TD SYNNEX CORPORATION For an understanding ofTD SYNNEX and the significant factors that influenced our performance during the past three 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 and Item 8 Financial Statements and Supplementary Data included elsewhere in this Report. Amounts in certain tables appearing in this Report may not add or compute due to rounding. In addition to historical information, the MD&A contains forward-looking statements that involve risks and uncertainties. These forward-looking statements include, but are not limited to, those matters discussed under the heading "Note Regarding Forward-looking Statements." Our actual results could differ materially from those anticipated by these forwardlooking statements due to various factors, including, but not limited to, those set forth under Item 1A. Risk Factors of this Form 10-K and elsewhere in this document.
Overview
OnDecember 1, 2020 , we completed the previously announced separation of our customer experience services business (the "Separation"), which was accomplished by the distribution of one hundred percent of the outstanding common stock of Concentrix Corporation ("Concentrix"). Our stockholders received one share of Concentrix common stock for every share of our common stock held at the close of business on the record date. Concentrix is now an independent public company trading under the symbol "CNXC" on theNasdaq Stock Market . After the Separation, we do not beneficially own any shares of Concentrix' common stock and beginningDecember 1, 2020 , we no longer consolidate Concentrix within our financial results or reflect the financial results of Concentrix within our continuing results of operations. We distributed a total of approximately 51.6 million shares of Concentrix common stock to our stockholders. In connection with the Separation, we entered into a separation and distribution agreement, as well as various other agreements with Concentrix that provide a framework for the relationships between the parties going forward, including among others an employee matters agreement, a tax matters agreement, and a commercial agreement, pursuant to which Concentrix has continued to provide services to us following the Separation. The historical results of operations and financial position of Concentrix are reported as discontinued operations in our Consolidated Financial Statements. For further information on discontinued operations, see Note 5 - Discontinued Operations, to the Consolidated Financial Statements in Item 8. OnMarch 22, 2021 , SYNNEX entered into an agreement and plan of merger (the "Merger Agreement") which provided that legacySYNNEX Corporation would acquire legacy Tech Data Corporation, aFlorida corporation ("Tech Data") through a series of mergers, which would result in Tech Data becoming an indirect subsidiary ofTD SYNNEX Corporation . (collectively, the "Merger"). OnSeptember 1, 2021 , pursuant to the terms of the Merger Agreement, we acquired all the outstanding shares of common stock ofTiger Parent (AP) Corporation , the parent corporation of Tech Data, for consideration of$1.61 billion in cash ($1.11 billion in cash after giving effect to a$500 million equity contribution byTiger Parent Holdings, L.P. ,Tiger Parent (AP) Corporation's sole stockholder and an affiliate of Apollo Global Management, Inc., toTiger Parent (AP) Corporation prior to the effective time of the Merger) and 44 million shares of common stock of SYNNEX, valued at approximately$5.61 billion . See Note 3
-
Acquisitions to the Consolidated Financial Statements for further information.
We previously had two reportable segments as ofNovember 30, 2020 : Technology Solutions and Concentrix. After giving effect to the Separation onDecember 1, 2020 , we operated in a single reportable segment. After completion of the Merger, we reviewed our reportable segments as there was a change in our chief executive officer,who is also our chief operating decision maker. Our chief operating decision maker has a leadership structure aligned with the geographic locations of theAmericas ,Europe andAsia-Pacific andJapan ("APJ") and reviews and allocates resources based on these geographic locations. As a result, as ofSeptember 1, 2021 we began operating in three reportable segments based on our geographic locations: theAmericas ,Europe and APJ. Our three reportable segments each generate revenues from products and services across our Endpoint Solutions and Advanced Solutions portfolios. Segment results for all prior periods have been restated for comparability to our current reportable segments. For financial information by segment, refer to Note 13 - Segment Information, to the Consolidated Financial Statements in Item 8. We have not presented information by reportable segment within the Management's Discussion and Analysis of Financial Condition and Results of Operations due to the lack of comparability between periods resulting from the Merger onSeptember 1, 2021 .
Revenue and Cost of Revenue
We distribute peripherals, information technology ("IT") systems including data
center server and storage solutions, system components, software, networking,
communications and security equipment, consumer electronics and complementary
products. We also provide systems design and integration solutions.
In fiscal years 2021, 2020 and 2019 approximately 37%, 24% and 23% of our
revenue, respectively, was generated from our international operations. As a
result, our revenue growth has been impacted by fluctuations in foreign currency
exchange rates.
The market for IT products is generally characterized by declining unit prices
and short product life cycles. Our overall business is also highly competitive
on the basis of price. We set our sales price based on the market supply and
demand characteristics for each particular product or bundle of products we
distribute and solutions we provide. We also participate in the incentive and
rebate
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programs of our OEM suppliers. These programs are important determinants of the final sales price we charge to our reseller customers. To mitigate the risk of declining prices and obsolescence of our distribution inventory, our OEM suppliers generally offer us limited price protection and return rights for products that are marked down or discontinued by them. We carefully manage our inventory to maximize the benefit to us of these supplier-provided protections. A significant portion of our cost of revenue is the purchase price we pay our OEM suppliers for the products we sell, net of any incentives, rebates, price protection and purchase discounts received from our OEM suppliers. Cost of revenue also consists of provisions for inventory losses and write-downs, freight expenses associated with the receipt in and shipment out of our inventory, and royalties due to OEM vendors. In addition, cost of revenue includes the cost of material, labor and overhead for our systems design and integration solutions. Margins The IT distribution industry in which we operate is characterized by low gross profit as a percentage of revenue, or gross margin, and low income from operations as a percentage of revenue, or operating margin. Our gross margin has fluctuated annually due to changes in the mix of products we offer, customers we sell to, incentives and rebates received from our OEM suppliers, competition, seasonality, replacement of lower margin business, inventory obsolescence, and lower costs associated with increased efficiencies. Generally, when our revenue becomes more concentrated on limited products or customers, our gross margin tends to decrease due to increased pricing pressure from OEM suppliers or reseller customers. Our operating margin has also fluctuated in the past, based primarily on our ability to achieve economies of scale, the management of our operating expenses, changes in the relative mix of our revenue, and the timing of our acquisitions and investments.
Economic and Industry Trends
Our revenue is highly dependent on the end-market demand for IT products. This end-market demand is influenced by many factors including the introduction of new IT products and software by OEMs, replacement cycles for existing IT products, seasonality and overall economic growth and general business activity. A difficult and challenging economic environment may also lead to consolidation or decline in the IT distribution industry and increased price-based competition. Business in our system design and solutions is highly dependent on the demand for cloud infrastructure, and the number of key customers and suppliers in the market. Our business includes operations in theAmericas ,Europe and APJ, so we are affected by demand for our products in those regions and the strengthening or weakening of local currencies relative to theU.S. Dollar. InDecember 2019 , there was an outbreak of a new strain of coronavirus ("COVID-19"). InMarch 2020 , theWorld 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 business particularly during the second quarter of fiscal year 2020. We have successfully transitioned a significant portion of our workforce 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 co-workerswho are required to be on-premise to support our business. During the fiscal year endedNovember 30, 2020 , we incurred net incremental costs associated with COVID-19 of approximately$45 million . Net incremental costs associated with COVID-19 were not material during the fiscal year endedNovember 30, 2021 . 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
The discussions and analysis of our consolidated financial condition and results of operations are based on our Consolidated Financial Statements, which have been prepared in conformity with GAAP. The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of any contingent assets and liabilities at the financial statement date and reported amounts of revenue and expenses during the reporting period. On an ongoing basis, we review and evaluate our estimates and assumptions. Our estimates are based on our historical experience and a variety of other assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making our judgment about the carrying values of assets and liabilities that are not readily available from other sources. Actual results could differ from these estimates under different assumptions or conditions.
We believe the following critical accounting policies involve the more significant judgments, estimates and/or assumptions used in the preparation of our Consolidated Financial Statements.
Revenue Recognition.
We generate revenue primarily from the sale of various IT products.
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We recognize revenues from the sale of IT hardware and software as control is transferred to customers, which is at the point in time when the product is shipped or delivered. We account for a contract with a customer when it has written approval, the contract is committed, the rights of the parties, including payment terms, are identified, the contract has commercial substance and consideration is probable of collection. Binding purchase orders from customers together with agreement to 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. Products sold by us are delivered via shipment from our facilities, drop-shipment directly from the vendor, or by electronic delivery of software products. In situations where arrangements include customer acceptance provisions, revenue is recognized when we can objectively verify the products comply with specifications underlying acceptance and the customer has control of the products. Revenue is presented net of taxes collected from customers and remitted to government authorities. We generally invoice a customer upon shipment, or in accordance with specific contractual provisions. Payments are due as per contract terms and do not contain a significant financing component. Service revenues represents less than 10% of the total revenue for the periods presented. Provisions for sales returns and allowances are estimated based on historical data and are recorded concurrently with the recognition of revenue. A liability is recorded at the time of sale for estimated product returns based upon historical experience and an asset is recognized for the amount expected to be recorded in inventory upon product return. These provisions are reviewed and adjusted periodically. Revenue is reduced for early payment discounts and volume incentive rebates offered to customers, which are considered variable consideration, at the time of sale based on an evaluation of the contract terms and historical experience. We recognize revenue on a net basis on certain contracts, where our performance obligation is to arrange for the products or services to be provided by another party or the rendering of logistics services for the delivery of inventory for which we do not assume the risks and rewards of ownership, by recognizing the margins earned in revenue with no associated cost of revenue. Such arrangements include supplier service contracts, post-contract software support services and extended warranty contracts. We consider shipping and handling activities as costs to fulfill the sale of products. Shipping revenue is included in revenue when control of the product is transferred to the customer, and the related shipping and handling costs are included in cost of revenue.
Business Combinations.
We allocate the fair value of purchase consideration to the assets acquired, liabilities assumed, and noncontrolling interests in the acquiree generally based on their fair values at the acquisition date. The excess of the fair value of purchase consideration over the fair value of these assets acquired, liabilities assumed and noncontrolling interests in the acquiree is recorded as goodwill and may involve engaging independent third-parties to perform an appraisal. When determining the fair values of assets acquired, liabilities assumed, and noncontrolling interests in the acquiree, we make significant estimates and assumptions, especially with respect to intangible assets. Critical estimates in valuing intangible assets include, but are not limited to, expected future cash flows, which includes consideration of future growth rates and margins, attrition rates, and discount rates. Fair value estimates are based on the assumptions we believe a market participant would use in pricing the asset or liability. Amounts recorded in a business combination may change during the measurement period, which is a period not to exceed one year from the date of acquisition, as additional information about conditions existing at the acquisition date becomes available.
The values assigned to intangible assets include estimates and judgment regarding expectations for the length of customer relationships acquired in a business combination. Included within intangible assets is an indefinite lived trade names intangible asset. Indefinite lived intangible assets are tested for impairment annually and more frequently if events or changes in circumstances indicate that it is more likely than not that the asset is impaired. Other purchased intangible assets are amortized over the useful lives based on estimates of the use of the economic benefit of the asset or on the straight-line amortization method. We allocate goodwill to reporting units based on the reporting unit expected to benefit from the business combination and test for impairment annually in the fourth quarter or more frequently if events or changes in circumstances indicate that it may be impaired.Goodwill is tested for impairment at the reporting unit level by first performing a qualitative assessment to determine whether it is more likely than not that the fair value of the reporting unit is less than its carrying value. The factors that are considered in the qualitative analysis include macroeconomic conditions, industry and market considerations, cost factors such as increases in product cost, labor, or other costs that would have a negative effect on earnings and cash flows; and other relevant entity-specific events and information. If the reporting unit does not pass the qualitative assessment, then the reporting unit's carrying value is compared to its fair value. The fair values of the reporting units are estimated using market and discounted cash flow approaches. The assumptions used in the market approach are based on the value of a business through an analysis of sales and other multiples of guideline companies and recent sales or offerings of a comparable entity. The assumptions used in the discounted cash flow approach are based on historical and forecasted revenue, operating costs, future economic conditions, and other relevant factors.Goodwill is considered impaired if the carrying value of the reporting unit exceeds its fair value and the excess is recognized as an impairment loss. No goodwill impairment has been identified for any of the years presented. 32
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We review the recoverability of our long-lived assets, such as definite-lived intangible assets, property and equipment and certain other assets, when events or changes in circumstances occur that indicate the carrying value of the asset or asset group may not be recoverable. The assessment of possible impairment is based on our ability to recover the carrying value of the asset or asset group from the expected future pre-tax cash flows, undiscounted and without interest charges, of the related operations. If these cash flows are less than the carrying value of such assets, an impairment loss is recognized for the difference between estimated fair value and carrying value.
Income taxes
The asset and liability method is used in accounting for income taxes. Under this method, deferred tax assets and liabilities are recognized for the expected tax consequences of temporary differences between the tax bases of assets and liabilities and their reported amounts in the financial statements using enacted tax rates and laws that will be in effect when the difference is expected to reverse. Tax on global low-taxed intangible income is accounted for as a current expense in the period in which the income is includable in a tax return using the "period cost" method. Valuation allowances are provided against deferred tax assets that are not likely to be realized. We recognize tax benefits from uncertain tax positions only if that tax position is more likely than not to be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such positions are then measured based on the largest benefit that has a greater than 50% likelihood of being realized upon settlement. We recognize interest and penalties related to unrecognized tax benefits in the provision for income taxes.
Acquisitions
We continually seek to augment organic growth in our business with strategic acquisitions of businesses and assets that complement and expand our existing capabilities. We also divest businesses that we deem no longer strategic to our ongoing operations. In our 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.
Results of Operations
The following table sets forth, for the indicated periods, Consolidated Statement of Operations data as a percentage of revenue:
Fiscal Years Ended November 30,
Statements of Operations Data: 2021 2020 2019
Revenue 100.00 % 100.00 % 100.00 %
Cost of revenue (94.02 )% (94.02 )% (93.93 )%
Gross profit 5.98 % 5.98 % 6.07 %
Acquisition, integration and restructuring
costs (0.35 )% (0.04 )% (0.01 )%
Selling, general and administrative
expenses (3.65 )% (3.33 )% (3.34 )%
Operating income 1.97 % 2.61 % 2.72 %
Interest expense and finance charges, net (0.50 )% (0.40 )% (0.39 )%
Other income (expense), net 0.00 % (0.03 )% 0.15 %
Income from continuing operations before
income taxes 1.48 % 2.18 % 2.48 %
Provision for income taxes (0.23 )% (0.51 )% (0.58 )%
Income from continuing operations 1.25 % 1.67 % 1.90 %
Income from discontinued operations, net
of taxes 0.00 % 0.97 % 0.73 %
Net income 1.25 % 2.65 % 2.63 %
The financial results of the former Concentrix business are presented as income from discontinued operations, net of taxes in the Consolidated Statement of Operations data.
Due to the ongoing impact of the COVID-19 pandemic, current results and financial condition discussed herein may not be indicative of future operating results and trends.
Certain non-GAAP financial information
In addition to disclosing financial results that are determined in accordance with GAAP, we also disclose certain non-GAAP financial information, including:
• Non-GAAP operating income, which is operating income, adjusted to exclude
acquisition, integration and restructuring costs, amortization of
intangible assets, share-based compensation expense and purchase accounting
adjustments.
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• Non-GAAP operating margin, which is non-GAAP operating income, as defined
above, divided by revenue.
• 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, acquisition, integration and restructuring costs, share-based
compensation expense, purchase accounting adjustments and income from
discontinued operations, net of taxes.
• Non-GAAP income from continuing operations, which is income from continuing
operations, adjusted to exclude acquisition, integration and restructuring
costs, amortization of intangible assets, share-based compensation expense,
purchase accounting adjustments, contingent consideration, an
acquisition-related contingent gain, income taxes related to the
aforementioned items, as well as a capital loss carryback benefit.
• Non-GAAP diluted earnings per common share ("EPS") from continuingoperations, which is diluted EPS from continuing operations excluding the
per share impact of acquisition, integration and restructuring costs,
amortization of intangible assets, share-based compensation expense,
purchase accounting adjustments, contingent consideration, an
acquisition-related contingent gain, income taxes related to the
aforementioned items, as well as a capital loss carryback benefit.
Acquisition, integration and restructuring costs typically consist of
acquisition, integration, restructuring and divestiture related costs and are
expensed as incurred. These expenses primarily represent professional services
costs for legal, banking, consulting and advisory services, severance and other
personnel related costs and debt extinguishment fees. From time to time, this
category may also include transaction-related gains/losses on
divestitures/spin-off of businesses, as well as various other costs associated
with the acquisition or divestiture.
Our acquisition activities have resulted in the recognition of definite-lived
intangible assets which consist primarily of customer relationships and lists
and vendor lists. 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. Although intangible assets
contribute to our revenue generation, the amortization of intangible assets does
not directly relate to the sale of our products. 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.
Share-based compensation expense is a non-cash expense arising from the grant of
equity awards to employees based on the estimated fair value of those awards.
Although share-based compensation is an important aspect of the compensation of
our employees, the fair value of the share-based awards may bear little
resemblance to the actual value realized upon the vesting or future exercise of
the related share-based awards and the expense can vary significantly between
periods as a result of the timing of grants of new stock-based awards, including
grants in connection with acquisitions. Given the variety and timing of awards
and the subjective assumptions that are necessary when calculating share-based
compensation expense, we believe this additional information allows investors to
make additional comparisons between our operating results from period to period.
Purchase accounting adjustments are primarily related to the impact of purchase
accounting on the recognition of certain consideration received from vendors
related to the Merger.
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. Management also uses these
non-GAAP measures to establish operational goals and, in some cases, for
measuring performance for compensation purposes. As these non-GAAP financial
measures are not calculated in accordance with GAAP, they may not necessarily be
comparable to similarly titled measures employed by other companies. These
non-GAAP financial measures should not be considered in isolation or as a
substitute for the comparable GAAP measures and should be used as a complement
to, and in conjunction with, data presented in accordance with GAAP.
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Non-GAAP Financial Information:
Fiscal Years Ended November 30,
2021 2020 2019
(in thousands, except per share amounts)
Consolidated
Operating income $ 623,218 $ 521,341 $ 519,429
Acquisition, integration and
restructuring costs 112,150 7,414 981
Amortization of intangibles 105,332 40,148 43,875
Share-based compensation 33,078 17,631 17,608
Purchase accounting adjustments 28,353 - -
Non-GAAP operating income $ 902,131 $ 586,534 $ 581,893
Operating margin 1.97 % 2.61 % 2.72 %
Non-GAAP operating margin 2.85 % 2.94 % 3.05 %
Net income $ 395,069 $ 529,160 $ 500,712
Interest expense and finance charges,
net 157,835 79,023 74,225
Provision for income taxes 71,416 101,609 111,113
Depreciation 44,232 24,923 22,454
Amortization of intangibles 105,332 40,148 43,875
EBITDA $ 773,884 $ 774,863 $ 752,379
Other (income) expense, net (1,102 ) 6,172 (28,083 )
Acquisition, integration and
restructuring costs 112,150 9,667 981
Share-based compensation 33,078 17,631 17,608
Purchase accounting adjustments 28,353 - -
Income from discontinued operations, net
of taxes - (194,622 ) (138,538 )
Adjusted EBITDA $ 946,363 $ 613,711 $ 604,347
Income from continuing operations $ 395,069 $ 334,538 $ 362,174
Acquisition, integration and
restructuring costs 159,194 9,667 981
Amortization of intangibles 105,332 40,148 43,875
Share-based compensation 33,078 17,631 17,608
Purchase accounting adjustments 28,353 - -
Contingent consideration - - (19,034 )
Acquisition-related contingent gain - - (11,112 )
Income taxes related to the above (80,375 ) (19,557 ) (11,284 )
Income tax capital loss carryback
benefit (44,968 ) - -
Non-GAAP income from continuing
operations $ 595,683 $
382,427
Diluted EPS from continuing operations $ 6.24 $ 6.46$ 7.05 Acquisition, integration and restructuring costs 2.51 0.19 0.02 Amortization of intangibles 1.66 0.78 0.85 Share-based compensation 0.52 0.34 0.34 Purchase accounting adjustments 0.45 - - Contingent consideration - - (0.37 ) Acquisition-related contingent gain - - (0.22 ) Income taxes related to the above (1.27 ) (0.38 ) (0.22 ) Income tax capital loss carryback benefit (0.71 ) - - Non-GAAP diluted EPS from continuing operations $ 9.40 $
7.38
Fiscal Years Ended
Revenue
Fiscal Years Ended November 30, Percent Change
2021 2020 2019 2021 to 2020 2020 to 2019
(in thousands)
Revenue $ 31,614,169 $ 19,977,150 $ 19,069,970 58.3 % 4.8 %
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Table of Content s We distribute a comprehensive range of products for the technology industry and design and integrate data center equipment. The prices of our products are highly dependent on the volumes purchased within a product category. The products we sell from one period to the next are often not comparable due to changes in product models, features and customer demand requirements. Revenue increased in fiscal year 2021 compared to fiscal year 2020 primarily due to an increase in sales resulting from the Merger of approximately$10 billion as well as broad-based demand for technology equipment. Revenue 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 business increased by 4.8% during fiscal year 2020, compared to fiscal year 2019. Gross Profit Fiscal Years Ended November 30, Percent Change 2021 2020 2019 2021 to 2020
2020 to 2019
(in thousands)
Gross profit $ 1,889,534 $ 1,193,858 $ 1,157,258 58.3 % 3.2 %
Gross margin 5.98 % 5.98 % 6.07 %
Our gross margin is affected by a variety of factors, including competition,
selling prices, mix of products, product costs along with rebate and discount
programs from our suppliers, reserves or settlement adjustments, freight costs,
inventory losses and fluctuations in revenue.
Our gross profit increased in fiscal year 2021, as compared to the prior fiscal year, primarily driven by an increase in sales as a result of the Merger.
Our 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 driven by product mix from our projects and integration-based server solutions.
Acquisition, Integration and Restructuring Costs
Acquisition, integration and restructuring costs are primarily comprised of costs related to the Merger, costs related to the Global Business Optimization 2 Program initiated by Tech Data prior to the Merger (the "GBO 2 Program") and costs related to the Separation. The Merger We incurred acquisition, integration and restructuring costs related to the completion of the Merger, including professional services costs, personnel and other costs, an impairment of long-lived assets and stock-based compensation expense. Professional services costs are primarily comprised of legal expenses and tax and other consulting services. Personnel and other costs are primarily comprised of costs related to the settlement of certain outstanding long-term cash incentive awards for Tech Data upon closing of the Merger, retention and other bonuses, as well as severance costs. Impairment of long-lived assets relates to a charge of$22.2 million recorded for the write-off of capitalized costs associated with Tech Data's tdONE program in conjunction with the decision to consolidate certain IT systems. Stock-based compensation expense primarily relates to costs associated with the conversion of certain Tech Data performance-based equity awards issued prior to the Merger into restricted stock units of TD SYNNEX (refer to Note 6 - Share-Based Compensation to the Consolidated Financial Statements for further information) and expenses for certain restricted stock awards issued in conjunction with the Merger. To date, acquisition and integration expenses related to the Merger were composed of the following: Year Ended November 30, 2021 (in thousands) Professional services costs $ 22,288 Personnel and other costs 33,716 Impairment of long-lived assets 22,166 Stock-based compensation 20,113 Total $ 98,283 36
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Table of Content s GBO 2 Program Prior to the Merger, Tech Data implemented its GBO 2 Program, that includes investments to optimize and standardize processes and apply data and analytics to be more agile in a rapidly evolving environment, increasing productivity, profitability and optimizing net-working capital.TD SYNNEX plans to continue this program in conjunction with the Company's integration activities. Acquisition, integration and restructuring expenses related to the GBO 2 Program are primarily comprised of restructuring costs and other professional services costs. Restructuring costs are comprised of severance costs and other associated exit costs, including certain consulting costs. Other professional services costs are primarily comprised of professional services fees not related to restructuring activities, including costs related to improving profitability and optimizing net-working capital.
Acquisition, integration and restructuring costs under the GBO 2 Program for fiscal 2021 included the following:
Year Ended November 30,
2021
(in thousands)
Restructuring costs $ 8,709
Other professional services costs 5,158
Total $ 13,867
Restructuring costs under the GBO 2 Program for fiscal 2021 were composed of the
following:
Year Ended November 30,
2021
(in thousands)
Severance $ 2,893
Other exit costs 5,816
Total $ 8,709
During fiscal 2021, we recorded restructuring costs related to GBO 2 of
The Separation
During the fiscal year ended
Selling, General and Administrative Expenses
Fiscal Years Ended November 30, Percent Change
2021 2020 2019 2021 to 2020 2020 to 2019
(in thousands)
Selling, general and administrative
expenses $ 1,154,166 $ 665,102 $ 636,849 73.5 % 4.4 %
Percentage of revenue 3.65 % 3.33 % 3.34 %
Our selling, general and administrative expenses consist primarily of personnel
costs such as salaries, commissions, bonuses, share-based compensation and
temporary personnel costs. 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
intangible assets, and marketing expenses, offset in part by reimbursements from
our OEM suppliers.
Selling, general and administrative expenses increased in fiscal year 2021,
compared to fiscal year 2020, primarily due to an increase in employee related
expenses resulting from the Merger and an increase in amortization of intangible
assets acquired in connection with the Merger. Selling, general and
administrative expenses increased as a percentage of revenue, compared to the
prior year period, primarily due to the impact of the Merger.
Selling, general and administrative expenses 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
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Operating Income
Fiscal Years Ended November 30, Percent Change
2021 2020 2019 2021 to2020 2020 to 2019
(in thousands)
Operating income $ 623,218 $ 521,341 $ 519,429 19.5 % 0.4 %
Operating margin 1.97 % 2.61 % 2.72 %
Operating income increased during fiscal year 2021, compared to the prior year,
primarily due to increased sales as a result of the Merger, partially offset by
an increase in employee related expenses resulting from the Merger, an increase
in acquisition, integration and restructuring costs and an increase in
amortization of intangible assets acquired in connection with the Merger.
Operating margin decreased due to an increase in employee related expenses
resulting from the Merger, an increase in acquisition, integration and
restructuring costs and an increase in amortization of intangible assets
acquired in connection with the Merger.
Operating income 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 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 business decreased due to product mix.
Interest Expense and Finance Charges, Net
Fiscal Years Ended November 30, Percent Change
2021 2020 2019 2021 to 2020 2020 to 2019
(in thousands)
Interest expense and
finance charges, net $ 157,835 $ 79,023 $ 74,225 99.7 % 6.5 %
Percentage of revenue 0.50 % 0.40 % 0.39 %
Amounts recorded in interest expense and finance charges, net, consist primarily
of interest expense paid on our Senior Notes (as defined below), our lines of
credit and term loans and fees associated with 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, during the fiscal
year 2021, compared to the prior year, was due to approximately $47 million of
acquisition and integration related financing costs primarily related to a
commitment for a bridge loan facility obtained in March 2021 which was
terminated in conjunction with the Merger and an increase in interest expense
related to the issuance of our Senior Notes and higher average outstanding
borrowings.
The increase in our interest expense and finance charges net, during the fiscal
year 2020, compared to the prior year, was primarily due to increased financing
activities related to growth in the business and the planned Separation of
Concentrix.
Other Income (Expense), Net
Fiscal Years Ended November 30, Percent Change
2021 2020 2019 2021 to 2020 2020 to 2019
(in thousands)
Other income (expense), net $ 1,102 $ (6,172 ) $ 28,083 117.9 % -122.0 %
Percentage of revenue 0.00 % (0.03 )% 0.15 %
Amounts recorded as other income (expense), net include certain foreign currency
transaction gains and losses, investment gains and losses, 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 increased during the fiscal year ended
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Other income (expense), net decreased during the fiscal year endedNovember 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-ComstorAmericas 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 onNovember 30, 2020 in preparation of the Separation onDecember 1, 2020 . Provision for Income Taxes Fiscal Years Ended November 30, Percent Change 2021 2020 2019 2021 to 2020 2020 to 2019 (in thousands)
Provision for income taxes
-29.7 % -8.6 % Percentage of income before income taxes 15.31 % 23.30 % 23.48 %
Income taxes consist of our current and deferred tax expense resulting from our income earned in domestic and foreign jurisdictions.
In connection with the Merger, the Company restructured its foreign financing structure, as well as select legal entities in anticipation of legally integrating legacy Tech Data and SYNNEX foreign operations. In addition to the treasury efficiencies, these restructurings resulted in a one-time domestic capital loss which would offset certain domestic capital gains when carried back underUnited States tax law to tax year 2020, resulting in a tax benefit of approximately$45 million . Our income tax expense decreased during the fiscal year endedNovember 30, 2021 , as compared to the prior year, due to the capital loss carryback benefit, partially offset by an increase in income from continuing operations before income taxes. The effective tax rate for fiscal year 2021 was lower when compared to the prior year due to the capital loss carryback benefit. Our income tax expense decreased during the fiscal year endedNovember 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 the reversal of a reserve for 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. Discontinued Operations Fiscal Years Ended November 30, Percent Change 2021 2020 2019 2021 to 2020 2020 to 2019 (in thousands) Income from discontinued operations, net of taxes $ -$ 194,622 $ 138,538 -100.0 % 40.5 % Percentage of revenue 0.00 % 0.97 % 0.73 % Income from discontinued operations includes net income from Concentrix during the fiscal years endedNovember 30, 2020 and 2019, prior to the Separation onDecember 1, 2020 .
See Note 5 - Discontinued Operations 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
Cash Conversion Cycle
Three Months Ended
November 30, November 30, November 30,
2021 2020 2019
(Amounts in thousands)
Days sales outstanding ("DSO")
Revenue (a) $ 15,611,266 $ 6,118,836 $ 5,374,241
Accounts receivable, net (b) 8,310,032 2,791,703 2,995,610
(c) =
((b)/(a))*the
number of
days
during the
Days sales outstanding period 48 42 51
Days inventory outstanding ("DIO")
Cost of revenue (d) $ 14,668,096 $ 5,752,179 $ 5,036,301
Inventories (e) 6,642,915 2,684,076 2,546,115
(f) =
((e)/(d))*the
number of
days
during the
Days inventory outstanding period 41 42 46
Days payable outstanding ("DPO")
Cost of revenue (g) $ 14,668,096 $ 5,752,179 $ 5,036,301
Accounts payable (h) 12,034,946 3,751,240 3,104,886
(i) =
((h)/(g))*the
number of
days
during the
Days payable outstanding period 75 59 56
Cash conversion cycle ("CCC") (j) =
(c)+(f)-(i) 14 25 41
Cash Flows
Our business is working capital intensive. Our working capital needs are
primarily to finance accounts receivable and inventory. We rely heavily on term
loans, accounts receivable arrangements, our securitization programs, our
revolver programs and trade credit from vendors for our working capital needs.
We have financed our growth and cash needs to date primarily through cash
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. Conversely, when sales volumes decrease, our net
investment in working capital dollars typically decreases, which generally
results in increases in cash flows generated from operating activities. We
calculate CCC as days of the last fiscal quarter's revenue outstanding in
accounts receivable plus days of supply on hand in inventory, less days of the
last fiscal quarter's cost of revenue outstanding in accounts payable. Our CCC
was 14 days, 25 days and 41 days at the end of fiscal years 2021, 2020 and 2019,
respectively. The decrease in fiscal year 2021, compared to fiscal year 2020,
was primarily due to our DPO, which was impacted by the timing of payments of
accounts payable in our business including the impact of the Merger. The
decrease in fiscal year 2020, compared to fiscal year 2019, was primarily due to
efficient collections of accounts receivable and faster turnover of our
inventories in the Company and the timing of payments of accounts payable in our
business.
To increase our market share and better serve our customers, we may further
expand our operations through investments or acquisitions. We expect that such
expansion would require an initial investment in working capital, personnel,
facilities and operations. These investments or acquisitions would likely be
funded primarily by our existing cash and cash equivalents, additional
borrowings, or the issuance of securities.
Our Consolidated Statements of Cash Flows include both continuing and discontinued operations. See Note 5 - Discontinued Operations of the Consolidated Financial Statements for further details.
Operating Activities
Net cash provided by operating activities was$810 million during fiscal year 2021, primarily due to net income and an increase in accounts payable due to the timing of payments, including the impact of the Merger. These cash inflows were partially offset by an increase in inventory and accounts receivable driven by growth in our business, including the impact of the Merger. Net cash provided by operating activities was$1.834 billion during fiscal year 2020, primarily due to net income and cash inflows from an increase in accounts payable and changes in other operating assets and liabilities primarily reflecting efficient 40
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working capital management in our business, and a decrease in DSO in our business of approximately 9 days from the end of fiscal year 2019 largely due to the impact of COVID-19. These items were partially offset by an increase in inventories driven by growth in our larger projects and integration-based server solutions. Net cash provided by operating activities was$550 million during fiscal year 2019, primarily due to net income, an increase in accounts payable and a net change in other operating assets and liabilities. These cash inflows were partially offset by an increase in accounts receivable and receivables from vendors, and an increase in inventories. The increase in accounts receivable, including receivables from vendors, inventories and accounts payable was driven by growth in our business.
The significant components of our investing and financing cash flow activities are listed below.
Investing Activities 2021 •$907.1 million in net cash paid related to the Merger. •$54.9 million related to infrastructure investments.
2020
•$198.0 million related to infrastructure investments. •$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.
2019
•$137.4 million related to infrastructure investments. •$9.4 million of cash paid related to the settlement of employee stock-based awards assumed under the Convergys acquisition. Financing Activities 2021 • Proceeds of$2.5 billion for issuance of Senior Notes to finance the Merger. • Repayment of approximately$2.6 billion of debt of Tech Data paid off
substantially concurrent with the closing of the Merger.
•
in connection with the Separation.
• Dividends of $50.3 million paid.
• Debt issuance costs of $42.3 million paid.
2020
• Net repayments of$262.6 million under our borrowing arrangements. • Dividends of$20.8 million paid. 2019 • Net repayments of$521.4 million under our borrowing arrangements. •$76.6 million of dividend payments. •$15.2 million of repurchases of our common stock. •$14.0 million in cash was used to pay contingent consideration related to our Westcon-Comstor Americas acquisition. 41
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We believe our current cash balances, cash flows from operations and credit availability are sufficient to support our operating activities for at least the next twelve months.
Capital Resources Our cash and cash equivalents totaled$994.0 million and$1.4 billion as ofNovember 30, 2021 and 2020, respectively. Our cash and cash equivalents held by international subsidiaries are no longer subject toU.S. federal tax on repatriation intothe United States . Repatriation of some foreign balances is restricted by local laws. Historically, we have fully utilized and reinvested all foreign cash to fund our foreign operations and expansion. If in the future our intentions change, and we repatriate the cash back tothe 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 withinthe United States to fund current and expected future working capital, investment and other general corporate funding requirements. 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, 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. Historically, we have renewed our accounts receivable securitization program and our parent company credit facilities on, or prior to, their respective expiration dates. We have no reason to believe that these and other arrangements will not be renewed or replaced as we continue to be in good credit standing with the participating financial institutions. We have had similar borrowing arrangements with various financial institutions throughout our years as a public company.
On-Balance Sheet Arrangements
TD SYNNEX United States accounts receivable securitization agreement
Inthe United States , we have an accounts receivable securitization program to provide additional capital for our operations (the "U.S. AR Arrangement"). Under the terms of theU.S. AR Arrangement, that, prior to theDecember 2021 amendment described below, was scheduled to expire inMay 2022 , our subsidiary that is the borrower under this facility could borrow up to a maximum of$650 million based upon eligible trade accounts receivable. The effective borrowing cost under theU.S. AR Arrangement was a blended rate based upon the composition of the lenders, that included prevailing dealer commercial paper rates and a rate based upon LIBOR. In addition, a program fee payable on the used portion of the lenders' commitment, accrued at 1.25% per annum in the case of lender groupswho funded their advances based on prevailing commercial paper rates, and 1.30% per annum in the case of lender groupswho funded their advances based on LIBOR (subject to a 0.50% per annum floor). A facility fee was 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. Under the terms of theU.S. AR Arrangement, we and certain of ourU.S. 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. Any amounts received under theU.S. AR Arrangement are recorded as debt on our Consolidated Balance Sheets. OnDecember 22, 2021 , we and our subsidiaries that are party to theU.S. AR Arrangement amended theU.S. AR Arrangement to extend the maturity date toDecember 2024 and increase the lending commitment to$1.5 billion . Further, the effective borrowing cost under theU.S. AR Arrangement was also modified through adjustments to the (i) program fee payable on the used portion of the lenders' commitment, which now accrues at 0.75% per annum and (ii) facility fee payable on the adjusted commitment of the lenders, which now accrues at different tiers ranging between 0.30% per annum and 0.40% per annum depending on the amount of outstanding advances from time to time. 42
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SYNNEX United States credit agreement
Prior to the Merger, inthe United States , we had a senior secured credit agreement (as amended, the "U.S. Credit Agreement") with a group of financial institutions. TheU.S. Credit Agreement included a$600 million commitment for a revolving credit facility and a term loan in the original principal amount of$1.2 billion . Interest on borrowings under theU.S. Credit Agreement was based on LIBOR or a base rate at our option, plus a margin. The margin for LIBOR loans ranged from 1.25% to 2.00% and the margin for base rate loans ranged from 0.25% to 1.00%, provided that LIBOR was not less than zero. The base rate was a variable rate which was 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 ranged from 0.175% to 0.30% per annum. The margins above the applicable interest rates and the revolving commitment fee for revolving loans were based on our consolidated leverage ratio, as calculated under theU.S. Credit Agreement. Our obligations under theU.S. Credit Agreement were secured by substantially all of the parent company's and ourUnited States domestic subsidiaries' assets on a pari passu basis with the interests of the lenders under theU.S. Term Loan Credit Agreement (defined below) pursuant to an intercreditor agreement and were guaranteed by certain of ourUnited States domestic subsidiaries. TheU.S. Credit Agreement was originally scheduled to mature inSeptember 2022 , however theU.S. Credit Agreement was terminated onSeptember 1, 2021 and all outstanding balances were repaid in full as part of the Merger (see Note 3 - Acquisitions for further discussion).
SYNNEX United States term loan credit agreement
Prior to the Merger, inthe United States we had a senior 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 . The remaining outstanding principal was payable on maturity. Interest on borrowings under theU.S. Term Loan Credit Agreement were based on LIBOR or a base rate at our option, plus a margin. The margin for LIBOR loans ranged from 1.25% to 1.75% and the margin for base rate loans ranged from 0.25% to 0.75%, provided that LIBOR was not less than zero. The base rate was a variable rate which was 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 theU.S. During the period in which the term loans were available to be drawn, we paid term loan commitment fees. The margins above our applicable interest rates and the term loan commitment fee were based on our consolidated leverage ratio as calculated under theU.S. Term Loan Credit Agreement. Our obligations under theU.S. Term Loan Credit Agreement were secured by substantially all of our and certain of our domestic subsidiaries' assets on a pari passu basis with the interests of the lenders under theU.S. Credit Agreement pursuant to an intercreditor agreement, and were guaranteed by certain of our domestic subsidiaries. TheU.S. Term Loan Credit Agreement was originally scheduled to mature inOctober 2023 , however theU.S. Term Loan Credit Agreement was terminated onSeptember 1, 2021 and all outstanding balances were repaid in full as part of the Merger (see Note 3 - Acquisitions for further discussion).TD SYNNEX credit agreement In connection with the Merger Agreement, we entered into a credit agreement, dated as ofApril 16, 2021 (the "TD SYNNEX Credit Agreement") with the lenders party thereto andCitibank, N.A ., as agent, pursuant to which we received commitments for the extension of a senior unsecured revolving credit facility not to exceed an aggregate principal amount of$3.5 billion , which revolving credit facility (the "TD SYNNEX revolving credit facility") may, at our request but subject to the lenders' discretion, potentially be increased by up to an aggregate amount of$500 million . The TD SYNNEX Credit Agreement also includes a senior unsecured term loan (the "TD SYNNEX term loan" and, together with theTD SYNNEX revolving credit facility, the "TD SYNNEX credit facilities") in an aggregate principal amount of$1.5 billion , that was fully funded in connection with the closing of the Merger. The borrower under theTD SYNNEX credit facilities is the Company. There are no guarantors of theTD SYNNEX credit facilities. The maturity of theTD SYNNEX credit facilities is on the fifth anniversary of theSeptember 2021 closing date, to occur inSeptember 2026 , subject in the case of the revolving credit facility, to two one-year extensions upon our prior notice to the lenders and the agreement of the lenders to extend such maturity date. The outstanding principal amount of theTD SYNNEX term loan is payable in quarterly installments in an amount equal to 1.25% of the original$1.5 billion principal balance commencing on the last day of the first full fiscal quarter after the closing date of theTD SYNNEX credit facilities, with the outstanding principal amount of the term loans due in full on the maturity date. Loans borrowed under the TD SYNNEX Credit Agreement bear interest, in the case of LIBOR (or successor) rate loans, at a per annum rate equal to the applicable LIBOR (or successor) rate, plus the applicable margin, which may range from 1.125% to 1.75%, based on our public debt rating (as defined in theTD SYNNEX Credit Agreement). The applicable margin on base rate loans is 1.00% less than the corresponding margin on LIBOR (or successor rate) based loans. In addition to these borrowing rates, there is a commitment fee that ranges from 0.125% to 0.300% on any unused commitment under theTD SYNNEX revolving credit facility based on our public debt rating. As ofNovember 30, 2021 , the effective interest rate for the term loan was 1.49%. The TD SYNNEX Credit Agreement contains various loan covenants that are customary for similar facilities for similarly rated borrowers that restrict our ability to take certain actions. The TD SYNNEX Credit Agreement also contains financial covenants that require compliance with a maximum debt to EBITDA ratio and a minimum interest coverage ratio, in each case tested on the last day of each fiscal quarter commencing with the first full fiscal quarter to occur after the closing date of theTD SYNNEX credit facilities. 43
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The TD SYNNEX Credit Agreement also contains various customary events of default, including with respect to a change of control of the Company.
OnMarch 22, 2021 , we had entered into a debt commitment letter (the "Commitment Letter"), under whichCitigroup Global Markets Inc. and certain other financing institutions joining thereto pursuant to the terms thereof committed to provide (i) a$1.5 billion senior unsecured term bridge facility (the "Term Loan A Bridge Facility"), (ii) a$2.5 billion senior unsecured term bridge facility (the "Bridge Facility") and (iii) a$3.5 billion senior unsecured revolving bridge facility (the "Bridge Revolving Facility"), subject to the satisfaction of certain customary closing conditions. OnApril 16, 2021 , (i) the$1.5 billion commitment with respect to the Term Loan A Bridge Facility under the Commitment Letter and (ii) the$3.5 billion commitment with respect to the Bridge Revolving Facility under the Commitment Letter were reduced to zero, in each case, as a result of us entering into the TD SYNNEX Credit Agreement; and onAugust 9, 2021 the Bridge Facility was reduced to zero as a result of the issuance of theTD SYNNEX Senior Notes described below.
OnAugust 9, 2021 , we completed our offering of$2.5 billion aggregate principal amount of senior unsecured notes, consisting of$700.0 million of 1.25% senior notes due 2024,$700.0 million of 1.75% senior notes due 2026,$600.0 million of 2.375% senior notes due 2028, and$500.0 million of 2.65% senior notes due 2031 (collectively, the "Senior Notes," and such offering, the "Senior Notes Offering"). We incurred$19.6 million towards issuance costs for the Senior Notes. We will pay interest semi-annually on the notes on each ofFebruary 9 andAugust 9 , beginningFebruary 9, 2022 . The net proceeds from this offering were used to fund a portion of the aggregate cash consideration payable in connection with the Merger, refinance certain of our existing indebtedness and pay related fees and expenses and for general corporate purposes. The interest rate payable on each series of the Senior Notes will be subject to adjustment from time to time if the credit rating assigned to such series of Senior Notes is downgraded (or downgraded and subsequently upgraded). We may redeem the Senior Notes, at any time in whole or from time to time in part, prior to (i)August 9, 2022 (the "2024 Par Call Date") in the case of the 2024 Senior Notes, (ii)July 9, 2026 (the "2026 Par Call Date") in the case of the 2026 Senior Notes, (iii)June 9, 2028 (the "2028 Par Call Date") in the case of the 2028 Senior Notes, and (iv)May 9, 2031 in the case of the 2031 Senior Notes (the "2031 Par Call Date" and, together with the 2024 Par Call Date, the 2026 Par Call Date and the 2028 Par Call Date, each, a "Par Call Date" and together, the "Par Call Dates"), at a redemption price equal to the greater of (x) 100% of the aggregate principal amount of the applicable Senior Notes to be redeemed and (y) the sum of the present values of the remaining scheduled payments of the principal and interest on the Senior Notes, discounted to the date of redemption on a semi-annual basis at a rate equal to the sum of the applicable treasury rate plus 15 basis points for the 2024 Senior Notes, 20 basis points for the 2026 Senior Notes and 25 basis points for the 2028 Senior Notes and 2031 Senior Notes, plus in each case, accrued and unpaid interest thereon to, but excluding, the redemption date. We may also redeem the Senior Notes of any series at our option, at any time in whole or from time to time in part, on or after the applicable Par Call Date, at a redemption price equal to 100% of the principal amount of the Senior Notes to be redeemed.
Other borrowings and term debt
We have various other committed and uncommitted lines of credit with financial institutions at certain locations outsidethe United States , accounts receivable securitization arrangements, factoring of accounts receivable with recourse provisions, capital leases, a building mortgage, short-term loans, term loans, credit facilities, and book overdraft facilities, totaling approximately$635.5 million in borrowing capacity as ofNovember 30, 2021 . Most of these facilities are provided on an unsecured, short-term basis and are reviewed periodically for renewal. Interest rates and other terms of borrowing under these lines of credit vary by country, depending on local market conditions. There was$106.3 million outstanding on these facilities atNovember 30, 2021 , at a weighted average interest rate of 4.59%, and there was$57.9 million outstanding atNovember 30, 2020 , at a weighted average interest rate of 1.03%. Borrowings under these lines of credit facilities are guaranteed by the Company or secured by eligible accounts receivable. AtNovember 30, 2021 , we were also contingently liable for reimbursement obligations with respect to issued standby letters of credit in the aggregate outstanding amount of$104.7 million . These letters of credit typically act as a guarantee of payment to certain third parties in accordance with specified terms and conditions.
The maximum commitment amounts for local currency credit facilities have been
translated into United States Dollars at
Off-Balance Sheet Arrangements
We have financing programs under which trade accounts receivable owed by certain customers may be sold to financial institutions. Available capacity under these programs is dependent upon the level of our trade accounts receivable eligible to be sold into these programs and the financial institutions' willingness to purchase such receivables. In addition, certain of these programs also require that we continue to service, administer and collect the sold accounts receivable. AtNovember 30, 2021 and 2020, we had a total of$759.9 million and$21.4 million , respectively, of trade accounts receivable sold to and held by the financial institutions under 44
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these programs. Discount fees for these programs in the years ended
Covenant Compliance
Our credit facilities have a number of covenants and restrictions that require us to maintain specified financial ratios. They also limit our ability to incur additional debt, create liens, enter into agreements with affiliates, modify the nature of our business, and merge or consolidate. As ofNovember 30, 2021 , we were in compliance with all current and material covenants for the above arrangements.
Contractual Obligations
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. There have been no material repurchases throughNovember 30, 2021 under these agreements and we are not aware of any pending customer defaults or repossession obligations. As we do not have access to information regarding the amount of inventory purchased from us still on hand with the customer at any point in time, our repurchase obligations relating to inventory cannot be reasonably estimated. For more information on our third-party revolving short-term financing arrangements, see
Note 2 - Summary of Significant Accounting Policies to the Consolidated Financial Statements included in Part II, Item 8 of this Report.
Related Party Transactions
We have a business relationship with MiTAC Holdings, a publicly-traded company inTaiwan , which began in 1992 when MiTAC Holdings became our primary investor through its affiliates. As ofNovember 30, 2021 and 2020, MiTAC Holdings and its affiliates beneficially owned approximately 9.5% and 18% of our outstanding common stock, respectively. Mr.Matthew Miau , the Chairman Emeritus of our Board of Directors and a director, is the Chairman of MiTAC Holdings' and a director or officer of MiTAC Holdings' affiliates.
The shares owned by MiTAC Holdings are held by the following entities:
As of November 30, 2021
(shares in thousands)
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-ownedsubsidiary of MiTAC Holdings. Excludes 192 shares held directly by Mr.
Miau, 217 shares indirectly held by
trust, and 190 shares held by his spouse.
(2) Synnex Technology International Corp. ("
is a separate entity from us and is a publicly-traded corporation in
subsidiary of Synnex Technology International. MiTAC Holdings owns a
noncontrolling interest of 14.1% in
Taiwanese company, which in turn holds a noncontrolling interest of 15.7%
in Synnex Technology International. Neither MiTAC Holdings nor
affiliated with any person(s), entity, or entities that hold a majority
interest in
We purchased inventories and services from MiTAC Holdings and its affiliates totaling$199.7 million ,$211.9 million and$173.4 million during fiscal years 2021, 2020 and 2019, respectively. Our sales to MiTAC Holdings and its affiliates during fiscal years 2021, 2020 and 2019 totaled$0.6 million ,$0.8 million and$0.8 million , respectively. In addition, we made payments of$0.2 million ,$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 the fiscal years endedNovember 30, 2021 , 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. We negotiate pricing and other material terms on a case-by-case basis with MiTAC Holdings. We have adopted a policy requiring that material transactions with MiTAC Holdings or its related parties be approved by our Audit Committee, which is composed solely of independent directors. In addition,Mr. Miau's compensation is approved by theNominating and Corporate Governance Committee , which is also composed solely of independent directors. Synnex Technology International is a publicly-traded corporation inTaiwan that currently provides distribution and fulfillment services to various markets inAsia andAustralia , and is also our competitor. MiTAC Holdings and its affiliates are not restricted from competing with us.
Recently Issued Accounting Pronouncements
For a summary of recent accounting pronouncements and the anticipated effects on
our consolidated financial statements see Note 2 - Summary of Significant
Accounting Policies to the Consolidated Financial Statements, which can be found
under Item 8 of this Report.
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