TD SYNNEX (SNX) - 2021 Q1 - Quarterly Report

PART I - FINANCIAL INFORMATION Item 1. Financial Statements This section presents SYNNEX Corporation's unaudited consolidated financial statements, including balance sheets and cash flows, reflecting the Concentrix separation Consolidated Balance Sheets Total assets decreased to $7.73 billion from $13.47 billion due to the Concentrix spin-off, impacting stockholders' equity Consolidated Balance Sheet Highlights (in thousands) | Account | Feb 28, 2021 | Nov 30, 2020 | Change | | :--- | :--- | :--- | :--- | | Total Assets | $7,726,033 | $13,468,590 | ($5,742,557) | | Current assets of discontinued operations | $0 | $1,421,065 | ($1,421,065) | | Noncurrent assets of discontinued operations | $0 | $3,754,180 | ($3,754,180) | | Total Liabilities | $5,596,735 | $9,129,730 | ($3,532,995) | | Current liabilities of discontinued operations | $0 | $985,840 | ($985,840) | | Noncurrent liabilities of discontinued operations | $0 | $1,866,807 | ($1,866,807) | | Total Stockholders' Equity | $2,129,298 | $4,338,860 | ($2,209,562) | Consolidated Statements of Operations Revenue increased 21.0% to $4.94 billion, with income from continuing operations rising to $87.8 million Q1 2021 vs Q1 2020 Performance (in thousands, except per share amounts) | Metric | Three Months Ended Feb 28, 2021 | Three Months Ended Feb 29, 2020 | YoY Change | | :--- | :--- | :--- | :--- | | Revenue | $4,939,014 | $4,081,024 | +21.0% | | Gross Profit | $304,567 | $255,105 | +19.4% | | Operating Income | $141,748 | $100,445 | +41.1% | | Income from Continuing Operations | $87,822 | $68,514 | +28.2% | | Diluted EPS from Continuing Operations | $1.69 | $1.32 | +28.0% | | Income from Discontinued Operations | $0 | $54,070 | -100.0% | | Net Income | $87,822 | $122,584 | -28.4% | Consolidated Statements of Cash Flows Net cash provided by operating activities was $25.0 million, with a $149.9 million transfer to Concentrix impacting financing activities Cash Flow Summary (in thousands) | Activity | Three Months Ended Feb 28, 2021 | Three Months Ended Feb 29, 2020 | | :--- | :--- | :--- | | Net cash provided by operating activities | $24,977 | $58,141 | | Net cash used in investing activities | ($4,041) | ($54,304) | | Net cash provided by (used in) financing activities | ($147,219) | $67,567 | - A significant financing cash outflow was the net transfer of $149.9 million to Concentrix as part of the separation[25] Notes to the Consolidated Financial Statements Notes detail accounting policies, the Concentrix separation, and the subsequent merger agreement with Tech Data Corporation - On December 1, 2020, the company completed the separation of its Concentrix business, which is now an independent public company[28] - On March 22, 2021, SYNNEX entered into a merger agreement to acquire Tech Data Corporation in a cash and stock transaction[128] - In connection with the Tech Data merger, SYNNEX secured a debt commitment letter for a $4.0 billion bridge facility and a $3.5 billion revolving credit facility[131] Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses Q1 2021 financial performance, highlighting 21.0% revenue growth, operating income increase, and the Tech Data merger - Revenue increased by 21.0% to $4.94 billion in Q1 2021, driven by broad-based demand for IT products supporting remote work[165][166] - Operating income rose 41.1% to $141.7 million, with operating margin improving to 2.87% due to growth and scale efficiencies[171] Non-GAAP Financial Highlights (in thousands, except per share amounts) | Metric | Three Months Ended Feb 28, 2021 | Three Months Ended Feb 29, 2020 | | :--- | :--- | :--- | | Non-GAAP operating income | $156,004 | $115,523 | | Non-GAAP operating margin | 3.16% | 2.83% | | Adjusted EBITDA | $161,502 | $121,399 | | Non-GAAP diluted EPS from continuing operations | $1.89 | $1.42 | - The cash conversion cycle improved significantly to 32 days from 57 days year-over-year, due to faster inventory turnover and accounts receivable collections[181][182] - The company announced a merger agreement to acquire Tech Data for $1.61 billion in cash and 44 million shares of common stock[152][153] Quantitative and Qualitative Disclosures about Market Risk The company manages foreign currency and interest rate risks, using forward contracts to hedge principal non-functional currencies - The company uses forward contracts to hedge foreign currency risk on assets and liabilities denominated in non-functional currencies[219] Hypothetical Change in Fair Value of Forward Contracts (in thousands) | Scenario (vs. USD) | Gain/(Loss) as of Feb 28, 2021 | | :--- | :--- | | 10% Weakening | ($20,369) | | 10% Strengthening | $21,699 | Controls and Procedures Management concluded that disclosure controls and procedures were effective, despite changes from the Concentrix separation - The CEO and CFO concluded that the company's disclosure controls and procedures were effective at the reasonable assurance level[223] - The Concentrix separation did not materially affect the company's internal control over financial reporting[224] PART II - OTHER INFORMATION Risk Factors New and updated risk factors primarily concern the proposed Tech Data acquisition and the discontinuation of LIBOR - The success of the Tech Data merger depends on realizing anticipated benefits, subject to integration and employee retention risks[229][230] - Failure to complete the merger could negatively impact SYNNEX's stock price and business, potentially incurring a termination fee of up to $132 million[237][241] - The company expects to incur substantial additional debt, increasing total debt to approximately $4 billion, impacting financial position and credit rating[240] - The discontinuation of LIBOR by the end of 2021 creates uncertainty and could adversely impact interest expense on variable-rate debt[243] Exhibits This section lists key exhibits filed with the Form 10-Q, including the Tech Data Merger Agreement and financing letters - Key exhibits filed include the Merger Agreement with Tiger Parent (AP) Corporation, the Bridge Commitment Letter from Citigroup, and various certifications[245]