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Item 7. Management’s Discussion and Analysis

2021-01-28 compared with 2020-01-29 · 210 added, 165 removed, 387 unchanged (49% of the section changed)

Management’s Discussion and Analysis of Financial Condition and Results of Operations

For an understanding of SYNNEX and the significant factors that influenced our performance during the past two fiscal years, the following discussion and analysis of our financial condition and results of operations should be read in conjunction with the description of the business appearing in Item 1 of this Report, Selected Consolidated Financial Data and the Consolidated Financial Statements and related Notes and Schedules included elsewhere in this Report.

For an understanding of SYNNEX and the significant factors that influenced our performance during the past two fiscal years, the following discussion and analysis of our financial condition and results of operations should be read in conjunction with the description of the business appearing in Item 1 of this Report, Selected Consolidated Financial Data and Item 8 Financial Statements and Supplementary Data included elsewhere in this Report.

You should carefully review and consider the information regarding our financial condition and results of operations set forth under Part I-Item 7 (Management’s Discussion and Analysis of Financial Condition and Results of Operations) in our Annual Report on Form 10-K for the fiscal year ended November 30, 2019, filed with the Securities and Exchange Commission on January 29, 2020, f or an understanding of our results of operations and liquidity discussions and analysis comparing fiscal year 2019 to fiscal year 2018 .

On December 1, 2018, we adopted Accounting Standards Codification (“ASC”) Topic 606 applying the full retrospective method.

Amounts for fiscal years ended November 30, 2018 and 2017 have been adjusted in this Report to reflect the adoption of ASC Topic 606, which did not have a material impact on our consolidated financial statements.

Refer to Note 2 to the consolidated financial statements under Item 8 of this Report for further information on the impact of ASC Topic 606 on our financial results, our financial condition and cash flows from operations.

Amounts in certain tables appearing in this Report may not add or compute due to rounding.

When used in this Annual Report on Form 10-K, or this Report, the words “believes,” “estimates,” “expects,” “allows,” “can,” “may,” “designed,” “will,” and similar expressions are intended to identify forward-looking statements.

These are statements that relate to future periods and include statements about market trends, our business model and our services, our market strategy, including expansion of our product lines, the proposed separation of SYNNEX and Concentrix, including as to the effect on our results of operations going forward, our infrastructure, our investment in information technology, or IT, systems, our employee hiring, retention and turnover, the ownership interest of MiTAC Holdings Corporation, or MiTAC Holdings, in us and its impact, our revenue, our gross margins, our operating costs and results, the value of our inventory, competition with Synnex Technology International Corp., our future needs for additional financing, the likely sources for such funding and the impact of such funding ,market acceptance of our customers’ products, concentration of customers, our international operations, foreign currency exchange rates and expected trends related thereto, expansion and scaling of our operations and related effects, including our Concentrix business, our strategic acquisitions and divestitures of businesses and assets, including our acquisition of Convergys and the impact of the acquisition on our business, revenue, cost of revenue and gross margin, our goodwill, seasonality of sales, adequacy of our capital resources to meet our capital needs, cash held by our foreign subsidiaries and repatriation, changes in fair value of derivative instruments, adequacy of our disclosure controls and procedures, pricing pressures, competition, impact of economic and industry trends, impact of our accounting policies and recently issued accounting pronouncements, our belief regarding the impact of inventory repurchase obligations and commitments and contingencies, our effective tax rates, our share repurchase and dividend program, our securitization programs and revolving credit lines, our succession planning, our investments in working capital, personnel, facilities and operations.

These are statements that relate to future periods and include statements about market trends, our business model and our services, our market strategy, including expansion of our product lines, the separation of SYNNEX and Concentrix, including as to the effect on our results of operations going forward, our infrastructure, our investment in information technology, or IT, systems, our employee hiring, retention and turnover, the ownership interest of MiTAC Holdings Corporation, or MiTAC Holdings, in us and its impact, our revenue, our gross margins, our operating costs and results, the value of our inventory, competition with Synnex Technology International Corp., our future needs for additional financing, the likely sources for such funding and the impact of such funding, market acceptance of our customers’ products, concentration of customers, our international operations, foreign currency exchange rates and expected trends related thereto, expansion and scaling of our operations and related effects, our strategic acquisitions and divestitures of businesses and assets, our goodwill, seasonality of sales, adequacy of our capital resources to meet our capital needs, cash held by our international subsidiaries and repatriation, changes in fair value of derivative instruments, adequacy of our disclosure controls and procedures, pricing pressures, competition, impact of economic and industry trends, impact of our accounting policies and recently issued accounting pronouncements, our belief regarding the impact of inventory repurchase obligations and commitments and contingencies, our effective tax rates, our share repurchase and dividend program, our securitization programs and revolving credit lines, our succession planning, our investments in working capital, personnel, facilities and operations.

Forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those projected.

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We expressly disclaim any obligation or undertaking to release publicly any updates or revisions to any forward-looking statements contained herein to reflect any change in our expectations with regard thereto or any change in events, conditions or circumstances on which any such statement is based.

Announcement of a plan to separate our Concentrix segment into a separate publicly-traded company

On January 9, 2020, we announced a plan to separate our Concentrix segment into an independent publicly-traded company, in a transaction expected to be completed in the second half of 2020.

The separation is intended to qualify as a tax-free transaction for federal income tax purposes for both us and our current stockholders.

Immediately following the separation, our stockholders will own shares of both SYNNEX and Concentrix, each at the same percentage ownership that they held of us prior to the transaction.

Completion of the separation will not require a stockholder vote but will be subject to customary closing conditions, including final approval of our Board of Directors, the receipt of a favorable opinion with respect to the tax-free nature of the transaction, and the effectiveness of a Form 10 registration statement with the U.S.

Securities and Exchange Commission.

Revenue and Cost of Revenue

We derive our Technology Solutions revenue primarily through the distribution of peripherals, IT systems, system components, software, networking, communications and security equipment and CE and complementary products, and the delivery of servers and networking solutions for our design and integration solutions customers’ data centers.

In our Concentrix segment, we provide high value business outsourcing services and solutions to improve customer experience of our clients.

Our Concentrix customer contracts typically consist of a master services agreement or statement of work, which contains the terms and conditions of each program or service we offer.

Our agreements can range from less than one year to over five years and are subject to early termination by our customers or us for any reason, typically with 30 to 90 days’ notice.

In fiscal years 2019 and 2018, approximately 34% and 28% of our consolidated revenue, respectively, was generated from our international operations.

In our Concentrix segment, we provided high value business outsourcing services and solutions to improve customer experience of our clients.

Our Concentrix customer contracts typically consisted of a master services agreement or statement of work, which contained the terms and conditions of each program or service we offered.

Our agreements could range from less than one year to over five years and were subject to early termination by our customers or us for any reason, typically with 30 to 90 days’ notice.

In fiscal years 2020 and 2019, approximately 34% of our consolidated revenue and approximately 24% of our Technology Solutions revenue, was generated from our international operations.

As a result, our revenue growth has been impacted by fluctuations in foreign currency exchange rates.

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completion of the planned separation of our Concentrix segment, we expect this trend to reverse, with a greater proportion of our revenue generated in the United States.

The market for IT products and services is generally characterized by declining unit prices and short product life cycles.

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In addition, cost of revenue includes the cost of material, labor and overhead for our systems design and integration solutions.

In our Concentrix segment, cost of revenue consists primarily of personnel costs related to contract delivery.

In our Concentrix segment, cost of revenue consists primarily of personnel costs related to contract services delivery.

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Revenue and cost of revenue in our Technology Solutions segment relate to products, and revenue and cost of revenue in our Concentrix segment relate to services.

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Our Technology Solutions business includes operations in the United States, Canada, Japan and Latin America, so we are affected by demand for our products in those regions and the strengthening or weakening of local currencies relative to the U.S.

The customer experience services industry in which our Concentrix segment operates is competitive.

Customers’ performance measures are based on competitive pricing terms and quality of services.

Accordingly, we could be subject to pricing pressure and may experience a decline in our average selling prices for our services.

Our Concentrix business is largely concentrated in the United States, the United Kingdom, the Philippines, India, Canada, China and Japan.

Accordingly, we would be impacted by economic strength or weakness in these geographies and by the strengthening or weakening of local currencies relative to the U.S.

During the three-year period ended November 30, 2019, the economic environment was generally stable.

The customer experience services industry in which our Concentrix segment operated is competitive.

Customers’ performance measures were based on competitive pricing terms and quality of services.

Our Concentrix business was largely concentrated in the United States, the United Kingdom, the Philippines, India, Canada, China and Japan.

Accordingly, we were impacted by economic strength or weakness in these geographies and by the strengthening or weakening of local currencies relative to the U.S.

In December 2019, there was an outbreak of a new strain of coronavirus (“COVID-19”).

In March 2020, the World Health Organization characterized COVID-19 as a pandemic.

The COVID-19 pandemic has negatively impacted the global economy, disrupted global supply chains and workforce participation, including our own, and created significant volatility and disruption of financial markets.

The disruptions due to COVID-19 have impacted our business including logistics operations in our Technology Solutions segment and limited the productive ability of many of our associates who were in our Concentrix segment, particularly during the second quarter of fiscal year 2020 .

We have successfully transitioned a significant portion of our workforce in both segments to a remote working environment and implemented a number of safety and social distancing measures within our premises to protect the health and safety of associates who are required to be on-premise to support our business.

As of November 30, 2020, the majority of our workforce across both segments was productive.

During the fiscal year ended November 30, 2020, we incurred net incremental costs associated with COVID-19 of approximately $131 million, of which Concentrix incurred net costs of approximately $86 million and Technology Solutions incurred net costs of approximately $45 million.

We are unable to predict how long these conditions will persist, what additional measures may be introduced by governments, vendors or customers and the effect of any such additional measures on our business.

As a result, many of the estimates and assumptions involved in the preparation of the financial statements included in this report on Form 10-K, required increased judgment and carry a higher degree of variability and volatility.

As events continue to evolve with respect to the pandemic, our estimates may materially change in future periods.

Critical Accounting Policies and Estimates

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Revenue Recognition.

On December 1, 2018, we adopted ASC Topic 606 applying the full retrospective method.

See Note 2 to the Consolidated Financial Statements for information regarding the impact of adopting this new revenue standard.

We generate revenue primarily from (i) the sale of various IT products through our Technology Solutions business unit and (ii) the provision of business outsourcing services focused on customer experience through our Concentrix business unit.

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Binding purchase orders from customers together with agreement to our terms and conditions of sale by way of an executed agreement or other signed documents are considered to be the contract with a customer.

In situations where arrangements include customer acceptance provisions, revenue is recognized when we can objectively verify the products comply with specifications underlying acceptance and the customer has control of the goods.

Revenue is presented net of taxes collected from customers and remitted to government authorities.

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We consider shipping and handling activities as costs to fulfill the sale of products.

Shipping revenue is included in net sales when control of the product is transferred to the customer, and the related shipping and handling costs are included in cost of products sold.

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 products sold.

For the Concentrix segment, we recognize revenue from services contracts over time as the promised services are delivered to clients for an amount that reflects the consideration to which we are entitled in exchange for those services.

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Billings related to such transition activities are classified under contract liabilities and subsequently recognized ratably over the period in which the related services are performed.

We apply a measure of progress (typically time-based) to any fixed consideration and allocates variable consideration to the distinct periods of service based on usage.

We apply a measure of progress (typically time-based) to any fixed consideration and allocate variable consideration to the distinct periods of service based on usage.

As a result, revenue is generally recognized over the period the services are provided on a usage basis.

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Certain client contracts include incentive payments from the client upon achieving certain agreed-upon service levels and performance metrics or service level agreements that could result in credits or refunds to the client.

Revenue relating to such

Revenue relating to such arrangements is accounted for as variable consideration when the likely amount of revenue to be recognized can be estimated to the extent that it is probable that a significant reversal of any incremental revenue will not occur.

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arrangements is accounted for as variable consideration when the likely amount of revenue to be recognized can be estimated to the extent that it is probable that a significant reversal of any incremental revenue will not occur.

Business Combinations.

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In our Technology Solutions business we seek to acquire new OEM relationships, enhance our supply chain and integration capabilities, the services we provide to our customers and OEM suppliers, and expand our geographic footprint.

In our Concentrix segment we seek to enhance our capabilities and domain expertise in our key verticals, expand our geographic footprint and further expand into higher value service offerings.

We are also strategically focused on further increasing our scale to support our customers.

Acquisition during fiscal year 2018

On October 5, 2018, we acquired 100% of Convergys Corporation, ("Convergys”), a customer experience outsourcing company for a purchase price of $2.3 billion.

This acquisition is related to our Concentrix segment and added scale, diversified our revenue base, expanded our service delivery footprint, and strengthened our leadership position as a top global provider of services to improve customer experience.

In our Concentrix segment, prior to the Separation, we sought to enhance our capabilities and domain expertise in key industry verticals, expand our geographic footprint and further expand into higher value service offerings and increase scale.

Results of Operations

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Provision for income taxes

With the announcement of a plan to separate the Concentrix segment into a separate publicly-traded company in a transaction expected to be completed in the second half of 2020, our services revenue and cost of services revenue which represent revenue and cost of revenue of our Concentrix segment are expected to be discontinued following the separation.

Further, selling, general and administrative expenses, interest expense and finance charges, net, other income (expense), net and provision for income-taxes are expected to decrease by amounts related to the Concentrix segment or impacted by the proposed separation, with related reductions in gross profit, operating income and net income.

Additionally, our gross margin and operating margin are expected to decrease due to the discontinuance of the higher margins earned in the Concentrix segment.

With the completion of the Separation on December 1, 2020, our services revenue and cost of services revenue which represent revenue and cost of revenue of our Concentrix segment will be discontinued.

Further, selling, general and administrative expenses, interest expense and finance charges, net, other income (expense), net and provision for income-taxes will decrease by amounts related to the Concentrix segment or impacted by the Separation, with related reductions in gross profit, operating income and net income.

Additionally, our gross margin and operating margin will decrease due to the discontinuance of the higher margins earned in the Concentrix segment.

In addition, in the second half of 2021, we expect a decrease in our products revenue of approximately $1.2 billion due to a customer moving to a consignment model where we will provide integration services on an agency basis.

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Certain non-GAAP financial information

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Revenue in constant currency, which is revenue adjusted for the translation effect of foreign currencies so that certain financial results can be viewed without the impact of fluctuations in foreign currency exchange rates, thereby facilitating period-to-period comparisons of our business performance.

Revenue in constant currency is calculated by translating the revenue of fiscal year 2019 in the billing currency using their comparable prior year’s currency conversion rate.

Revenue in constant currency is calculated by translating the revenue of fiscal year 2020 in the billing currency using the prior year’s currency conversion rate.

Generally, when the dollar either strengthens or weakens against other currencies, the growth at constant currency rates or adjusting for currency will be higher or lower than growth reported at actual exchange rates.

Non-GAAP operating income, which is operating income, adjusted to exclude acquisition-related and integration expenses, restructuring costs and amortization of intangible assets.

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Non-GAAP operating income, which is operating income , adjusted to exclude transaction -related and integration expenses, restructuring costs and amortization of intangible assets.

Non-GAAP operating margin, which is non-GAAP operating income, as defined above, divided by revenue.

Adjusted earnings before interest, taxes, depreciation and amortization, or adjusted EBITDA, which is non-GAAP operating income, as defined above, plus depreciation.

Non-GAAP diluted earnings per common share (“EPS”), which is diluted EPS excluding the per share, tax effected impact of (i) acquisition-related and integration expenses, (ii) restructuring costs, (iii) amortization of intangible assets, (iv) a gain upon the settlement of contingent consideration related to the acquisition of Westcon-Comstor Americas in fiscal year 2017, and (v) a gain recorded upon realization of a contingent asset related to the Westcon-Comstor Americas acquisition, and the per share amount of the net impact of the adjustments related to the Tax Cuts and Jobs Act of 2017.

Adjusted earnings before interest, taxes, depreciation and amortization (“Adjusted EBITDA”) which is net income before interest, taxes, depreciation and amortization, adjusted to exclude other income (expense), net and transaction-related and integration expenses.

Non-GAAP diluted earnings per common share (“EPS”), which is diluted EPS excluding the per share, tax effected impact of (i) transaction-related and integration expenses, (ii) amortization of intangible assets, (iii) a gain upon the settlement of contingent consideration related to the acquisition of Westcon-Comstor Americas in fiscal year 2017, and (iv) a gain recorded upon realization of a contingent asset related to the Westcon-Comstor Americas acquisition.

Transaction-related expenses typically consist of acquisition, integration, and divestiture related costs and are expensed as incurred.

These expenses primarily represent costs for legal, banking, consulting and advisory services, and debt extinguishment fees.

From time to time, this category may also include transaction-related gains/losses on divestitures/spin-off of businesses.

Our acquisition activities have resulted in the recognition of intangible assets which consist primarily of customer relationships, vendor lists and technology.

Definite-lived intangible assets are amortized over their estimated useful lives and are tested for impairment when events indicate that the carrying value may not be recoverable.

The amortization of intangible assets is reflected in our statements of operations within each segment.

Although intangible assets contribute to our revenue generation, the amortization of intangible assets does not directly relate to the sale of our products and the services performed for our clients.

Additionally, intangible asset amortization expense typically fluctuates based on the size and timing of our acquisition activity.

Accordingly, we believe excluding the amortization of intangible assets, along with the other non-GAAP adjustments which neither relate to the ordinary course of our business nor reflect our underlying business performance, enhances our and our investors’ ability to compare our past financial performance with its current performance and to analyze underlying business performance and trends.

Intangible asset amortization excluded from the related non-GAAP financial measure represents the entire amount recorded within our GAAP financial statements, and the revenue generated by the associated intangible assets has not been excluded from the related non-GAAP financial measure.

Intangible asset amortization is excluded from the related non-GAAP financial measure because the amortization, unlike the related revenue, is not affected by operations of any particular period unless an intangible asset becomes impaired or the estimated useful life of an intangible asset is revised.

We believe that providing this additional information is useful to the reader to better assess and understand our base operating performance, especially when comparing results with previous periods and for planning and forecasting in future periods, primarily because management typically monitors the business adjusted for these items in addition to GAAP results.

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Operating income

Acquisition-related and integration expenses

Transaction-related and integration expenses

Amortization of intangibles

Non-GAAP operating income

Depreciation (excluding accelerated depreciation included in acquisition-related and integration expenses above)

Adjusted EBITDA

Operating margin

Non-GAAP operating margin

Acquisition-related and integration expenses

Interest expense and finance charges, net

Provision for income taxes

Depreciation (excluding accelerated depreciation included in transaction-related and integration expenses below)

Amortization of intangibles

Other (income) expense, net (excluding amounts included in transaction-related and integration expenses below)

Transaction-related and integration expenses

Adjusted EBITDA

Transaction-related and integration expenses

Amortization of intangibles

Contingent consideration

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Income taxes related to the above (1)

tax reform adjustment

Non-GAAP diluted EPS

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Operating income

Acquisition-related and integration expenses

Transaction-related and integration expenses

Amortization of intangibles

Non-GAAP operating income

Adjusted EBITDA

Operating margin

Non-GAAP operating margin

Interest expense and finance charges, net

Provision for income taxes

Amortization of intangibles

Other (income) expense, net

Transaction-related and integration expenses

Adjusted EBITDA

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Fiscal Years Ended November 30,

(in thousands, except per share amounts)

Foreign currency translation

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Operating income

Acquisition-related and integration expenses

Transaction-related and integration expenses

Amortization of intangibles

Non-GAAP operating income

Depreciation (excluding accelerated depreciation included in acquisition-related and integration expenses above)

Adjusted EBITDA

Operating margin

Non-GAAP operating margin

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The tax effect of taxable and deductible non-GAAP adjustments was calculated using the effective year-to date tax rate during the respective fiscal years.

The effective tax rate for fiscal year 2018 excludes the impact of the transition tax on accumulated overseas profits and the re-measurement of deferred tax assets and liabilities to the new U.S.

tax rate related to the enactment of the Tax Cuts and Jobs Act of 2017.

Interest expense and finance charges, net

Provision for income taxes

Depreciation (excluding accelerated depreciation included in transaction-related and integration expenses below)

Amortization of intangibles

Other (income) expense, net (excluding amounts included in transaction-related and integration expenses below)

Transaction-related and integration expenses

Adjusted EBITDA

The tax effect of taxable and deductible non-GAAP adjustments was calculated using the effective tax rate during the respective fiscal years.

Fiscal Years Ended November 30, 2020 and 2019

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Substantially all of the inter-segment revenue represents services provided by the Concentrix segment to the Technology Solutions segment.

Revenue in our Technology Solutions segment increased in fiscal year 2019 compared to fiscal year 2018 primarily due to broad-based strength in system components, IT systems, networking equipment and peripherals, primarily in the United States, which was partially offset by a decrease driven by revenue that is subject to net revenue presentation, primarily consisting of software, cloud and security products.

By product category, our sales of system components, networking equipment, IT systems and peripherals, in fiscal year 2019, increased by 32%, 14%, 9% and 3%, respectively, while sales of software decreased by 1%.

Revenue in our Technology Solutions segment increased in fiscal year 2020 compared to fiscal year 2019 primarily due to a demand for technology equipment as COVID-19 related government mandated shelter-in-place restrictions during the second, third and fourth quarters of fiscal year 2020 led to increased needs for remote work, learn and consume related solutions .

On a constant currency basis, revenue in our Technology Solutions segment increased by 5.2% during fiscal year 2020, compared to fiscal year 2019.

Concentrix segment revenue increased in fiscal year 2019, compared to fiscal year 2018, primarily due to the impact of the acquisition of Convergys in October 2018, which was partially offset by the translation effect of foreign currencies.

Concentrix segment revenue increased slightly in fiscal year 2020, compared to fiscal year 2019, due to growth with technology, retail and ecommerce clients partially offset by lower demand from media, communications, travel, tourism and automotive clients.

During fiscal year 2020, Concentrix revenue was impacted by the COVID-19 related government mandated shelter-in-place restrictions in several countries in the world.

These restrictions adversely impacted our revenue due to the inability of a significant

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number of our associates to work despite client demand.

This impact was most acute in the second quarter of 2020.

Our revenue was also unfavorably impacted by the translation effect of foreign currencies .

Fiscal Years Ended November 30,

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Concentrix margins, which are higher than those in our Technology Solutions segment, can be impacted by resource location, client mix and pricing, additional lead time for programs to be fully scalable, and transition and initial set-up costs.

In fiscal year 2019, our gross profit increased due to increases in both the Technology Solutions and Concentrix segments, compared to fiscal year 2018.

The increase in our gross margin over the prior fiscal year is due to an increase in the Technology Solutions gross margin and an increase in the proportion of gross profit generated in the Concentrix segment, primarily due to the acquisition of Convergys.

Technology Solutions gross profit and margin increased in fiscal year 2019, as compared to the prior year, primarily due to product mix, including higher yielding project and integration-based transactions, and broad-based growth across our product portfolio, primarily in the United States .

This increase was partially offset by net unfavorable foreign currency translation.

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increase in gross margin during the fiscal year ended November 30, 2019 was also attributable to an increase in our revenue generated from sales of products and services where revenue is reported on a net basis by recognizing the margins earned in revenue with no associated cost of revenue.

Concentrix gross profit increased in fiscal year 2019, as compared to the prior fiscal year, primarily due to the full year impact of the acquisition of Convergys in October 2018 and client mix.

This increase was partially offset by net unfavorable foreign currency translation.

Concentrix gross margin during the year ended November 30, 2019 decreased compared to the prior year, primarily due to client mix .

Technology Solutions gross profit increased in fiscal year 2020, as compared to the prior fiscal year, primarily driven by strong demand for technology products as COVID-19 related government mandated shelter-in-place restrictions during the second, third and fourth quarters of fiscal year 2020 led to a greater need for remote work, learn and consume related solutions.

This increase was partially offset by lower margins due to product mix from our projects and integration-based server solutions and incremental COVID-19 related costs of approximately $10.4 million.

Our Concentrix segment’s gross profit and margin decreased during fiscal year 2020 as compared to the prior fiscal year, due to the incremental impact of $76.0 million in COVID-19 related non-productive workforce and other costs, which was most acute during the second and third quarters of fiscal year 2020, as we transitioned our workforce to work remotely .

Selling, General and Administrative Expenses

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Selling, general and administrative expenses also include cost of warehouses, delivery centers and other non-integration facilities, utility expenses, legal and professional fees, depreciation on certain of our capital equipment, bad debt expense, amortization of our non-technology related intangible assets, and marketing expenses, offset in part by reimbursements from our OEM suppliers.

Selling, general and administrative expenses increased, in both absolute dollars and as a percentage of revenue, in fiscal year 2019, compared to the prior fiscal year, primarily due to the full year impact of the Convergys acquisition.

Selling, general and administrative expenses in our Technology Solutions segment increased in fiscal year 2019, compared to fiscal year 2018, primarily due to an increase in investments in our associates to support growth and incremental bad debt provision for specific customers, partially offset by a decrease in amortization of intangible assets and acquisition -related and integration expenses.

Scale efficiencies resulted in a decrease in selling, general and administrative expenses as a percentage of segment revenue in the current year, compared to the prior year period.

Concentrix selling, general and administrative expenses increased in fiscal year 2019, compared to the prior year, primarily due to the full year impact of the acquisition of Convergys, an increase in the amortization of intangible assets by $92.5 million and an increase in acquisition-related and integration expenses of $33.0 million.

These increases were partially offset by the impact of net favorable foreign currency translation.

Scale efficiencies resulted in a decrease in selling, general and administrative expenses as a percentage of segment revenue in the current year, compared to the prior year period.

Selling, general and administrative expenses in our Technology Solutions segment increased in fiscal year 2020, compared to fiscal year 2019, primarily due to an increase in allowance for doubtful accounts and higher salaries and employee related expenses due to COVID-19.

Incremental costs related to COVID-19 were approximately $33 million for fiscal year 2020.

In addition, we incurred $7.4 million in transaction costs related to the Separation of Concentrix.

These increases were partially offset by a $3.7 million decrease in amortization of intangible assets.

Technology Solutions selling, general and administrative expenses as a percentage of revenue in fiscal year 2020, was consistent with the prior fiscal year.

Concentrix selling, general and administrative expenses decreased, in both absolute dollars and as a percentage of revenue, in fiscal year 2020, compared to the prior fiscal year, primarily due to lower facility and employee costs as a result of integration and

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facility rationalization undertaken in fiscal year 2019 in connection with the acquisition of Convergys Corporation as well as the impact of reduction in variable operating expenses and discretionary spend due to COVID-19 related remote work.

The decrease in the current fiscal year was also caused by an $18.9 million reduction in the amortization of intangible assets and a decrease in transaction-related and integration expenses by $33.0 million as compared to the prior year.

These decreases were partially offset by incremental technology and health and safety c osts of approximately $10.0 million due to COVID-19 related remote work.

Operating Income

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Concentrix operating margin

Operating income and margin in our Technology Solutions segment increased during fiscal year 2019, compared to the prior year, due to broad-based growth, higher operating income from our systems design and integration solutions business and a decrease in the amortization of intangible assets and acquisition-related and integration expenses.

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Operating income and margin in our Concentrix segment increased dur in g fiscal year 201 9 , compared to the prior year, due to the Convergys acquisition and integration synergies.

These increases were partially offset by higher acquisition-related and integration expenses and the amortization of intangible assets, as compared to the prior fiscal year .

Operating income in our Technology Solutions segment increased during fiscal year 2020, compared to the prior year, primarily due to broad based growth , decreases in the amortization of intangible assets and transaction-related expenses.

These increases were partially offset by the impact of COVID-19 related incremental costs associated with allowances for doubtful accounts and higher salary and employee related costs .

Operating margin in our Technology Solutions segment decreased due to product mix.

Operating income and margin in our Concentrix segment increased during fiscal year 2020, compared to the prior year, primarily due to lower transaction-related and integration expenses and lower amortization of intangible assets partially offset by the impact of COVID-19 related incremental costs.

Interest Expense and Finance Charges, Net

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Amounts recorded in interest expense and finance charges, net, consist primarily of interest expense paid on our lines of credit and term loans, fees associated with third party accounts receivable flooring arrangements and the sale or pledge of accounts receivable through our securitization facilities, offset by income earned on our cash investments.

The increase in our interest expense and finance charges, net, compared to the prior year, was due to higher interest expense as a result of the full year interest impact of borrowings in the prior year to fund the Convergys acquisitions and to support growth in our Technology Solutions segment.

Our interest expense was also unfavorably impacted by higher borrowing rates during the first half of fiscal year 2019.

This increase was partially offset by a reduction in outstanding borrowings and declining borrowing rates in the second half of fiscal year 2019.

$2.0 billion of our outstanding borrowings of $3.0 billion at November 30, 2019 have been economically converted to fixed-rate debt through interest rate swaps.

The decrease in our interest expense and finance charges, net, compared to the prior year, was due to due to lower interest expense as a result of reduction of approximately $700 million in our average borrowings during fiscal year 2020 , as compared to the prior year, as well as a lower interest rate environment.

$1.6 billion of our outstanding borrowings at November 30, 2020, representing substantially all of our borrowings post the Separation of Concentrix, have been economically converted to fixed-rate debt through interest rate swaps.

Other Income (Expense), Net

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Percentage of revenue

Amounts recorded as other income (expense), net include foreign currency transaction gains and losses, other than cash flow hedges, investment gains and losses, non-service component of pension costs, debt extinguishment gains and losses and other non-operating gains and losses, such as changes in the fair value of convertible debt conversion spread, settlements received from class actions lawsuits and realization of contingent assets.

During the year ended November 30, 2019, net other income (expense) increased from net other (expense) of $9.0 million in the prior year to a net other income of $30.4 million, primarily due to a gain of $19.0 million upon the settlement of contingent consideration related to our acquisition of Westcon-Comstor Americas in fiscal year 2017, a gain of $11.1 million recorded upon realization of contingent sales-tax assets related to the Westcon-Comstor Americas acquisition, and net foreign currency exchange gains of $9.3 million in the current year compared to net foreign currency exchange losses of $ 19.2 million, mainly in our Latin American businesses, in the prior year.

The losses and expenses in the prior year were partially offset by gains of $10.0 million related to changes in the fair value of the conversion spread of convertible debentures assumed in connection with the acquisition of Convergys and extinguishment gains on settlement of certain of those debentures.

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Amounts recorded as other income (expense), net include foreign currency transaction gains and losses other than on cash flow hedges, investment gains and losses, non-service component of pension costs, debt extinguishment gains and losses and other non-operating gains and losses, such as settlements received from class actions lawsuits and realization of contingent assets.

Other income (expense), net decreased during the fiscal year ended November 30, 2020, compared to the prior year, primarily due to a gain of $19.0 million upon the settlement of contingent consideration related to our acquisition of Westcon-Comstor Americas in an earlier year and a gain of $11.1 million recorded upon realization of contingent sales-tax assets related to the Westcon-Comstor Americas acquisition recorded in fiscal year 2019.

In addition, other income (expense), net in fiscal year 2020 decreased compared to the prior year due to the write-off of $2.2 million of deferred financing costs associated with the $1.2 billion partial prepayment of our term loans on November 30, 2020 in preparation of the Separation on December 1, 2020.

These decreases were partially offset by a $3.5 million gain recorded in fiscal year 2020 upon reversal of certain tax indemnification provisions set up at the time of disposition of a subsidiary in a prior year .

Provision for Income Taxes

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Income taxes consist of our current and deferred tax expense resulting from our income earned in domestic and foreign jurisdictions.

Our income tax expense increased during fiscal year ended November 30, 2019, as compared to the prior year, due to the increase in our income before taxes.

The effective tax rate for year ended November 30, 2019 decreased, compared to the prior year, primarily due to the impact of the reduction in federal income tax rates due to Tax Cuts and Jobs Act of 2017 (“TCJA”), the mix of income earned in different tax jurisdictions, and the favorable impact of the non-taxable gain upon the settlement of contingent consideration related to the acquisition of Westcon-Comstor Americas in fiscal year 2017.

Additionally, the effective tax rate decreased

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in fiscal year 2019 , compared to the prior year , due to the discrete impact of a net tax charge of $33.1 million related to the TCJA in the prior year period.

This charge included $59.8 million of transition tax expense for mandatory repatriation, partially offset by $26.7 million of tax benefit from the remeasurement of our net deferred tax balance to the new U.S.

tax rate enacted under the TCJA.

Our income tax expense decreased during the fiscal year ended November 30, 2020, as compared to the prior year, due to the decrease in our effective tax rate.

The effective tax rate for fiscal year 2020 was lower compared to the prior year, due to the benefit from the exercise of employee stock options and reversal of uncertain tax positions.

The comparative decrease in the effective tax rate for fiscal year 2020 was partially offset by the favorable impact of a nontaxable contingent consideration gain recorded in the prior year period related to the fiscal year 2017 Westcon-Comstor Americas acquisition.

See Note 15 of the Consolidated Financial Statements included in Part II, Item 8 of this Annual Report for further details.

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Liquidity and Capital Resources

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(j) = (c)+(f)-(i)

Technology Solutions

Days sales outstanding

Segment revenue

Accounts receivable, net

Days sales outstanding

Days inventory outstanding

Segment cost of revenue

Days inventory outstanding

(f) = (e)/((d)/the number of days during the period)

Days payable outstanding

Segment cost of revenue

Accounts payable

Days payable outstanding

(i) = (h)/((g)/the number of days during the period)

Cash conversion cycle

(j) = (c)+(f)-(i)

Our Technology Solutions business is working capital intensive.

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We rely heavily on term loans, accounts receivable arrangements, our securitization programs and our revolver programs for our working capital needs.

We have financed our growth and cash needs to date primarily through cash generated from operations and financing activities.

We have financed our growth and cash needs to date primarily through cash

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generated from operations and financing activities.

As a general rule, when sales volumes are increasing, our net investment in working capital dollars typically increases, which generally results in decreased cash flow generated from operating activities.

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Our CCC was 31 days and 4 4 days at the end of fiscal years 20 20 and 201 9 , respectively.

The decrease in fiscal year 2019, compared to fiscal year 2018, was primarily due to the impact of the acquisition of Convergys on October 5, 2018, which was included in our revenue and cost of revenue from the date of its acquisition, as well as our continued focus to optimize working capital efficiency by efficient collections of accounts receivable and managing inventory levels.

Our DPO was also impacted by the timing of payments of accounts payable.

CCC of our Technology Solutions segment was 25 days compared to 41 days at the end of fiscal years 2020 and 2019, respectively.

The de crease in fiscal year 20 20 , compared to fiscal year 20 19 , was primarily due to efficient collections of accounts receivable and faster turnover of our inventor ies in our Technology Solutions segment .

In addition, o ur DPO was favorably impacted by the timing of payments of accounts payable in both our Technology Solutions and Concentrix reportable segments .

To increase our market share and better serve our customers, we may further expand our operations through investments or acquisitions.

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These investments or acquisitions would likely be funded primarily by our existing cash and cash equivalents, additional borrowings, or the issuance of securities.

Net cash provided by operating activities was $1.834 billion during fiscal year 2020, primarily due to net income of $529.2 million, adjustments for non-cash items of $393.7 million, decreases in accounts receivable of $12.7 million and receivables from vendors of $79.8 million, an increase in accounts payable of $685.0 million and a net change of $262.8 million in other operating assets and liabilities.

These cash inflows were partially offset by an increase in inventories of $128.8 million.

The decrease in accounts receivable and vendor receivables is primarily due to an improvement in our collections in our Technology Solutions segment.

Notwithstanding the current economic uncertainties due to the impact of COVID-19, DSO in our Technology Solutions segment decreased by approximately 9 days from the end of fiscal year 2019.

This decrease in accounts receivable was partially offset by longer collection cycles in our Concentrix segment largely due to the impact of COVID-19.

The increase in accounts payable and cash inflow from changes in other operating assets and liabilities reflects primarily efficient working capital management in our Technology Solutions segment.

Operating liabilities also increased as the payment date for a higher number of days of salary of certain of our associates in the Concentrix segment became due after year end, as compared to the prior fiscal year, favorably impacting our operating cash flows for the year.

The increase in inventories was driven by growth in our larger projects and integration-based server solutions.

The adjustments for non-cash items consist primarily of amortization and depreciation, provision for doubtful accounts, share-based compensation expense, unrealized foreign exchange losses, amortization of deferred financing costs and a deferred tax benefit.

Excluding the impact of intercompany transactions, $1.346 billion of our cash provided by operating activities was generated in our Technology Solutions segment and $488.3 million was generated by our Concentrix segment.

Net cash provided by operating activities was $549.9 million during fiscal year 2019, primarily due to net income of $500.7 million, adjustments for non-cash items of $410.6 million, an increase in accounts payable of $98.4 million, and a net change in other operating assets and liabilities of $46.5 million.

These cash inflows were partially offset by an increase in accounts receivable and

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receivable s from vendors of $ 35 3.1 million and an increase in inventories of $153.1 million.

These cash inflows were partially offset by an increase in accounts receivable and receivables from vendors of $353.1 million and an increase in inventories of $153.1 million.

The increase in accounts receivable, including receivables from vendors, inventories and accounts payable was driven by growth in our Technology Solutions segment.

The adjustments for non-cash items consist primarily of amortization and depreciation, provision for doubtful accounts, stock-based compensation expense, a gain recorded upon the settlement of contingent consideration related to our Westcon-Comstor Americas acquisition in fiscal year 2017 and a deferred tax benefit.

Excluding the impact of intercompany transactions, $ 93.

1 million of our cash provided by operating activities was generated in our Technology Solutions segment and $ 456.

8 million was generated by our Concentrix segment.

Net cash provided by operating activities was $100.7 million in fiscal year 2018, primarily generated from our net income of $300.0 million, adjustments for non-cash items of $204.7 million, an increase in accounts payable of $382.0 million and the net change in other assets and liabilities of $95.5 million, partially offset by an increase in accounts receivable and receivable from vendors of $515.0 million, and an increase in inventories of $366.4 million.

The increase in accounts payable and inventories was primarily due to growth in our distribution business especially in the United States.

The increase in accounts receivable was due to the growth in our Technology Solutions business.

The adjustments for non-cash items primarily consist of $225.3 million of depreciation and amortization expense, stock-based compensation expense of $22.7 million.

These non-cash expenses were partially offset by a deferred tax benefit of $47.1 million, including $26.7 million related to the remeasurement of deferred tax assets and liabilities to the new U.S.

tax rate due to the enactment of the TCJA, and gains of $10.0 million related to changes in the fair value of the conversion spread of convertible debentures assumed in connection with the acquisition of Convergys and extinguishment gains on settlement of certain of those debentures.

Excluding the impact of intercompany transactions, $93.1 million of our cash provided by operating activities was generated in our Technology Solutions segment and $456.8 million was generated by our Concentrix segment.

Net cash used in investing activities in fiscal year 2020 was $209.5 million, primarily due to capital expenditures of $198.0 million related to infrastructure investments to support growth in both of our business segments and $5.6 million of cash paid related to the settlement of employee stock-based awards assumed under the Convergys acquisition, being paid in accordance with the original vesting schedule.

Net cash used in investing activities in fiscal year 2019 was $146.8 million, primarily due to capital expenditures of $137.4 million, principally related to infrastructure investments to support the anticipated growth in our Concentrix segment and from $9.4 million of cash paid related to the settlement of employee stock-based awards assumed under the Convergys acquisition.

Net cash used in investing activities in fiscal year 2018 was $1.2 billion, primarily due to payments of $1.1 billion, net of cash acquired, for the acquisition of the Convergys and $125.3 million invested in capital expenditures primarily to support growth in our Concentrix segment and our design and integration solutions business in the Technology Solutions segment.

These outflows were partially offset by the sale of approximately $12.9 million of trading securities related to a non-qualified, unfunded executive deferred compensation plan acquired as part of the Convergys acquisition and terminated subsequently.

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Net cash used in financing activities in fiscal year 2020 was $291.7 million, primarily due to net repayments of $262.6 million under our borrowing arrangements.

Cash generated from our operations was used to pay down revolving lines of credit and scheduled quarterly repayments of our term loans.

In addition, at November 30, 2020, in order to complete the S eparation, our Concentrix subsidiary borrowed approximately $1.

2 billion under credit facilities it had previously entered into and used substantially all of those funds to eliminate non-trade intercompany balances and other indebtedness owed by the Concentrix subsidiary to us .

These funds were used by our parent company to pay down $1.

2 billion in a partial repayment of its outstanding term loans.

Accordingly, Concentrix ’ borrowings and our term loan repayment s had no impact on our net debt at November 30, 2020.

Upon completion of the Separation on December 1, 2020 , t he approximately $1.

2 billion borrowed by the Concentrix subsidiary is now debt of the independent Concentrix company.

Consequently, our borrowings are lower by that amount post S eparation.

In addition, w e returned cash to stockholders in the form of dividends of $20.8 million and $3.4 million of repurchases of our common stock during the year, prior to suspension of our dividends program and share repurchases due to the COVID-19 related economic uncertainties in March 2020 .

Effective January 2021, our board of directors has reinstated our quarterly dividends.

Net cash used in financing activities in fiscal year 2019 was $631.7 million, primarily due to net repayments of $521.4 million under our borrowing arrangements.

Cash generated from our operations was used to pay down revolving lines of credit.

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$14.0 million in cash was used to pay contingent consideration related to our Westcon-Comstor Americas acquisition.

Net cash provided by financing activities in fiscal year 2018 was $1.0 billion, consisting primarily of proceeds of $1.1 billion from borrowings, net of repayments and debt discount and issuance costs.

The net borrowings increase was to fund the acquisition of Convergys and to support growth in our Technology Solutions segment.

The cash inflow was partially offset by $66.0 million of repurchases of our common stock and dividend payments of $59.7 million.

During the year, we obtained a term loan facility of $1.8 billion to fund the Convergys acquisition, the related refinancing or settlement of Convergys' debt and payment of related fees and expenses.

By November 30, 2018, we had drawn $1.6 billion of this term loan, of which approximately $1.2 billion was utilized to pay for the acquisition and approximately $313.8 million was utilized for settlement of Convergys' assumed debt.

We believe our current cash balances and credit availability are sufficient to support the operating activities for at least the next twelve months on a combined basis or as an operating entity after the separation of our Concentrix segment into an independent publicly-traded company.

We believe our current cash balances and credit availability are sufficient to support the operating activities for at least the next twelve months.

Capital Resources

Our cash and cash equivalents totaled $225.5 million and $454.7 million as of November 30, 2019 and 2018, respectively.

Of our total cash and cash equivalents, the cash held by our foreign subsidiaries was $219.7 million and $301.1 million as of November 30, 2019 and 2018, respectively.

Our cash and cash equivalents held by foreign subsidiaries are no longer subject to U.S.

Our cash and cash equivalents totaled $1.565 billion and $225.5 million as of November 30, 2020 and 2019, respectively.

Of our total cash and cash equivalents, the cash held by our international subsidiaries was $570.8 million and $219.7 million as of November 30, 2020 and 2019, respectively.

Our cash and cash equivalents held by international subsidiaries are no longer subject to U.S.

federal tax on repatriation into the United States.

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If in the future our intentions change, and we repatriate the cash back to the United States, we will report in our consolidated financial statements the impact of state and withholding taxes depending upon the planned timing and manner of such repatriation.

Presently, we believe we have sufficient resources, cash flow and liquidity within the United States to fund current and expected future working capital, investment and other general corporate funding requirements, including the impact of the planned separation of our Concentrix segment.

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We believe that our available cash and cash equivalents balances, the cash flows expected to be generated from operations and our existing sources of liquidity , will be sufficient to satisfy our current and planned working capital and investment needs , including the impact of the planned separation of our Concentrix segment, for the next twelve months in all geographies.

We believe that our available cash and cash equivalents balances, the cash flows expected to be generated from operations and our existing sources of liquidity, will be sufficient to satisfy our current and planned working capital and investment needs, including the impact of the separation of our Concentrix segment, for the next twelve months in all geographies.

We also believe that our longer-term working capital, planned capital expenditures, anticipated stock repurchases, dividend payments and other general corporate funding requirements will be satisfied through cash flows from operations and, to the extent necessary, from our borrowing facilities and future financial market activities.

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Under the terms of the U.S.

AR Arrangement, which expires in May 2020, our subsidiary, which is the borrower under this facility, can borrow up to a maximum of $850.0 million based upon eligible trade accounts receivable.

AR Arrangement, which has a maturity date of May 2022 , our subsidiary, which is the borrower under this facility, can borrow up to a maximum of $650.0 million 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 included prevailing dealer commercial paper rates and a rate based upon London Interbank Offered Rate (“LIBOR”).

In addition, a program fee is payable on the used portion of the lenders’ commitment 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 facility fee payable on the adjusted commitment of the lenders accrues 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 $150.0 million.

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, provided that LIBOR shall not be less than zero.

In addition, a program fee of 0.75% per annum based on the used portion of the commitment, and a facility fee of 0.35% per an num, is payable on the adjusted commitment of the lenders.

Under the terms of the U.S.

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subsidiaries sell, on a revolving basis, our 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 our bankruptcy-remote subsidiary as security.

The borrowings are funded by pledging all of the rights, title and interest in the

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receivables acquired by our bankruptcy-remote subsidiary as security.

Any amounts received under the U.S.

AR Arrangement are recorded as debt on our Consolidated Balance Sheets.

As of November 30, 2019 and 2018, $108.0 million and $615.0 million , respectively, was outstanding under the U.S.

As of November 30, 20 20 , there were no borrowings outstanding under this facility.

As of November 30, 2019, $ 108.0 million was outstanding under the U.S.

AR Arrangement.

In Canada, we have an accounts receivable securitization program with a bank to provide additional capital for operations.

Under the terms of this program, SYNNEX Canada Limited (“SYNNEX Canada”) can borrow up to CAD100.0 million, or $75.3 million, in exchange for the transfer of eligible trade accounts receivable, on an ongoing revolving basis through May 2020.

Under the terms of this program, as renewed in March 2020, SYNNEX Canada Limited (“SYNNEX Canada”) can borrow up to CAD100.0 million, or $76.9 million, in exchange for the transfer of eligible trade accounts receivable, on an ongoing revolving basis through May 2023.

The program includes an accordion feature that allows us to request an increase in the bank's commitment by an additional CAD50.0 million, or $38.4 million.

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We have guaranteed the obligations of SYNNEX Japan under this facility.

As of November 30, 2019 and 2018, the balances outstanding under the term loan component of these facilities were $63.9 million and $61.7 million, respectively.

Balances outstanding under the revolving credit facilities were $5.9 million and $20.3 million as of November 30, 2019 and 2018, respectively.

One of our subsidiaries in Mexico maintains a United States Dollars denominated $40.0 million revolving credit facility with a financial institution (the “LATAM facility”) that matures in February 2020.

We guarantee the obligations under this credit facility.

The interest rate on this facility ranges from 10.12% to 10.85%.

There were no borrowings outstanding under the LATAM facility as of either November 30, 2019 or 2018.

The Indian subsidiaries of our Concentrix segment have credit facilities with a financial institution to borrow up to an aggregate amount of $22.0 million.

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.

We guarantee the obligations under these credit facilities.

These credit facilities can be terminated at any time by our Indian subsidiaries or the financial institution.

There were no borrowings outstanding under these credit facilities as of either November 30, 2019 or 2018.

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As of November 30, 2020 and 2019, the balance outstanding under the term loan component of this facility was $67.1 million and $63.9 million, respectively.

Balance outstanding under the revolving credit facility was $31.6 million and $5.9 million as of November 30, 2020 and 2019, respectively.

In the United States, we have a senior secured credit agreement (as amended, the U.S.

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Credit Agreement matures in September 2022.

The outstanding principal amount of the term loan is repayable in quarterly installments of $15.0 million , 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.

On November 30, 2020, we partially repaid the term loan with a portion of the funds drawn from the Concentrix borrowing arrangements in the United States described below.

The remaining outstanding principal of the term loan is payable on maturity.

Interest on borrowings under the U.S.

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As of November 30, 2020 and 2019, the balance outstanding under the term loan component of the U.S.

Credit Agreement was $1.1 billion.

Credit Agreement was $0.5 billion and $1.1 billion, respectively.

There were no borrowings outstanding under the revolving line of credit under the U.S.

Credit Agreement as of November 30, 2020.

As of November 30, 2019, the balance outstanding under the revolving line of credit component of the U.S.

Credit Agreement was $25.8 million.

As of November 30, 201 8, there was no outstanding balance under the revolving line of credit component .

In order to fund the Convergys acquisition, the related refinancing or settlement of Convergys debt and payment of related fees and expenses, we entered into a secured term loan credit agreement on August 9, 2018 (the “U.S.

Term Loan Credit Agreement”) with a group of financial institutions, which provided for the extension of one or more term loans in an aggregate principal amount not to exceed $1.80 billion.

We have 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 $1.8 billion.

Term Loan Credit Agreement matures in October 2023.

Until November 30, 2018, we had drawn $1.55 billion of term loans.

During the fiscal year ended November 30, 2019, we borrowed the remaining available amount of $0.25 billion under this facility, to settle part of Convergys outstanding convertible debentures.

The outstanding principal amount of the term loans is payable in quarterly installments of $22.5 million, with the unpaid balance due in full on the maturity date.

The term loan can be repaid at any time prior to the maturity date without penalty.

On November 30, 2020, we partially repaid the term loan with a portion of the funds drawn from the Concentrix borrowing arrangements in the United States described below.

Interest on borrowings under the U.S.

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Term Loan Credit Agreement are secured by substantially all of the parent company 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 our domestic subsidiaries.

Credit Agreement pursuant

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to an intercreditor agreement, and are guaranteed by certain of our domestic subsidiaries.

As of November 30 , 20 20 and 201 9 , the balance outstanding under the U.S.

Term Loan Credit Agreement was $1.73 billion and $1.55 billion, respectively.

Term Loan Credit Agreement was $1.

0 billion and $1.

7 billion, respectively.

SYNNEX Canada has an uncommitted revolving line of credit with a bank under which it can borrow up to CAD50.0 million, or $38.4 million.

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As of both November 30, 2020 and 2019, there were no borrowings outstanding under this credit facility.

We also maintain other local currency denominated lines of credit and accounts receivable factoring arrangements with financial institutions at certain locations outside the United States aggregating commitments of $27.4 million at November 30, 2019.

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 November 30, 2020, commitments for these revolving credit facilities aggregated $84.6 million.

Interest rates and other terms of borrowing under these lines of credit vary by country, depending on local market conditions.

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As of November 30, 2020 and 2019, the balances outstanding under these revolving credit facilities were $25.8 million and $6.0 million, respectively.

As of November 30, 2020, Concentrix and its subsidiaries had borrowing arrangements with financial institutions credit facility that includes a revolving loan commitment of up to $600.0 million and a fully drawn term loan of $900.0 million, an accounts receivable securitization facility to borrow up to $350.0 million in the United States and revolving credit facilities aggregating $22.0 million with a financial institution in India.

Subsequent to November 30, 2020, upon completion of the Separation, these facilities are no longer part of our borrowing arrangements.

Refer to Note 9 of Item 8 of this Report for further details about Concentrix’ borrowings arrangements.

The maximum commitment amounts for local currency credit facilities have been translated into United States Dollars at November 30, 2020 exchange rates.

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At November 30, 2020 and 2019, we had a total of $22.5 million and $35.3 million, respectively, of trade accounts receivable sold to and held by the financial institutions under these programs.

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Covenant Compliance

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Contractual Obligations

Our contractual obligations consist of future payments due under our loans and repatriation tax under the TCJA, which are already recorded on our Consolidated Balance Sheet.

In addition, our contractual obligations include interest on our debt and payments for our operating lease arrangements and guarantees.

Our contractual obligations consist of future payments due under our loans, payments for our operating lease arrangements and repatriation tax under the Tax Cuts and Jobs Act of 2017 (“TCJA”), which are already recorded on our Consolidated Balance Sheet.

In addition, our contractual obligations include interest on our debt and guarantees.

The following table summarizes our contractual obligations at November 30, 2020:

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Contractual Obligations:

Principal debt payments

Principal debt payments under SYNNEX borrowing arrangements

Principal debt payments under Concentrix borrowing arrangements

Principal debt payments - Consolidated

Interest on debt

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Non-cancellable operating leases

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Principal debt payments assumes the repayment of our revolving lines of credit within a year.

Interest on debt, in the table above, includes estimated interest on our term loans and revolving credit facilities at rates of interest applicable at the end of our fiscal year.

Upon completion of Separation, the Concentrix borrowing arrangements are no longer part of our contractual obligations.

Interest on debt, in the table above, includes estimated interest on our term loans and revolving credit facilities at rates of interest applicable at the end of our fiscal year, but excludes interest on outstanding balances under the Concentrix borrowing arrangements.

We are contingently liable under agreements, without expiration dates, to repurchase repossessed inventory acquired by flooring companies as a result of default on floor plan financing arrangements by our customers.

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Shares are held via Silver Star Developments Ltd., a wholly-owned subsidiary of MiTAC Holdings.

Excludes 188 thousand shares held directly by Mr.

Excludes 190 shares held directly by Mr.

Miau, 217 thousand shares indirectly held by Mr.

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Shares are held via Peer Development Ltd., a wholly-owned subsidiary of Synnex Technology International.

MiTAC Holdings owns a noncontrolling interest

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of 8.7% in MiTAC Incorporated, a privately-held Taiwanese company, which in turn holds a noncontrolling interest of 14.4% in 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 15.2% 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 us regarding matters submitted to stockholders for consideration, including any merger or acquisition of ours.

MiTAC Holdings generally has influence over us regarding matters submitted to stockholders for consideration, including any merger or acquisition of ours.

Among other things, this could have the effect of delaying, deterring or preventing a change of control over us.

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Our sales to MiTAC Holdings and its affiliates during fiscal years 2020 and 2019 totaled $1.1 million and $0.8 million, respectively.

In addition, we made payments of $41 thousand to MiTAC Holdings and its affiliates for reimbursement of rent and overhead costs for facilities used by us during fiscal year ended November 30, 2019.

During fiscal year ended November 30, 2018, we received reimbursement of rent and overhead costs for MiTAC Holdings and its affiliates amounting to $0.1 million.

In addition, we made payments of $0.1 million and $41 thousand to MiTAC Holdings and its affiliates for reimbursement of rent and overhead costs for facilities used by us during fiscal year ended November 30, 2020 and 2019, respectively.

Our 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.

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MiTAC Holdings and its affiliates are not restricted from competing with us.

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Recently Issued Accounting Pronouncements

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis