,449 2,363,779 2,624,680 2,198,621 Net income 134,464 123,132 314,008 324,711 Cash dividends declared ( 7 ) ( 19,116 ) ( 20,782 ) ( 57,491 ) Cumulative effect of changes in accounting principles — — — 1,955 Ending balance 2,917,906 2,467,795 2,917,906 2,467,795 Accumulated other comprehensive income (loss): Beginning balance ( 337,276 ) ( 188,561 ) ( 209,077 ) ( 126,288 ) Other comprehensive income (loss) 112,648 ( 46,510 ) ( 15,552 ) ( 106,828 ) Cumulative effect of changes in accounting principles — — — ( 1,955 ) Ending balance ( 224,628 ) ( 235,070 ) ( 224,628 ) ( 235,070 ) Total stockholders' equity, ending balance $ 4,093,582 $ 3,601,810 $ 4,093,582 $ 3,601,810 Cash dividends declared per share $ — $ 0.375 $ 0.400 $ 1.125 (Amounts may not add due to rounding) The accompanying Notes are an integral part of these Consolidated Financial Statements (unaudited). 6 Table of Contents SYNNEX CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS (currency in thousands) (unaudited) Nine Months Ended August 31, 2020 August 31, 2019 Cash flows from operating activities: Net income $ 314,008 $ 324,711 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 251,459 281,392 Share-based compensation 25,041 19,515 Provision for doubtful accounts 48,233 25,496 Deferred income taxes ( 24,070 ) ( 16,789 ) Contingent consideration — ( 19,034 ) Unrealized foreign exchange (gains) losses 12,764 ( 4,115 ) Other 7,456 8,595 Changes in operating assets and liabilities, net of acquisition of businesses: Accounts receivable, net 280,476 148,128 Receivables from vendors, net 44,666 13,322 Inventories ( 282,654 ) ( 390,018 ) Accounts payable 454,290 ( 119,599 ) Other operating assets and liabilities 415,428 ( 69,131 ) Net cash provided by operating activities 1,547,097 202,473 Cash flows from investing activities: Purchases of property and equipment ( 127,326 ) ( 93,432 ) Acquisition of businesses ( 4,941 ) ( 8,647 ) Other ( 5,248 ) ( 199 ) Net cash used in investing activities ( 137,515 ) ( 102,279 ) Cash flows from financing activities: Proceeds from borrowings, net of debt discount and issuance costs 3,747,096 5,620,134 Repayments of borrowings ( 3,915,519 ) ( 5,834,258 ) Dividends paid ( 20,782 ) ( 57,491 ) Increase (decrease) in book overdraft ( 1,051 ) 336 Repurchases of common stock ( 3,405 ) ( 15,184 ) Proceeds from issuance of common stock 8,564 3,134 Repurchases of common stock for tax withholdings on equity awards ( 2,743 ) ( 994 ) Settlement of contingent consideration — ( 13,966 ) Other — ( 107 ) Net cash used in financing activities ( 187,841 ) ( 298,397 ) Effect of exchange rate changes on cash, cash equivalents and restricted cash 3,902 3,575 Net increase (decrease) in cash, cash equivalents and restricted cash 1,225,644 ( 194,628 ) Cash, cash equivalents and restricted cash at beginning of period 231,149 462,033 Cash, cash equivalents and restricted cash at end of period $ 1,456,793 $ 267,405 Supplemental disclosure of non-cash investing activities: Accrued costs for property and equipment purchases $ 13,425 $ 2,905 (Amounts may not add due to rounding) The accompanying Notes are an integral part of these Consolidated Financial Statements (unaudited). 7 Table of Contents SYNNEX CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS For the three and nine months ended August 31, 2020 and 2019 (currency and share amounts in thousands, except per share amounts) (unaudited) NOTE 1—ORGANIZATION AND BASIS OF PRESENTATION: SYNNEX Corporation (together with its subsidiaries, herein referred to as “SYNNEX” or the “Company”) is a business process services company headquartered in Fremont, California and has operations in North and South America, Asia-Pacific, Europe and Africa. The Company has two reportable segments: Technology Solutions and Concentrix. The Technology Solutions segment provides a comprehensive range of distribution, logistics and integration solutions for the information technology (“IT”) industry. The Concentrix segment offers a portfolio of technology-infused strategic solutions and end-to-end global business outsourcing services focused on customer experience, process optimization, technology innovation, front and back-office automation and business transformation to clients in five primary industry verticals. On January 9, 2020, the Company announced a plan to separate its Concentrix segment into an independent publicly-traded company. The transaction, which was delayed due to the focus on managing the economic impact of a pandemic caused by an outbreak of a new strain of coronavirus (“ COVID-19”), barring further economic disruption, is now expected to be completed in the fourth quarter of calendar year 2020. The plan is subject to current economic and capital market trends. The separation is intended to qualify as a tax-free transaction for federal income tax purposes for both the Company and its then current stockholders. Immediately following the separation, it is expected that the Company’s stockholders will own shares of both SYNNEX and Concentrix, at the same percentage ownership that they held of SYNNEX prior to the transaction. Completion of the separation will not require a stockholder vote but will be subject to customary closing conditions, including, among others, obtaining final approval from the Company’s Board of Directors, receipt of a favorable opinion with respect to the tax-free nature of the transaction for federal income tax purposes, and the effectiveness of a Form 10 registration statement with the Securities and Exchange Commission. The accompanying interim unaudited Consolidated Financial Statements as of August 31, 2020 and for the three and nine months ended August 31, 2020 and 2019 have been prepared by the Company in accordance with the rules and regulations of the Securities and Exchange Commission. The amounts as of November 30, 2019 have been derived from the Company’s annual audited financial statements. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles (“GAAP”) in the United States have been condensed or omitted in accordance with such rules and regulations. In the opinion of management, the accompanying unaudited Consolidated Financial Statements reflect all adjustments, consisting only of normal recurring adjustments, necessary to state fairly the financial position of the Company and its results of operations and cash flows as of and for the periods presented. These financial statements should be read in conjunction with the annual audited financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended November 30, 2019. Interim results of operations are not necessarily indicative of financial results for a full year, and the Company makes no representations related thereto. Certain columns and rows may not add due to the use of rounded numbers. NOTE 2—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: For a discussion of the Company’s significant accounting policies, refer to the discussion in the Company’s Annual Report on Form 10-K for the fiscal year ended November 30, 2019. As described more fully in Note 16 , as of August 31, 2020, due to the ongoing impact of the COVID-19 pandemic on the Company’s business, many of our 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. Accounting pronouncements adopted during the nine months ended August 31, 2020 are discussed below. Concentration of credit risk Financial instruments that potentially subject the Company to significant concentration of credit risk consist principally of cash and cash equivalents, accounts receivable, 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. Through August 31, 2020, the Company has not experienced any 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 primarily in the technology industry. The Company performs ongoing credit evaluations of its customers’ financial condition and limits the amount of credit extended when deemed necessary, but generally requires no collateral. The Company also maintains allowances for potential credit losses. In estimating the required allowances, the Company takes into consideration the overall quality and aging of its receivable portfolio, the existence of a limited amount of credit insurance and specifically identified customer and vendor risks. Through August 31, 2020, such losses have been within management’s expectations. One customer accounted for 16 % and 17 % of the Company’s total revenue during the three and nine months ended August 31, 2020. The same customer accounted for 21 % and 19 % of the Company’s total revenue during the three and nine months ended August 31, 2019. Products 8 Table of Contents SYNNEX CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(continued) For the three and nine months ended August 31, 2020 and 2019 (currency and share amounts in thousands, except per share amounts) (unaudited) purchased from the Company’s largest OEM supplier, HP Inc., accounted for approximately 12 % of total revenue during the three and nine months ended August 31, 2020 and 2019. As of August 31, 2020 and November 30, 2019, one customer comprised 18 % and 19 %, respectively, of the consolidated accounts receivable balance. Inventories Inventories are stated at the lower of cost and net realizable value. Cost is computed based on the weighted-average method. Inventories are comprised of finished goods and work-in-process. Finished goods include products purchased for resale, system components purchased for both resale and for use in the Company’s projects and integration-based completed systems. Work-in-process inventories are not material to the Consolidated Financial Statements. Leases The Company enters into leases as a lessee for property and equipment in the ordinary course of business. When procuring goods or services, or upon entering into a contract with its customers and clients, the Company determines whether an arrangement contains a lease at its inception. As part of that evaluation, the Company considers whether there is an implicitly or explicitly identified asset in the arrangement and whether the Company, as the lessee, or the customer, if the Company is the lessor, has the right to control the use of that asset. Effective December 1, 2019, when the Company is the lessee, all leases with a term of more than 12 months are recognized as right-of-use (“ROU”) assets and associated lease liabilities in the Consolidated Balance Sheet. Lease liabilities are measured at the lease commencement date and determined using the present value of the lease payments not yet paid, at the Company’s incremental borrowing rate, which approximates the rate at which the Company would borrow on a secured basis in the country where the lease was executed. The interest rate implicit in the lease is generally not determinable in transactions where the Company is the lessee. The ROU asset equals the lease liability adjusted for any initial direct costs, prepaid rent and lease incentives. The Company’s variable lease payments generally relate to payments tied to various indexes, non-lease components and payments above a contractual minimum fixed amount. Operating leases are included in other assets, net, other accrued liabilities and other long-term liabilities in the Consolidated Balance Sheet. Finance leases are included in property and equipment, net, borrowings, current and long-term borrowings in the Consolidated Balance Sheet. Substantially all of the Company's leases are classified as operating leases. The lease term includes options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option. The Company made a policy election to not recognize leases with a lease term of 12 months or less in the Consolidated Balance Sheet. Lease expenses are recorded within selling, general, and administrative expenses in the Consolidated Statements of Operations. Operating lease payments are presented within “Cash flows from operating activities” in the Consolidated Statements of Cash Flows. For all asset classes, the Company has elected the lessee practical expedient to combine lease and non-lease components (e.g., maintenance services) and account for the combined unit as a single lease component. Variable lease payments are recognized in the period in which the obligation for those payments is incurred. Recently adopted accounting pronouncements In February 2018, the Financial Accounting Standard Board (the “FASB”) issued guidance that permits the Company to reclassify disproportionate tax effects in accumulated other comprehensive income caused by the Tax Cuts and Jobs Act of 2017 to retained earnings. The guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018, with early adoption permitted. The adoption of this new guidance did not have a material impact on the Company’s Consolidated Financial Statements. In February 2016, the FASB issued a new standard which revises various aspects of accounting for leases, with amendments in 2018 and 2019 codified as Accounting Standards Codification Topic 842, Leases. The Company adopted the guidance effective December 1, 2019 , applying the optional transition method, which allows an entity to apply the new standard at the adoption date with a cumulative effect adjustment to the opening balance of retained earnings in the period of adoption. In addition, the Company elected the package of practical expedients not to reassess prior conclusions related to contracts containing leases, lease classification and initial direct costs and the lessee practical expedient to combine lease and non-lease components for all asset classes. The Company made a policy election to not recognize ROU assets and lease liabilities for short-term leases for all asset classes. The most significant impact of adoption to the Company’s Consolidated Financial Statements relates to the recognition of a right-of-use asset and a lease liability for virtually all of its leases other than short-term leases. The liability was equal to the present value of lease payments. The asset is based on the liability, and subject to adjustment, such as for initial direct costs. The recognition, measurement, and presentation of expenses and cash flows arising from a lease by a lessee depends primarily on its classification. For income statement purposes, operating leases will result in a straight-line expense while finance leases will result in a front-loaded expense pattern. Upon adoption, the Company recorded $ 591,129 of ROU assets and of $ 642,567 of liabilities relating to its operating leases on its Consolidated Balance Sheet. The adoption did not have an impact on the Company’s consolidated statements of operations or its consolidated statements of cash flows. 9 Table of Contents SYNNEX CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(continued) For the three and nine months ended August 31, 2020 and 2019 (currency and share amounts in thousands, except per share amounts) (unaudited) Recently issued accounting pronouncements In March 2020, the FASB issued optional guidance fo r 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 . The Company is currently evaluating the impact of the new guidance. In December 2019, the 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 Company is currently evaluating the impact of the new guidance. In August 2018, the FASB issued new guidance to add, remove, and clarify disclosure requirements related to defined benefit pension and other postretirement plans. The amendment requires the Company to disclose the weighted-average interest crediting rates used in cash balance pension plans. It also requires the Company to disclose the reasons for significant changes in the benefit obligation or plan assets including significant gains and losses affecting the benefit obligation for the period. This standard is effective for fiscal years ending after December 15, 2020, and early adoption is permitted. The adoption is not expected to have a material impact on the Company's Consolidated Financial Statements. In August 2018, the FASB issued guidance to improve the effectiveness of fair value measurement disclosures by removing or modifying certain disclosure requirements and adding other requirements. The guidance is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019, with early adoption permitted. Certain amendments should be applied prospectively, while all other amendments should be applied retrospectively to all periods presented. The Company is currently evaluating the impact of the new guidance. In June 2016, the FASB issued a new credit loss standard that replaces the incurred loss impairment methodology in current GAAP. The new impairment model requires immediate recognition of estimated credit losses expected to occur for most financial assets and certain other instruments. It is effective for annual reporting periods beginning after December 15, 2019 and interim periods within those annual periods. Early adoption for fiscal years beginning after December 15, 2018 is permitted. Entities will apply the standard’s provisions as a cumulative-effect adjustment to retained earnings as of the beginning of the first effective reporting period. The Company is currently evaluating the impact of the new guidance. NOTE 3—SHARE-BASED COMPENSATION: The Company recognizes share-based compensation expense for all share-based awards made to employees and directors, including employee stock options, restricted stock awards, restricted stock units, performance-based restricted stock units and employee stock purchases, based on estimated fair values. The following table summarizes the number of share-based awards granted under the Company’s 2013 Stock Incentive Plan, as amended, during the three and nine months ended August 31, 2020 and 2019, and the measurement-date fair value of those awards: Three Months Ended Nine Months Ended August 31, 2020 August 31, 2019 August 31, 2020 August 31, 2019 Shares awarded Fair value of grants Shares awarded Fair value of grants Shares awarded Fair value of grants Shares awarded Fair value of grants Stock options — $ — — $ — — $ — 17 $ 500 Restricted stock awards — — 1 90 36 2,983 27 2,699 Restricted stock units — — 107 9,852 1 73 158 14,617 — $ — 108 $ 9,942 37 $ 3,056 202 $ 17,816 10 Table of Contents SYNNEX CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(continued) For the three and nine months ended August 31, 2020 and 2019 (currency and share amounts in thousands, except per share amounts) (unaudited) The Company recorded share-based compensation expense in the Consolidated Statements of Operations for the three and nine months ended August 31, 2020 and 2019 as follows: Three Months Ended Nine Months Ended August 31, 2020 August 31, 2019 August 31, 2020 August 31, 2019 Total share-based compensation (recorded in selling, general and administrative expenses) $ 8,925 $ 6,461 $ 25,251 $ 19,616 Tax benefit recorded in the provision for income taxes ( 2,211 ) ( 1,653 ) ( 6,271 ) ( 5,146 ) Effect on net income $ 6,714 $ 4,808 $ 18,980 $ 14,470 NOTE 4—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, 2020 November 30, 2019 Cash and cash equivalents $ 1,452,273 $ 225,529 Restricted cash included in other current assets 4,520 5,620 Cash, cash equivalents and restricted cash $ 1,456,793 $ 231,149 Accounts receivable, net: As of August 31, 2020 November 30, 2019 Accounts receivable $ 3,657,245 $ 3,956,629 Less: Allowance for doubtful accounts ( 76,275 ) ( 29,920 ) Accounts receivable, net $ 3,580,970 $ 3,926,709 Receivables from vendors, net: As of August 31, 2020 November 30, 2019 Receivables from vendors $ 327,958 $ 373,986 Less: Allowance for doubtful accounts ( 4,931 ) ( 5,481 ) Receivables from vendors, net $ 323,027 $ 368,505 Property and equipment, net: As of August 31, 2020 November 30, 2019 Land $ 47,702 $ 47,494 Equipment, computers and software 585,195 503,240 Furniture and fixtures 116,886 111,408 Buildings, building improvements and leasehold improvements 462,716 428,180 Construction-in-progress 8,259 12,379 Total property and equipment, gross $ 1,220,759 $ 1,102,702 Less: Accumulated depreciation ( 636,808 ) ( 532,803 ) Property and equipment, net $ 583,951 $ 569,899 11 Table of Contents SYNNEX CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(continued) For the three and nine months ended August 31, 2020 and 2019 (currency and share amounts in thousands, except per share amounts) (unaudited) Depreciation expense was $ 37,447 and $ 111,139 , respectively, for the three and nine months ended August 31, 2020 and $ 39,124 and $ 123,242 , respectively, for the three and nine months ended August 31, 2019. Goodwill: Technology Solutions Concentrix Total Balance as of November 30, 2019 $ 425,076 $ 1,829,326 $ 2,254,402 Foreign exchange translation ( 3,308 ) 6,198 2,890 Balance as of August 31, 2020 $ 421,768 $ 1,835,524 $ 2,257,292 Intangible assets, net: As of August 31, 2020 As of November 30, 2019 Gross Amounts Accumulated Amortization Net Amounts Gross Amounts Accumulated Amortization Net Amounts Customer relationships and lists $ 1,563,164 $ ( 652,341 ) $ 910,823 $ 1,546,349 $ ( 522,083 ) $ 1,024,266 Vendor lists 177,102 ( 78,100 ) 99,002 178,444 ( 66,954 ) 111,490 Technology 14,831 ( 10,523 ) 4,308 14,720 ( 8,998 ) 5,721 Other intangible assets 34,388 ( 17,353 ) 17,035 35,267 ( 14,532 ) 20,735 Total $ 1,789,485 $ ( 758,317 ) $ 1,031,168 $ 1,774,780 $ ( 612,567 ) $ 1,162,212 Amortization expense was $ 46,828 and $ 140,320 , respectively, for the three and nine months ended August 31, 2020 and $ 52,428 and $ 158,150 , respectively, for the three and nine months ended August 31, 2019. Estimated future amortization expense of the Company’s intangible assets is as follows: Fiscal years ending November 30, 2020 (remaining three months) $ 57,525 2021 173,532 2022 150,213 2023 131,762 2024 109,475 Thereafter 408,661 Total $ 1,031,168 Other accrued liabilities: As of August 31, 2020 November 30, 2019 Customer advances and other customer liabilities $ 398,571 $ 108,401 Current operating lease liabilities 178,723 — Derivative instruments 143,514 87,406 Other accrued expenses and payables 536,352 527,909 Total $ 1,257,160 $ 723,716 Other accrued expenses and payables includes accrued expenses, sales and value added tax accruals, sales return reserve, and other third-party liabilities. 12 Table of Contents SYNNEX CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(continued) For the three and nine months ended August 31, 2020 and 2019 (currency and share amounts in thousands, except per share amounts) (unaudited) Accumulated other comprehensive income (loss): The components of accumulated other comprehensive income (loss) (“AOCI”), net of taxes, were as follows: Unrecognized gains (losses) on defined benefit plans, net of taxes 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, 2019 $ ( 28,784 ) $ ( 46,932 ) $ ( 133,361 ) $ ( 209,077 ) Other comprehensive income (loss) before reclassification ( 8,768 ) ( 24,772 ) 14,526 ( 19,013 ) Reclassification of (gains) losses from Other comprehensive income (loss) — 3,462 — 3,462 Balance as of August 31, 2020 $ ( 37,552 ) $ ( 68,242 ) $ ( 118,835 ) $ ( 224,628 ) Refer to Note 5 for the location of gains and losses reclassified from other comprehensive income (loss) to the Consolidated Statements of Operations. Foreign currency translation adjustment and other, net of taxes, is comprised of foreign currency translation adjustment and unrealized gains and losses on available-for-sale debt securities. Substantially, all of the balance at both November 30, 2019 and August 31, 2020 represents foreign currency translation adjustment. NOTE 5—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 foreign 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. Generally, 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 To protect gross margins from fluctuations in foreign currency exchange rates, certain of the Company’s subsidiaries with functional currencies that are not in U.S. dollars may hedge a portion of forecasted revenue or costs not denominated in the subsidiaries’ functional currencies. These instruments mature at various dates through August 2022 . The Company also uses interest rate 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 foreign currency revenue are recognized as a component of Revenue from Services in the same period as the related revenue is recognized, and deferred gains and losses related to cash flow hedges of costs are recognized as a component of “Cost of revenue” for “services” and/or “Selling, general and administrative expenses” in the same period as the related costs are recognized. 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 13 Table of Contents SYNNEX CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(continued) For the three and nine months ended August 31, 2020 and 2019 (currency and share amounts in thousands, except per share amounts) (unaudited) 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. Fair Values of Derivative Instruments in the Consolidated Balance Sheets The fair values of the Company’s derivative instruments are disclosed in Note 6 — Fair Value Measurements and summarized in the table below: Value as of Balance Sheet Line Item August 31, 2020 November 30, 2019 Derivative instruments not designated as hedging instruments: Foreign exchange forward contracts (notional value) $ 1,429,429 $ 1,192,964 Other current assets 29,808 11,757 Other accrued liabilities 14,123 2,637 Interest rate swap (notional value) $ 100,000 $ 100,000 Other assets, net — 515 Other accrued liabilities 367 — Derivative instruments designated as cash flow hedges: Foreign exchange forward contracts (notional value) $ 814,879 $ 563,654 Other current assets and other assets, net 38,288 14,523 Other accrued liabilities and other long-term liabilities 740 1,633 Interest rate swaps (notional value) $ 1,500,000 $ 1,900,000 Other accrued liabilities 128,418 83,428 Volume of Activity The notional amounts of foreign exchange forward contracts represent the gross amounts of foreign currency, including, principally, the Philippine Peso, Indian Rupee, the Euro, Canadian Dollar, British Pound, the Chinese Yuan, the Japanese Yen and the Brazilian Real that will be bought or sold at maturity. The term and notional amount of interest rate swaps are determined based on management’s assessment of future interest rates and other factors such as debt maturities. 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. 14 Table of Contents SYNNEX CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(continued) For the three and nine months ended August 31, 2020 and 2019 (currency and share amounts in thousands, except per share amounts) (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 and not designated as hedging instruments in Other Comprehensive Income (“OCI”), and the Consolidated Statements of Operations for the periods presented: Location of Gain (Loss) Three Months Ended August 31, Nine Months Ended August 31, in Income 2020 2019 2020 2019 Revenue for services $ 1,158,421 $ 1,155,690 $ 3,403,305 $ 3,480,275 Cost of revenue for services ( 747,809 ) ( 731,472 ) ( 2,206,256 ) ( 2,196,212 ) Selling, general and administrative expenses ( 498,956 ) ( 517,135 ) ( 1,514,734 ) ( 1,557,906 ) Interest expense and finance charges, net ( 28,749 ) ( 42,945 ) ( 99,046 ) ( 127,695 ) Other income (expense), net ( 567 ) ( 1,087 ) 3,280 19,764 Derivative instruments designated as cash flow hedges: Gains (losses) recognized in OCI: Foreign exchange forward contracts $ 34,764 $ 1,592 $ 35,795 $ 8,304 Interest rate swaps ( 1,902 ) ( 34,058 ) ( 68,520 ) ( 104,323 ) Total $ 32,862 $ ( 32,466 ) $ ( 32,725 ) $ ( 96,020 ) Gains (losses) reclassified from AOCI into income: Foreign exchange forward contracts Gain (loss) reclassified from AOCI into income Revenue for services $ — $ 73 $ — $ 89 Gain (loss) reclassified from AOCI into income Cost of revenue for services 5,568 4,586 13,322 12,034 Gain (loss) reclassified from AOCI into income Selling, general and administrative expenses 2,350 1,888 5,805 5,041 Gain (loss) reclassified from AOCI into income Other income (expense), net — 10 — 10 Interest rate swaps Gain (loss) reclassified from AOCI into income Interest expense and finance charges, net ( 10,305 ) ( 2,065 ) ( 23,710 ) ( 4,545 ) Total $ ( 2,387 ) $ 4,492 $ ( 4,583 ) $ 12,629 Derivative instruments not designated as hedging instruments: Gains (losses) recognized from foreign exchange forward contracts, net (1) Other income (expense), net $ 24,972 $ ( 1,286 ) $ 32,512 $ 8,657 Gains (losses) recognized from interest rate swaps, net Interest expense and finance charges, net 222 ( 807 ) ( 882 ) ( 2,984 ) Total $ 25,194 $ ( 2,093 ) $ 31,630 $ 5,673 (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 $ 9,002 . Offsetting of Derivatives The Company’s derivative instruments are generally governed by standard International Swaps and Derivatives Association, Inc. master agreements, which generally do not require the Company to post any collateral, and specify netting rights, and other customary provisions including events of defaults and termination rights. In the Consolidated Balance Sheets, the Company does not offset derivative assets against liabilities in master netting arrangements. If derivative exposures covered by a qualifying master netting agreement had been netted in the 15 Table of Contents SYNNEX CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(continued) For the three and nine months ended August 31, 2020 and 2019 (currency and share amounts in thousands, except per share amounts) (unaudited) Consolidated Balance Sheet , the total derivative asset and liability positions would have been reduced by $ 12,458 each as o f August 31, 2020 and $ 6,003 each as of November 30, 2019 . 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 NOTE 6—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, 2020 As of November 30, 2019 Fair value measurement category Fair value measurement category Total Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3 Assets: Cash equivalents $ 50,019 $ 50,019 $ — $ — $ 37,760 $ 37,760 $ — $ — Marketable equity securities 3,192 3,192 — — 2,834 2,834 — — Foreign government bond 1,378 1,378 — — 1,228 1,228 — — Forward foreign currency exchange contracts 68,096 — 68,096 — 26,280 — 26,280 — Interest rate swaps — — — — 515 — 515 — Liabilities: Forward foreign currency exchange contracts $ 14,863 $ — $ 14,863 $ — $ 4,270 $ — $ 4,270 $ — Interest rate swaps 128,785 — 128,785 — 83,428 — 83,428 — The Company’s cash equivalents consist primarily of highly liquid investments in money market funds and term deposits with maturity periods of three months or less. The carrying values of cash equivalents approximate fair value since they are near their maturity. Investments in marketable equity securities, primarily comprising investments in other companies’ equity securities as per local customary business practice, are recorded at fair value based on quoted market prices. Investment in foreign government bond classified as available-for-sale debt security is recorded at fair value based on quoted market prices. 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 long-term foreign currency exchange contracts are measured using valuations based upon quoted prices for similar assets and liabilities in active markets and are valued by reference to similar financial instruments, adjusted for terms specific to the contracts. 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, 2020 and November 30, 2019. 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. During the nine months ended August 31, 2020, there were no transfers between the fair value measurement category levels. 16 Table of Contents SYNNEX CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(continued) For the three and nine months ended August 31, 2020 and 2019 (currency and share amounts in thousands, except per share amounts) (unaudited) NOTE 7—ACCOUNTS RECEIVABLE ARRANGEMENTS: The Company has an uncommitted supply-chain financing program with a global financial institution under which trade accounts receivable of certain customers and their affiliates may be acquired, without recourse, by the financial institution. Available capacity under this program is dependent on the level of the Company’s trade accounts receivable with these customers and the financial institution’s willingness to purchase such receivables. As of August 31, 2020 and November 30, 2019, accounts receivable sold to and held by the financial institution under this program were $ 17,957 and $ 32,472 , respectively. Discount fees related to the sale of trade accounts receivable under this facility are included in “Interest expense and finance charges, net” in the Consolidated Statements of Operations. During the three and nine months ended August 31, 2020 and 2019, discount fees were not material to the Company’s results of operations. SYNNEX Japan, the Company’s Japanese Technology Solutions subsidiary, has arrangements with financial institutions for the sale and financing of approved accounts receivable and notes receivable. The amounts outstanding under these arrangements that were sold, but not collected, as of August 31, 2020 and November 30, 2019 were $ 5,760 and $ 2,856 , respectively. The Company also has other financing agreements in North America with financial institutions (“Flooring Companies”) to allow certain customers of the Company to finance their purchases directly with the Flooring Companies. Under these agreements, the Flooring Companies pay to the Company the selling price of products sold to various customers, less a discount, within approximately 15 to 30 days from the date of sale. The Company is contingently liable to repurchase inventory sold under flooring agreements in the event of any default by its customers under the agreement and such inventory being repossessed by the Flooring Companies. See Note 15 — Commitments and Contingencies for further information. The following table summarizes the net sales financed through flooring agreements and the flooring fees incurred: Three Months Ended Nine Months Ended August 31, 2020 August 31, 2019 August 31, 2020 August 31, 2019 Net sales financed $ 584,901 $ 521,341 $ 1,512,429 $ 1,424,081 Flooring fees (1) 3,690 3,584 9,563 9,410 (1) Flooring fees are included within “Interest expense and finance charges, net.” As of August 31, 2020 and November 30, 2019, accounts receivable subject to flooring agreements were $ 58,567 and $ 69,637 , respectively. NOTE 8—BORROWINGS: Borrowings consist of the following: As of August 31, 2020 November 30, 2019 SYNNEX United States accounts receivable securitization arrangement $ — $ 108,000 SYNNEX Japan credit facility - revolving line of credit component 72,696 5,936 SYNNEX United States credit agreement - revolving line of credit component — 25,800 SYNNEX United States credit agreement - current portion of term loan component 60,000 60,000 SYNNEX United States term loan credit agreement - current portion 90,000 90,000 Other borrowings 21,418 9,233 Borrowings, current $ 244,114 $ 298,969 SYNNEX Japan credit facility - term loan component $ 66,088 $ 63,921 SYNNEX United States credit agreement - term loan component 975,000 1,020,000 SYNNEX United States term loan credit agreement 1,575,000 1,642,500 Other term debt 95 298 Long-term borrowings, before unamortized debt discount and issuance costs $ 2,616,183 $ 2,726,719 Less: unamortized debt discount and issuance costs ( 6,374 ) ( 8,452 ) Long-term borrowings $ 2,609,809 $ 2,718,267 17 Table of Contents SYNNEX CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(continued) For the three and nine months ended August 31, 2020 and 2019 (currency and share amounts in thousands, except per share amounts) (unaudited) 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”). Prior to the amendment in May 2020 that is described in this paragraph, u nder the terms of the U.S. AR Arrangement, the Company’s subsidiary that is the borrower under this facility could borrow up to a maximum of $ 850,000 based upon eligible trade accounts receivable. 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 LIBOR. In addition, prior to the May 2020 amendment, a program fee of 0.75 % per annum based on the used portion of the commitment, and a facility fee of 0.35% per annum, was payable on the adjusted commitment of the lenders. In May 2020 , the U.S. AR Arrangement was amended to revise the maximum borrowing amount to $ 650,000 and to extend the maturity date of the U.S. AR Arrangement to May 2022 . The program fee payable on the used portion of the lenders’ commitment, was modified to accrue at 1.25 % per annum in the case of lender groups who fund their advances based on prevailing commercial paper rates, and 1.30 % per annum in the case of lender groups who fund their advances based on LIBOR (subject to a 0.50 % per annum floor). The amendment also modified the facility fee payable on the adjusted commitment of the lenders, to accrue at different tiers ranging between 0.35 % per annum and 0.45 % per annum depending on the amount of outstanding advances from time to time. In addition, the U.S. AR Arrangement includes an accordion feature to allow requests for an increase in the lenders' commitment by an additional $ 150,000 . Under the terms of the U.S. Arrangement, the Company and two of its U.S. subsidiaries sell, on a revolving basis, their receivables to a wholly-owned, bankruptcy-remote subsidiary. 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. SYNNEX Canada accounts receivable securitization arrangement SYNNEX Canada Limited (“SYNNEX Canada”), the Company's Technology Solutions subsidiary in Canada, has an accounts receivable securitization program with a bank to provide additional capital for its operations. In March 2020, SYNNEX Canada renewed this agreement to mature in May 2023 . Under the terms of this program, SYNNEX Canada can borrow up to CAD 100,000 , or $ 76,628 , in exchange for the transfer of eligible trade accounts receivable, on an ongoing revolving basis. The program includes an accordion feature that allows SYNNEX Canada to request an increase in the bank's commitment up to an additional CAD 50,000 , or $ 38,314 . Any amounts received under this arrangement are recorded as debt on the Company's Consolidated Balance Sheets and are secured by pledging all of the rights, title and interest in the receivables to the bank. The effective borrowing cost is based on the weighted-average of the Canadian Dollar Offered Rate plus a margin of 1.00 % per annum and the prevailing lender commercial paper rates. In addition, prior to an event of termination, SYNNEX Canada is obligated to pay a program fee of 0.75 % per annum based on the used portion of the commitment. After an event of termination, the program fee shall be the sum of the base rate and 2.50 % per annum, based on the used portion of the commitment. SYNNEX Canada pays a fee of 0.40 % per annum for any unused portion of the commitment up to CAD 60,000 , or $ 45,977 , and when the unused portion exceeds CAD 60,000 , or $ 45,977 , a fee of 0.55 % per annum of the unused portion of the commitment. As of both August 31, 2020 and November 30, 2019, there was no outstanding balance under this arrangement. The Company has guaranteed the performance obligations of SYNNEX Canada under this facility. SYNNEX Japan credit facility SYNNEX Japan has a credit agreement with a group of banks for a maximum commitment of JPY 15,000,000 or $ 141,616 . The credit agreement is comprised of a JPY 7,000,000 , or $ 66,088 , term loan and a JPY 8,000,000 , or $ 75,529 , revolving credit facility and expires in November 2021 . The interest rate for the term loan and revolving credit facility is based on the Tokyo Interbank Offered Rate, plus a margin, which is based on the Company’s consolidated leverage ratio, and currently equals 0.70 % per annum. The unused line fee on the revolving credit facility is currently 0.10 % per annum based on the Company's consolidated current leverage ratio. The term loan can be repaid at any time prior to the expiration date without penalty. The Company has guaranteed the obligations of SYNNEX Japan under this facility. Concentrix India revolving lines of credit facilities The Company's Indian subsidiaries have credit facilities with a financial institution to borrow up to an aggregate amount of $ 22,000 . The interest rate under these facilities is the higher of the bank's minimum lending rate or LIBOR, plus a margin of 0.9 % per annum. The Company guarantees the obligations under these credit facilities. These credit facilities can be terminated at any time by the Company’s Indian subsidiaries or the financial institution. There were no borrowings outstanding under these credit facilities as of either August 31, 2020 or November 30, 2019. 18 Table of Contents SYNNEX CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(continued) For the three and nine months ended August 31, 2020 and 2019 (currency and share amounts in thousands, except per share amounts) (unaudited) SYNNEX United States credit agreement In the United States, the Company has a senior secured credit agreement (as amended, the "U.S. Credit Agreement") with a group of financial institutions. The U.S. Credit Agreement includes a $ 600,000 commitment for a revolving credit facility and a term loan in the original principal amount of $ 1,200,000 . The Company may request incremental commitments to increase the principal amount of the revolving line of credit or term loan by $ 500,000 , plus an additional amount which is dependent upon the Company's pro forma first lien leverage ratio, as calculated under the U.S. Credit Agreement. The U.S. Credit Agreement matures in September 2022 . The outstanding principal amount of the term loan is repayable in quarterly installments of $ 15,000 , with the unpaid balance due in full on the September 2022 maturity date. The term loan can be repaid at any time prior to the maturity date without penalty. Interest on borrowings under the U.S. Credit Agreement can be based on LIBOR or a base rate at the Company's option, plus a margin. The margin for LIBOR loans ranges from 1.25 % to 2.00 % and the margin for base rate loans ranges from 0.25 % to 1.00 %, provided that LIBOR shall not be less than zero . The base rate is a variable rate which is the highest of (a) the Federal Funds Rate, plus a margin of 0.5 %, (b) the rate of interest announced, from time to time, by the agent, Bank of America, N.A., as its “prime rate,” and (c) the Eurodollar Rate, plus 1.0 %. The unused revolving credit facility commitment fee ranges from 0.175 % to 0.30 % per annum. The margins above the applicable interest rates and the revolving commitment fee for revolving loans are based on the Company’s consolidated leverage ratio, as calculated under the U.S. Credit Agreement. The Company’s obligations under the U.S. Credit Agreement are secured by substantially all of the parent company’s and its United States domestic subsidiaries’ assets on a pari passu basis with the interests of the lenders under the U.S. Term Loan Credit Agreement (defined below) pursuant to an intercreditor agreement and are guaranteed by certain of the Company's United States domestic subsidiaries. SYNNEX United States term loan credit agreement The Company has a secured term loan credit agreement (the “U.S. Term Loan Credit Agreement”) with a group of financial institutions in the original principal amount of $ 1,800,000 . The U.S. Term Loan Credit Agreement matures in October 2023 . The outstanding principal amount of the term loans is payable in quarterly installments of $ 22,500 , with the unpaid balance due in full on the maturity date. The term loan can be repaid at any time prior to the expiration date without penalty. Interest on borrowings under the U.S. Term Loan Credit Agreement can be based on LIBOR or a base rate at the Company’s option, plus a margin. The margin for LIBOR loans ranges from 1.25 % to 1.75 % and the margin for base rate loans ranges from 0.25 % to 0.75 %, provided that LIBOR shall not be less than zero . The base rate is a variable rate which is the highest of (a) 0.5 % plus the greater of (x) the Federal Funds Rate in effect on such day and (y) the overnight bank funding rate in effect on such day, (b) the Eurodollar Rate plus 1.0 % per annum, and (c) the rate of interest last quoted by The Wall Street Journal as the “Prime Rate” in the U.S. During the period in which the term loans were available to be drawn, the Company paid term loan commitment fees. The margins above the Company's applicable interest rates are, and the term loan commitment fee were, based on the Company's consolidated leverage ratio as calculated under the U.S. Term Loan Credit Agreement. The Company's obligations under the U.S. Term Loan Credit Agreement are secured by substantially all of the Company’s and certain of its domestic subsidiaries’ assets on a pari passu basis with the interests of the lenders under the existing U.S. Credit Agreement pursuant to an intercreditor agreement, and are guaranteed by certain of its domestic subsidiaries. SYNNEX Canada revolving line of credit SYNNEX Canada has an uncommitted revolving line of credit with a bank under which it can borrow up to CAD 50,000 , or $ 38,314 . Borrowings under the facility are secured by eligible inventory and bear interest at a base rate plus a margin ranging from 0.50 % to 2.25 % depending on the base rate used. The base rate could be a Banker's Acceptance Rate, a Canadian Prime Rate, LIBOR or U.S. Base Rate. As of both August 31, 2020 and November 30, 2019, there were no borrowings outstanding under this credit facility. Other borrowings and term debt Other borrowings and term debt include lines of credit with financial institutions at certain locations outside the United States, factoring of accounts receivable with recourse provisions, capital leases, a building mortgage and book overdrafts. As of August 31, 2020, commitments for these revolving credit facilities aggregated $ 83,335 . Interest rates and other terms of borrowing under these lines of credit vary by country, depending on local market conditions. Borrowings under these lines of credit facilities are guaranteed by the Company or secured by eligible accounts receivable. The maximum commitment amounts for local currency credit facilities have been translated into United States Dollars at August 31, 2020 exchange rates. 19 Table of Contents SYNNEX CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(continued) For the three and nine months ended August 31, 2020 and 2019 (currency and share amounts in thousands, except per share amounts) (unaudited) Future principal payments As of August 31, 2020, future principal payments under the above loans are as follows: Fiscal Years Ending November 30, 2020 (remaining three months) $ 131,519 2021 216,274 2022 1,050,004 2023 1,462,500 Total $ 2,860,297 Interest expense and finance charges The total interest expense and finance charges for the Company's borrowings were $ 31,021 and $ 105,017 , respectively, for the three and nine months ended August 31, 2020, and $ 44,401 and $ 132,111 , respectively, for the three and nine months ended August 31, 2019. The variable interest rates ranged between 0.74 % and 4.95 % during the three months ended August 31, 2020, and between 0.74% and 8.41 % during the nine months ended August 31, 2020. During the three months ended August 31, 2019, the variable interest rate ranged between 0.87 % and 10.74 %, and between 0.70 % and 11.38 % during the nine months ended August 31, 2019. Covenant compliance The Company's credit facilities have a number of covenants and restrictions that, among other things, require the Company to maintain specified financial ratios and satisfy certain financial condition tests. The covenants also limit the Company’s ability to incur additional debt, make or forgive intercompany loans, pay dividends and make other types of distributions, make certain acquisitions, repurchase the Company’s stock, create liens, cancel debt owed to the Company, enter into agreements with affiliates, modify the nature of the Company’s business, enter into sale-leaseback transactions, make certain investments, transfer and sell assets, cancel or terminate any material contracts and merge or consolidate. As of August 31, 2020, the Company was in compliance with all material covenants for the above arrangements. NOTE 9—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, 2020 August 31, 2019 August 31, 2020 August 31, 2019 Basic earnings per common share: Net income $ 134,464 $ 123,132 $ 314,008 $ 324,711 Less: net income allocated to participating securities (1) ( 1,491 ) ( 1,070 ) ( 3,623 ) ( 2,894 ) Net income attributable to common stockholders $ 132,973 $ 122,062 $ 310,385 $ 321,817 Weighted-average number of common shares - basic 50,890 50,601 50,851 50,661 Basic earnings per common share $ 2.61 $ 2.41 $ 6.10 $ 6.35 Diluted earnings per common share: Net income $ 134,464 $ 123,132 $ 314,008 $ 324,711 Less: net income allocated to participating securities (1) ( 1,481 ) ( 1,066 ) ( 3,602 ) ( 2,883 ) Net income attributable to common stockholders $ 132,983 $ 122,066 $ 310,406 $ 321,828 Weighted-average number of common shares - basic 50,890 50,601 50,851 50,661 Effect of dilutive securities: Stock options and restricted stock units 351 244 321 242 Weighted-average number of common shares - diluted 51,241 50,845 51,172 50,903 Diluted earnings per common share $ 2.60 $ 2.40 $ 6.07 $ 6.32 Anti-dilutive shares excluded from diluted earnings per share calculation 41 121 83 120 (1) Restricted stock awards granted to employees by the Company are considered participating securities . 20 Table of Contents SYNNEX CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(continued) For the three and nine months ended August 31, 2020 and 2019 (currency and share amounts in thousands, except per share amounts) (unaudited) NOTE 10—SEGMENT INFORMATION: Summarized financial information related to the Company’s reportable business segments for the periods presented is shown below: Technology Solutions Concentrix Inter-Segment Elimination Consolidated Three months ended August 31, 2020 Revenue $ 5,306,361 $ 1,163,694 $ ( 5,273 ) $ 6,464,782 External revenue 5,306,361 1,158,421 6,464,782 Operating income 132,373 76,763 — 209,136 Three months ended August 31, 2019 Revenue $ 5,047,970 $ 1,160,928 $ ( 5,240 ) $ 6,203,659 External revenue 5,047,968 1,155,690 6,203,659 Operating income 138,830 70,025 — 208,855 Nine months ended August 31, 2020 Revenue $ 13,858,313 $ 3,418,676 $ ( 15,371 ) $ 17,261,619 External revenue 13,858,313 3,403,305 — 17,261,619 Operating income 320,962 188,554 — 509,515 Nine months ended August 31, 2019 Revenue $ 13,695,729 $ 3,495,076 $ ( 14,805 ) $ 17,176,000 External revenue 13,695,725 3,480,275 — 17,176,000 Operating income 352,594 192,879 — 545,473 Total assets as of August 31, 2020 $ 11,164,679 $ 5,110,950 $ ( 3,012,522 ) $ 13,263,107 Total assets as of November 30, 2019 $ 10,312,512 $ 4,645,475 $ ( 3,260,027 ) $ 11,697,960 Inter-segment elimination represents services and other transactions, principally intercompany investments and loans, between the Company's reportable segments that are eliminated on consolidation. Geographic information The Company attributes revenues from external customers to the country from where Technology Solutions products are delivered and the country of domicile of the Concentrix legal entity that is party to the client contract. Shown below are the countries that accounted for 10% or more of the Company’s revenue and property and equipment, net, for the periods presented: Three Months Ended Nine Months Ended August 31, 2020 August 31, 2019 August 31, 2020 August 31, 2019 Revenue: United States $ 4,650,397 $ 4,181,667 $ 11,576,670 $ 11,327,961 Others 1,814,385 2,021,992 5,684,948 5,848,039 Total $ 6,464,782 $ 6,203,659 $ 17,261,619 $ 17,176,000 As of August 31, 2020 November 30, 2019 Property and equipment, net: United States $ 279,008 $ 287,679 Philippines 69,315 63,421 Others 235,628 218,799 Total $ 583,951 $ 569,899 21 Table of Contents SYNNEX CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(continued) For the three and nine months ended August 31, 2020 and 2019 (currency and share amounts in thousands, except per share amounts) (unaudited) NOTE 11—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 the Company's primary investor through its affiliates. As of both August 31, 2020 and November 30, 2019, MiTAC Holdings and its affiliates beneficially owned approximately 18 % of the Company’s outstanding common stock. 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 18% of the Company’s outstanding common stock as of August 31, 2020. These shares are owned by the following entities: As of August 31, 2020 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 190 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 8.7 % in MiTAC Incorporated, a privately-held Taiwanese company, which in turn holds a noncontrolling interest of 14.9 % 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. MiTAC Holdings generally has significant influence over the Company regarding matters submitted to stockholders for consideration, including any merger or acquisition of the Company. Among other things, this could have the effect of delaying, deterring or preventing a change of control over the Company. 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, 2020 August 31, 2019 August 31, 2020 August 31, 2019 Purchases of inventories and services $ 53,365 $ 41,989 $ 151,929 $ 120,093 Sale of products to MiTAC Holdings and affiliates 285 142 882 546 Rent and overhead costs incurred for use of facilities of MiTAC Holdings and affiliates 27 — 91 — The following table presents the Company’s receivable from and payable to MiTAC Holdings and its affiliates for the periods presented: August 31, 2020 November 30, 2019 Receivable from related parties (included in Accounts receivable, net) $ 15,841 $ 4,405 Payable to related parties (included in Accounts payable) 28,761 23,179 The Company’s business relationship with MiTAC Holdings and its affiliates has been informal and is generally not governed by long-term commitments or arrangements with respect to pricing terms, revenue or capacity commitments. The Company negotiates pricing and other material terms on a case-by-case basis with MiTAC Holdings and affiliates. The Company has adopted a policy requiring that material transactions with MiTAC Holdings or its related parties be approved by its Audit Committee, which is composed solely of independent directors. In addition, Mr. Miau’s compensation is approved by the Nominating and Corporate Governance Committee, which is also composed solely of independent directors. Synnex Technology International is a publicly-traded corporation in Taiwan that currently provides distribution and fulfillment services to various markets in Asia and Australia, and is also a potential competitor of the Company. Neither MiTAC Holdings nor Synnex Technology International is restricted from competing with the Company. NOTE 12—PENSION AND EMPLOYEE BENEFITS PLANS: The Company has 401(k) plans in the United States under which eligible employees may contribute up to the maximum amount as provided by law. Employees become eligible to participate in these plans on the first day of the month after their employment date. The 22 Table of Contents SYNNEX CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(continued) For the three and nine months ended August 31, 2020 and 2019 (currency and share amounts in thousands, except per share amounts) (unaudited) Company may make discretionary contributions under the plans. Employees in most of the Company's foreign subsidiaries are covered by government-mandated defined contribution plans. During the three and nine months ended August 31, 2020 , the Company contributed $ 18,874 and $ 51,487 , respectively, to defined contribution plans. During the three and nine months ended August 31, 2019 , the Company contributed $ 11,052 and $ 34,596 , respectively, to defined contribution plans . The Company has a deferred compensation plan for certain directors and officers. Distributions under the plan are subject to Section 409A of the United States Tax Code. The Company may invest balances in the plan in trading securities reported on recognized exchanges. As of August 31, 2020 and November 30, 2019, the deferred compensation liability balance was $ 5,511 and $ 5,389 , respectively. Defined Benefit Plans The Company has defined benefit pension or retirement plans for eligible employees in certain foreign subsidiaries. Benefits under these plans are primarily based on years of service and compensation during the years immediately preceding retirement or termination of participation in the plans. In addition, the Company has a frozen defined benefit pension plan, which includes both a qualified and non-qualified portion, for all eligible employees in the U.S. (“the cash balance plan”). The pension benefit formula for the cash balance plan is determined by a combination of compensation, age-based credits and annual guaranteed interest credits. The qualified portion of the cash balance plan has been funded through contributions made to a trust fund. The plan assumptions are evaluated annually and are updated as deemed necessary. During the three and nine months ended August 31, 2020, net periodic pension costs were $ 3,995 and $ 10,171 , respectively, and the Company’s contribution was $ 239 and $ 636 , respectively. During the three and nine months ended August 31, 2019, net periodic pension costs were $ 6,204 and $ 11,678 , respectively, and the Company’s contribution was $ 2,225 and $ 5,437 , respectively. The plans were underfunded by $ 135,313 and $ 116,675 as of August 31, 2020 and November 30, 2019, respectively. NOTE 13—EQUITY: Share repurchase program In June 2020, the Board of Directors authorized a three-year $ 400,000 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, 2020, the Company had no t repurchased any shares under this program. In June 2017, the Board of Directors authorized a three-year $ 300,000 share repurchase program, effective July 1, 2017, pursuant to which the Company could repurchase its outstanding common stock from time to time in the open market or through privately negotiated transactions. Through the expiration of this program in June 2020, the Company had repurchased 875 shares at a total cost of $ 84,577 . The share purchases were made on the open market and the shares repurchased by the Company are held in treasury for general corporate purposes. Dividends On March 24, 2020, as a result of the unpredictable economic environment due to the impact of the COVID-19 pandemic, the Company announced the suspension of its quarterly dividend . NOTE 14—LEASES: The Company leases certain of its facilities and equipment under operating lease agreements, which expire in various periods through 2034 . The Company’s finance leases are not material. The following table presents the various components of lease costs. Three Months Ended Nine Months Ended August 31, 2020 August 31, 2020 Operating lease cost $ 61,354 $ 182,374 Short-term lease cost 1,753 8,574 Variable lease cost 11,941 31,500 Sublease income ( 52 ) ( 193 ) Total operating lease cost $ 74,996 $ 222,255 The following table presents a maturity analysis of expected undiscounted cash flows for operating leases on an annual basis for the next five years and thereafter as of August 31, 2020: 23 Table of Contents SYNNEX CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(continued) For the three and nine months ended August 31, 2020 and 2019 (currency and share amounts in thousands, except per share amounts) (unaudited) Fiscal Years Ending November 30, 2020 (remaining three months) $ 56,407 2021 200,153 2022 158,322 2023 111,850 2024 78,311 Thereafter 80,229 Total payments $ 685,272 Less: imputed interest* 91,428 Total present value of lease payments $ 593,844 * Imputed interest represents the difference between undiscounted cash flows and discounted cash flows. During the three and nine months ended August 31, 2019, rent expense was $ 66,749 and $ 197,645 , respectively. Sublease income was immaterial. The following amounts were recorded in the Company's Consolidated Balance Sheet as of August 31, 2020: Operating leases Balance sheet location August 31, 2020 Operating lease ROU assets Other assets, net $ 540,990 Current operating lease liabilities Other accrued liabilities 178,723 Non-current operating lease liabilities Other long-term liabilities 415,121 The following table presents s upplemental cash flow information related to the Company's operating leases for the nine months ended August 31, 2020. Cash payments related to variable lease costs and short-term leases are not included in the measurement of operating lease liabilities, and, as such, are excluded from the amounts below : Nine months ended Cash flow information August 31, 2020 Cash paid for amounts included in the measurement of lease liabilities $ 168,954 Non-cash ROU assets obtained in exchange for lease liabilities (subsequent to initial adoption) 77,506 The weighted-average remaining lease term and discount rate as of August 31, 2020 were as follows: Operating lease term and discount rate Operating Leases Weighted-average remaining lease term (years) 4.13 Weighted-average discount rate 7.01 % Future minimum contractually required cash payment obligations under non-cancellable lease agreements as of November 30, 2019 were as follows: Fiscal Years Ending November 30, 2020 $ 213,649 2021 174,611 2022 132,778 2023 96,084 2024 66,753 Thereafter 71,351 Total minimum lease payments $ 755,226 24 Table of Contents SYNNEX CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(continued) For the three and nine months ended August 31, 2020 and 2019 (currency and share amounts in thousands, except per share amounts) (unaudited) NOTE 15— COMMITMENTS AND CONTINGENCIES: The Company was contingently liable as of August 31, 2020 under agreements to repurchase repossessed inventory acquired by flooring companies as a result of default on floor plan financing arrangements by the Company's customers. These arrangements are described in Note 7 and do not have expiration dates. 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. There have been no repurchases through August 31, 2020 under these agreements 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. 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. 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. NOTE 16— RISKS AND UNCERTAINTIES RELATED TO THE COVID-19 PANDEMIC: On March 11, 2020, the World Health Organization characterized the COVID-19 outbreak as a pandemic. The COVID-19 pandemic has negatively impacted the global economy, disrupted global supply chains and work force participation and created significant volatility and disruption of financial markets. These disruptions, which were most acute during the second quarter of fiscal year 2020, have impacted the Company’s business including Concentrix’ ability to support customer demand due to decreased workforce productivity and limiting the Technology Solutions segment’s ability to support end market demand due to supply chain disruptions. As a result, many of the estimates and assumptions used in preparation of these interim financial statements required increased judgment and carry a higher degree of variability and volatility. As events continue to evolve with respect to the pandemic, the Company’s estimates may materially change in future periods. 25 Table of Contents