NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(currency and share amounts in thousands, except per share amounts)
NOTE 1—BACKGROUND AND BASIS OF PRESENTATION:
Background
Concentrix Corporation (“Concentrix,” the “CX business” or the “Company”) is a leading global provider of Customer Experience (“CX”) solutions and technology that help iconic and disruptive brands drive deep understanding, full lifecycle engagement, and differentiated experiences for their end-customers around the world. We provide end-to-end capabilities, including CX process optimization, technology innovation, front- and back-office automation, analytics and business transformation services to clients in five primary industry verticals.
On December 1, 2020, the separation of the CX business (the “separation”) from SYNNEX Corporation, now known as TD SYNNEX Corporation (“TD SYNNEX”) was completed through a tax-free distribution of all of the issued and outstanding shares of the Company’s common stock to TD SYNNEX stockholders (the “distribution” and, together with the separation, the “spin-off”). TD SYNNEX stockholders received one share of the Company’s common stock for each share of TD SYNNEX common stock held as of the close of business on November 17, 2020. As a result of the spin-off, the Company became an independent public company and the Company’s common stock commenced trading on the Nasdaq Stock Market (“Nasdaq”) under the symbol “CNXC” on December 1, 2020.
In connection with the spin-off, on November 30, 2020, the Company entered into a separation and distribution agreement, an employee matters agreement, a tax matters agreement and a commercial agreement with TD SYNNEX to set forth the principal actions to be taken in connection with the spin-off and define the Company’s ongoing relationship with TD SYNNEX after the spin-off.
Basis of presentation (including principles of consolidation)
The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and include the accounts of the Company, its majority-owned subsidiaries and entities over which the Company has control. All intercompany balances and transactions have been eliminated in consolidation.
Prior to the spin-off on December 1, 2020
Prior to the spin-off, the CX business was held entirely within certain wholly-owned subsidiaries of TD SYNNEX dedicated to the CX business. As the separate legal entities that make up the CX business were not historically held by a single legal entity, the financial statements of the Company were prepared in connection with the expected separation and were derived from the TD SYNNEX consolidated financial statements and accounting records as if the Company had been operated on a stand-alone basis during the periods presented. Accordingly, for periods prior to December 1, 2020, the Company’s financial statements are presented on a combined basis, and for the periods subsequent to December 1, 2020, they are presented on a consolidated basis (all periods hereinafter are referred to as “consolidated financial statements”). All direct revenue and expenses attributable to the CX business, including certain allocations of former parent costs and expenses, were separately maintained in a separate ledger in the legal entities that make up the CX business. As the separate legal entities that make up the CX business were not historically held by a single legal entity, former parent company investment was shown in lieu of stockholders’ equity in the prior year periods. All significant intercompany balances and transactions between the legal entities that comprise the CX business were eliminated.
Management of the Company and former parent consider allocations of former parent costs to be a reasonable reflection of the utilization of services by, or the benefits provided to, the Company. The allocations may not, however, have reflected the expense the Company would have incurred as a stand-alone company for those periods presented. Actual costs that may have been incurred if the Company had been a stand-alone company would depend on a number of factors, including the chosen organizational structure, what functions were outsourced or performed by employees and other strategic decisions.
Prior to the spin-off, certain Concentrix legal entities in the United States jointly and severally guaranteed certain of TD SYNNEX’ borrowing arrangements and substantially all of the assets of these Concentrix legal entities secured TD SYNNEX’ obligations under the borrowing arrangements. Historically, Concentrix received or provided funding for acquisitions or ongoing operations as part of TD SYNNEX’ centralized treasury program. Accordingly, only cash amounts specifically recorded in the separate Concentrix ledger were reflected in the balance sheets. The Company reflected transfers of the cash from the former parent’s cash management system as loan or other accounts payable to the former parent or a reduction of accounts or loans receivable in the prior year balance sheet based on the purpose for which the cash was provided by the former parent. Similarly, cash transfers to the former parent were reflected as reductions of loans or other accounts payable to the former parent or loans receivable from the former parent. The cash payments and receipts were recorded in the prior year statements of cash flows as operating or financing activities based on the nature of the transactions for which the funds were transferred between the Company and the former parent.
Prior to the spin-off, operations of Concentrix were included in the consolidated U.S. federal, and certain state and local income tax returns filed by TD SYNNEX, where applicable. Concentrix also filed certain separate state, local and foreign tax returns. Income tax expense and other income tax related information contained in the financial statements prior to the spin-off were presented on a separate return basis, which required the Company to estimate tax expense as if the Company filed a separate return apart from TD SYNNEX. The income taxes of Concentrix as presented in the financial statements for these periods may not be indicative of the income taxes that Concentrix has incurred following the spin-off or will incur in the future.
Reclassifications
Certain amounts in the consolidated financial statements related to the prior years have been reclassified to conform to the current year’s presentation.
Risks and uncertainties related to the COVID-19 pandemic
In December 2019, there was an outbreak of a new strain of the coronavirus (“COVID-19”), which was declared a pandemic by the World Health Organization in March 2020. The COVID-19 pandemic has negatively impacted the global economy, disrupted global supply chains and labor force participation, and created significant volatility and disruption of financial markets. The Company successfully transitioned a significant portion of its workforce to a remote working environment throughout the second quarter of 2020 and implemented a number of safety and social distancing measures in our sites to protect the health and safety of our team. During fiscal year 2021, almost all of the Company’s workforce was productive, but the Company experienced the continued effects of the COVID-19 pandemic, as the Delta variant caused new waves of COVID-19 cases around the globe.
The extent of the continued impact of the COVID-19 pandemic on our operational and financial performance, including our ability to execute our business strategies and initiatives in the expected time frame, will depend on future developments, including the duration, spread and severity of the pandemic, the evolution of the virus and the effects of mutations in its genetic code, country and state restrictions regarding virus containment, the availability and effectiveness of vaccines and treatment options, accessibility to the Company’s delivery and operations locations, our continued utilization of remote work environments in response to future health and safety restrictions, and the effect on the Company’s clients’ businesses and the demand for their products and services, all of which are uncertain and cannot be predicted. The Company is unable to predict how long the pandemic conditions will persist in regions in which the Company operates, if or when countries or localities may experience an increase in COVID-19 cases, what additional measures may be introduced by governments or the Company’s clients in
response to the pandemic generally or to an increase in COVID-19 cases in a particular country or locality, and the effect of any such additional measures on the Company’s business. As a result, many of the estimates and assumptions used in preparation of these consolidated financial statements required increased judgment and carry a higher degree of variability and volatility. As events continue to evolve with respect to the pandemic and the global recovery from the pandemic, the Company’s estimates may materially change in future periods.
NOTE 2—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Use of estimates
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenue and expense during the reporting period. The Company evaluates these estimates on a regular basis and bases them on historical experience and on various assumptions that the Company believes are reasonable. Actual results could differ from the estimates.
Segment reporting
Concentrix operations are based on an integrated global delivery model whereby services under a client contract in one location may be provided from delivery centers located in one or more different countries, with more than half of the Company’s workforce located in the Philippines and India. Given the homogeneity of technology-infused CX services and the integrated delivery model, the Company operates in a single segment, based on how the chief operating decision maker (“CODM”) views and evaluates the Company’s operations in making operational and strategic decisions and assessments of financial performance. The Company’s President and Chief Executive Officer has been identified as the CODM.
Cash equivalents
The Company considers all highly liquid debt instruments purchased with an original maturity or remaining maturity at the date of purchase of three months or less to be cash equivalents. Cash equivalents consist principally of money market deposit accounts that are stated at cost, which approximates fair value. The Company is exposed to credit risk in the event of default by financial institutions to the extent that cash balances with financial institutions are in excess of amounts that are insured.
Accounts receivable and allowance for doubtful accounts
Accounts receivable are comprised primarily of amounts owed to the Company by clients and are presented net of an allowance for doubtful accounts. The allowance for doubtful accounts is an estimate to cover the losses resulting from uncertainty regarding collections from customers to make payments for outstanding balances. In estimating the required allowance, the Company considers the overall quality and aging of the accounts receivable and credit evaluations of its clients’ financial condition. The Company also evaluates the collectability of accounts receivable based on specific client circumstances, current economic trends, historical experience with collections and the value and adequacy of any collateral received from clients.
Unbilled receivables
In the majority of service contracts, the Company performs the services prior to billing the client, and this amount is captured as an unbilled receivable included in accounts receivable, net on the consolidated balance sheet. Billing usually occurs in the month after the Company performs the services or in accordance with the specific contractual provisions.
Derivative financial instruments
The Company accounts for its derivative instruments as either assets or liabilities and carries them at fair value.
For derivative instruments that hedge the exposure to variability in expected future cash flows that are designated as cash flow hedges, the gain or loss on the derivative instrument is reported as a component of “Accumulated other comprehensive income (loss),” in stockholders’ equity and reclassified into earnings in the same line associated with the forecasted transactions, in the same period or periods during which the hedged transaction affects earnings. To receive hedge accounting treatment, cash flow hedges must be highly effective in offsetting changes to expected future cash flows on hedged transactions.
For derivative instruments that are not designated as cash flow hedges, gains and losses on derivative instruments are reported in the consolidated statements of operations in the current period.
Software costs
The Company develops software platforms for internal use. The Company capitalizes costs incurred to develop software subsequent to the software product reaching the application development stage. The Company also capitalizes the costs incurred to extend the life of existing software, or the cost of significant enhancements that are added to the features of existing software. The capitalized development costs primarily comprise payroll costs and related software costs. Capitalized costs are amortized over the economic life of the software using the straight line method.
Property and equipment
Property and equipment are stated at cost, less accumulated depreciation and amortization. Depreciation and amortization are computed using the straight line method based upon the shorter of the estimated useful lives of the assets, or the lease term of the respective assets, if applicable. Maintenance and repairs are charged to expense as incurred, and improvements are capitalized. When assets are retired or otherwise disposed of, the cost and accumulated depreciation and amortization are removed from the accounts and any resulting gain or loss is reflected in operations in the period realized. The ranges of estimated useful lives for property and equipment categories are as follows:
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Equipment and furniture
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3 - 10 years
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Software
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3 - 7 years
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Leasehold improvements
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2 - 15 years
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Buildings and building improvements
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10 - 39 years
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Leases
The Company enters into leases as a lessee for property and equipment in the ordinary course of business. When procuring services, or upon entering into a contract with its clients, the Company determines whether an arrangement contains a lease at its inception. As part of that evaluation, the Company considers whether there is an implicitly or explicitly identified asset in the arrangement and whether the Company, as the lessee, or the client, if the Company is the lessor, has the right to control the use of that asset. Effective December 1, 2019, when the Company is the lessee, all leases with a term of more than 12 months are recognized as right-of-use (“ROU”) assets and associated lease liabilities in the consolidated balance sheet. Lease liabilities are measured at the lease commencement date and determined using the present value of the lease payments not yet paid, at the Company’s incremental borrowing rate, which approximates the rate at which the Company would borrow on a secured basis in the country where the lease was executed. The interest rate implicit in the lease is generally not determinable in the transactions where the Company is the lessee. The ROU asset equals the lease liability adjusted for any initial direct costs, prepaid rent and lease incentives. The Company’s variable lease payments generally relate to payments tied to various indexes, non-lease components and payments above a contractual minimum fixed amount.
Operating leases are included in other assets, net, other accrued liabilities and other long-term liabilities in the consolidated balance sheet. Substantially all of the Company’s leases are classified as operating leases. The Company recognizes options to extend or terminate the lease when it is reasonably certain that the Company will
exercise that option. The Company made a policy election to not recognize leases with a lease term of 12 months or less in the consolidated balance sheet. Lease expenses are recorded within selling, general, and administrative expenses in the consolidated statements of operations. Operating lease payments are presented within “Cash flows from operating activities” in the consolidated statements of cash flows.
For all asset classes, the Company has elected the lessee practical expedient to combine lease and non-lease components (e.g. maintenance services) and account for the consolidated unit as a single lease component. Variable lease payments are recognized in the periods in which the obligations for those payments are incurred.
Business combinations
The purchase price is allocated to the assets acquired, liabilities assumed, and non-controlling interests in the acquired entity 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 non-controlling interests in the acquired entity is recorded as goodwill. The primary items that generate goodwill include the value of the synergies between the acquired entity and the Company and the value of the acquired assembled workforce, neither of which qualify for recognition as an intangible asset. 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 Company includes the results of operations of the acquired business in the consolidated financial statements prospectively from the date of acquisition. Acquisition-related charges are recognized separately from the business combination and are expensed as incurred. These charges primarily include direct third-party professional and legal fees, and integration-related costs.
Goodwill and intangible assets
The Company tests goodwill for impairment annually at the reporting unit level in the fiscal fourth quarter or more frequently if events or changes in circumstances indicate that it may be impaired. For purposes of the goodwill impairment test, the Company can elect to perform a quantitative or qualitative analysis. If the qualitative analysis is elected, 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 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 Company elects to perform or is required to perform a quantitative analysis, then the reporting unit’s carrying value is compared to its fair value. As part of this analysis, the Company reconciles the fair value of its reporting unit to its market capitalization. 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 fiscal years presented in these consolidated financial statements.
The values assigned to intangible assets are based on estimates and judgment regarding expectations for length of customer relationships and success of life cycle of technologies acquired in a business combination. Purchased intangible assets are amortized over the useful lives based on estimates of the use of the economic benefit of the asset or by using the straight line method.
Intangible assets consist of customer relationships, technology and trade names. Amortization is based on the pattern over which the economic benefits of the intangible assets will be consumed or, when the consumption pattern is not apparent, by using the straight line method over the following useful lives:
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Customer relationships
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10 - 15 years
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Technology
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5 years
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Trade names
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5 years
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Impairment of long-lived assets
The Company reviews the recoverability of its long-lived assets, such as intangible assets subject to amortization, property and equipment and certain other assets, including lease right-of-use 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 the Company’s 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.
Concentration of credit risk
Financial instruments that potentially subject the Company to significant concentration of credit risk consist principally of cash and cash equivalents, accounts receivable and derivative instruments.
The Company’s cash and cash equivalents and derivative instruments are transacted and maintained with financial institutions with high credit standing, and their compositions and maturities are regularly monitored by management. Through November 30, 2021, the Company has not experienced any credit losses on such deposits and derivative instruments.
Accounts receivable comprise amounts due from clients. The Company performs ongoing credit evaluations of its clients’ financial condition and limits the amount of credit extended when deemed necessary, but generally requires no collateral. The Company also maintains allowances for potential credit losses. In estimating the required allowances, the Company takes into consideration the overall quality and aging of its receivable portfolio and specifically identified client risks.
In fiscal years 2021, 2020 and 2019, one client accounted for 11.9%, 11.5% and 10.4%, respectively, of the Company’s consolidated revenue.
As of November 30, 2021 and 2020, one client comprised 15.3% and 16.2%, respectively, of the Company’s total accounts receivable balance.
Revenue recognition
The Company generates revenue primarily from the provision of CX solutions and technology to its clients. The Company recognizes revenue from services contracts over time as the promised services are delivered to clients for an amount that reflects the consideration to which the Company is entitled in exchange for those services. The Company recognizes revenue over time as the client simultaneously receives and consumes the benefits provided by the Company as the Company performs the services. The Company accounts for a contract with a client 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. Revenue is presented net of taxes collected from clients and remitted to government authorities. The Company generally invoices a client after performance of services, or in accordance with specific contractual provisions. Payments are due as per contract terms and do not contain a significant financing component.
The Company determines whether the services performed during the initial phases of an arrangement, such as setup activities, are distinct. In most cases, the arrangement is a single performance obligation comprised of a series of distinct services that are substantially the same and that have the same pattern of transfer (i.e., distinct days of service).
Service contracts are most significantly based on a fixed unit-price per transaction or other objective measure of output. Revenue on unit-price transactions is recognized over time using an objective measure of output such as staffing hours or the number of transactions processed by service advisors. Certain contracts may be based on a fixed price. Revenue on fixed price contracts is recognized over time using an input measure or on a straight-line basis over the term of the contract as the services are provided based on the nature of the contract. Client contract terms can range from less than one year to more than five years.
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 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.
Cost of revenue
Recurring direct operating costs for services are recognized as incurred. Cost of services revenue consists primarily of personnel costs and transition and initial set up costs.
Selling, general and administrative expenses
Selling, general and administrative expenses are charged to income as incurred. Expenses of promoting and selling products and services are classified as selling expense and include such items as compensation, sales commissions and travel. General and administrative expenses include such items as compensation, cost of delivery centers, legal and professional costs, office supplies, non-income taxes, insurance and utility expenses. In addition, selling, general and administrative expenses include other operating items such as allowances for credit losses, depreciation and amortization of non-technology related intangible assets.
Advertising
Costs related to advertising and service promotion expenditures are charged to “Selling, general and administrative expenses” as incurred. To date, net costs related to advertising and promotion expenditures have not been material.
Income taxes
Prior to December 1, 2020, the Company’s operations were included in the tax returns filed by the respective former parent entities of which the Company’s businesses were a part. For the fiscal years ended November 30, 2020 and 2019, income tax expense and other income tax related information contained in these consolidated financial statements are presented on a separate return basis as if the Company filed its own tax returns.
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.
The Company recognizes 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. The Company recognizes interest and penalties related to unrecognized tax benefits in the provisions for income taxes.
Foreign currency translations
The financial statements of the legal entities included in these consolidated financial statements, whose functional currencies are the local currencies, are translated into U.S. dollars for consolidation as follows: assets and liabilities at the exchange rate as of the balance sheet date, equity at the historical rates of exchange, and income and expense amounts at the average exchange rate for the month. Translation adjustments resulting from the translation of the legal entities’ accounts are included in “Accumulated other comprehensive income (loss).” Transactions denominated in currencies other than the applicable functional currency are converted to the functional currency at the exchange rate on the transaction date. At period end, monetary assets and liabilities are remeasured to the functional currency using exchange rates in effect at the balance sheet date. Non-monetary assets and liabilities are remeasured at historical exchange rates. Gains and losses resulting from foreign currency transactions are included within “Other expense (income), net.”
Other comprehensive income
The primary components of other comprehensive income for the Company include foreign currency translation adjustments arising from the combination of foreign legal entities engaged in the CX business, unrealized gains and losses on cash flow hedges, and changes in unrecognized pension and post-retirement benefits.
Share-based compensation
Share-based compensation cost for stock options, restricted stock awards and restricted stock units is determined based on the fair value at the measurement date. The Company recognizes share-based compensation cost as expense for these awards ratably on a straight-line basis over the requisite service period. Share-based compensation for performance-based restricted stock units is measured based on fair value at the initial measurement date and is adjusted each reporting period, as necessary, to reflect changes in the Company’s stock and management’s assessment of the probability that performance conditions will be satisfied. The Company recognizes share-based compensation cost associated with its performance-based restricted stock units over the requisite service period if it is probable that the performance conditions will be satisfied. The Company accounts for expense reductions that result from the forfeiture of unvested awards in the period that the forfeitures occur.
Pension and post-retirement benefits
The funded status of the Company’s pension and other post-retirement benefit plans is recognized in the consolidated balance sheets. The funded status is measured as the difference between the fair value of plan assets and the benefit obligation at November 30, the measurement date. For defined benefit pension plans, the benefit obligation is the projected benefit obligation (“PBO”) and, for the other post-retirement benefit plans, the benefit obligation is the accumulated post-retirement benefit obligation (“APBO”). The PBO represents the actuarial present value of benefits expected to be paid upon retirement. For active plans, the present value reflects estimated future compensation levels. The APBO represents the actuarial present value of post-retirement benefits attributed to employee services already rendered. The fair value of plan assets represents the current market value of assets held by an irrevocable trust fund for the sole benefit of participants. The measurement of the benefit obligation is based on the Company’s estimates and actuarial valuations. These valuations reflect the terms of the plans and use participant-specific information such as compensation, age and years of service, as well as certain key assumptions that require significant judgment, including, but not limited to, estimates of discount rates, expected return on plan assets, inflation, rate of compensation increases, interest crediting rates and mortality rates. The assumptions used are reviewed on an annual basis.
Earnings per common share
Basic and diluted earnings per common share are calculated using the two-class method. The two-class method is an earnings allocation proportional to the respective ownership among holders of common stock and participating securities. The Company’s restricted stock awards are considered participating securities because they are legally issued at the grant date and holders have a non-forfeitable right to receive dividends. Basic earnings per common share is computed by dividing net income attributable to the Company’s common stockholders by the weighted-average common shares outstanding during the period. Diluted earnings per common share also considers the dilutive effect of in-the-money stock options and restricted stock units, calculated using the treasury stock method.
Treasury stock
Repurchases of shares of common stock are accounted for at cost and are included as a component of stockholders’ equity in the consolidated balance sheets.
Accounting pronouncements adopted during the three-year period ended November 30, 2021
In June 2016, the Financial Accounting Standards Board (the “FASB”) issued a credit loss standard that replaced the incurred loss impairment model with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to determine credit loss estimates. This standard became effective for the Company’s fiscal year beginning December 1, 2020. The adoption did not have a material impact on the consolidated financial statements.
In August 2018, the FASB issued new guidance to add, remove, and clarify disclosure requirements related to defined benefit pension and other post-retirement plans. The guidance requires the Company to disclose the weighted-average interest crediting rates used in cash balance pension plans. It also requires the Company to disclose the reasons for significant changes in the benefit obligation or plan assets, including significant gains and losses affecting the benefit obligation for the period. This standard became effective for fiscal year 2021 and did not have a material impact on the Company’s consolidated financial statements.
In February 2018, the FASB issued guidance that permitted the Company to reclassify disproportionate tax effects in accumulated other comprehensive income caused by the Tax Cuts and Jobs Act of 2017 to retained earnings. The guidance was effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018, with early adoption permitted. The adoption of this new guidance did not have a material impact on the Company’s consolidated financial statements.
In February 2016, the FASB issued a new standard which revised various aspects of accounting for leases, with amendments in 2018 and 2019 codified as Accounting Standards Codification Topic 842, Leases (“ASC Topic 842”). The Company adopted the guidance effective December 1, 2019, applying the optional transition method, which allows an entity to apply the new standard at the adoption date with a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption. In addition, the Company elected the package of practical expedients not to reassess prior conclusions related to contracts containing leases, lease classification and initial direct costs, and the lessee practical expedient to combine lease and non-lease components for all asset classes. The Company made a policy election to not recognize ROU assets and lease liabilities for short-term leases for all asset classes. The most significant impact of adoption to the Company’s consolidated financial statements related to the recognition of a ROU asset and a lease liability for virtually all of its leases other than short-term leases. The liability was equal to the present value of lease payments. The asset is based on the liability, and subject to adjustment, such as for initial direct costs. The recognition, measurement, and presentation of expenses and cash flows arising from a lease by a lessee primarily will depend on its classification. For income statement purposes, operating leases will result in a straight-line expense while finance leases will result in a front-loaded expense pattern. Upon adoption, the Company recorded $525,344 of ROU assets and $571,940 of liabilities relating to its operating leases on its consolidated balance sheet. The adoption did not have an impact on the Company’s consolidated statements of operations or its consolidated statements of cash flows.
In May 2014, the FASB issued a comprehensive new revenue recognition standard for contracts with customers with amendments in 2015 and 2016, codified as Accounting Standards Codification Topic 606, Revenue from Contracts with Customers. The Company adopted the guidance effective December 1, 2018 on a full retrospective basis to ensure a consistent basis of presentation within the Company’s consolidated financial statements for all periods reported. In addition, the Company elected the one year practical expedient for contract costs. The impact of adoption was not material and related primarily to the capitalization of certain sales commissions that are assessed to be incremental for obtaining new contracts. Such costs are amortized over the period of expected benefit rather than being expensed as incurred as was the Company’s prior practice.
In January 2016, the FASB issued new guidance that amended various aspects of the recognition, measurement, presentation, and disclosure of financial instruments. With respect to the Company’s consolidated financial statements, the most significant impact related to the accounting for equity investments (other than those that are consolidated or accounted under the equity method), which are measured at fair value through earnings. The Company has elected to use the measurement alternative for non-marketable equity securities, defined as cost, adjusted for changes from observable transactions for identical or similar investments of the same issuer, less impairment. The Company adopted the guidance as of December 1, 2018, with amendments related specifically to equity securities without readily determinable fair values applied prospectively. The adoption did not have a material impact on the Company’s consolidated financial statements.
Recently issued accounting pronouncements not yet adopted
In March 2020, the FASB issued optional guidance for a limited time to ease the potential burden in accounting for or recognizing the effects of reference rate reform, particularly, the risk of cessation of the London Interbank Offered Rate (“LIBOR”) on financial reporting. The guidance provides optional expedients and exceptions for applying GAAP to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met. The amendments are elective and are effective upon issuance for all entities through December 31, 2022. The Company is currently evaluating the impact of the guidance on its consolidated financial statements.
In December 2019, the FASB issued new guidance that simplifies the accounting for income taxes. The guidance is effective for annual reporting periods beginning after December 15, 2020, and interim periods within those reporting periods. Certain amendments should be applied prospectively, while other amendments should be applied retrospectively to all periods presented. The Company is currently evaluating the impact of the new guidance on its consolidated financial statements.
NOTE 3—ACQUISITIONS AND DIVESTITURES:
PK Acquisition
On December 27, 2021, the Company completed its acquisition of PK, a leading CX design engineering company with more than 5,000 staff in four countries. PK creates pioneering experiences that accelerate digital outcomes for their clients’ customers, partners and staff. The acquisition of PK expands the Company’s scale in the digital IT services market and supports the Company’s growth strategy of investing in digital transformation to deliver exceptional customer experiences. The addition of the PK staff and technology to the Company’s team further strengthens its capabilities in CX design and development, artificial intelligence (“AI”), intelligent automation, and customer loyalty.
At the completion of the acquisition, the Company paid approximately $1.6 billion in cash. The Company used proceeds from its Amended Credit Facility to fund the payment. See Note 9 for a discussion of the financing that the Company secured to fund the acquisition.
Given the short period of time from the close of the acquisition to the filing of this Annual Report on Form 10-K, the Company is in the process of compiling the initial accounting for the PK acquisition, including the determination of the fair values of tangible assets acquired and liabilities assumed, the valuation of intangible assets
acquired, income and non-income based taxes, residual goodwill and the amount of goodwill that will be deductible for tax purposes.
Divestitures
In July 2021, the Company completed the sales of its insurance third-party administration operations and software platform, Concentrix Insurance Solutions (“CIS”), and another non-CX solutions business in separate transactions for total cash consideration of approximately $73,708, both subject to customary post-closing adjustments. The divestitures generated a pre-tax gain of approximately $13,197, net of related transaction costs. The gain on divestitures and related transaction costs are included in selling, general and administrative expenses in the consolidated statements of operations.
The Company determined that the sale of the businesses did not qualify as discontinued operations. The results of the sold businesses’ operations are included within the Company’s statements of operations for fiscal year 2021 through the sales dates in July 2021.
NOTE 4—SHARE-BASED COMPENSATION:
In November 2020, in connection with the spin-off, TD SYNNEX, as sole stockholder of Concentrix, approved the Concentrix Corporation 2020 Stock Incentive Plan (the “Concentrix Stock Incentive Plan”) and the Concentrix Corporation 2020 Employee Stock Purchase Plan (the “Concentrix ESPP”), each to be effective upon completion of the spin-off. 4,000 shares of Concentrix common stock were reserved for issuance under the Concentrix Stock Incentive Plan, and 1,000 shares of Concentrix common stock were authorized for issuance under the Concentrix ESPP.
Prior to the spin-off, certain of the Company’s employees participated in a long-term incentive plan sponsored by TD SYNNEX. The Company recognized share-based compensation expense for all share-based awards made to Concentrix employees, including employee stock options, restricted stock awards, restricted stock units, performance-based restricted stock units and employee stock purchases, based on estimated fair values. In connection with the completion of the spin-off and pursuant to the employee matters agreement with TD SYNNEX, each outstanding TD SYNNEX share-based award as of the distribution date was converted into either (a) TD SYNNEX and Concentrix share-based awards, each with the same number of shares as the original TD SYNNEX award, or (b) a share-based award of only TD SYNNEX common stock or only Concentrix common stock, with an adjustment to the number of shares to preserve the value of the award. As a result of the conversion of awards, on December 1, 2020, 827 restricted stock awards and restricted stock units and 684 stock options were issued under the Concentrix Stock Incentive Plan. Following the conversion, it was determined that the share-based awards were modified in accordance with the applicable accounting guidance. As a result, the fair values of the share-based awards immediately before and after the modification were assessed in order to determine if the modification resulted in any incremental compensation cost related to the awards. Based on the analysis performed, including consideration of the anti-dilution feature contained in the TD SYNNEX stock incentive plan, it was determined that the conversion resulted in an immaterial amount of incremental compensation cost for the outstanding awards.
The Company recorded share-based compensation expense in the consolidated statements of operations for fiscal years 2021, 2020 and 2019 as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Years Ended November 30,
|
|
2021
|
|
2020
|
|
2019
|
Total share-based compensation
|
$
|
36,762
|
|
|
$
|
15,914
|
|
|
$
|
10,554
|
|
Tax benefit recorded in the provision for income taxes
|
(9,234)
|
|
|
(3,979)
|
|
|
(2,417)
|
|
Effect on net income
|
$
|
27,528
|
|
|
$
|
11,935
|
|
|
$
|
8,137
|
|
Share-based compensation expense is included in selling, general and administrative expenses in the consolidated statements of operations.
Employee Stock Options
The Company uses the Black-Scholes valuation model to estimate the fair value of stock options. The Black-Scholes option-pricing model was developed for use in estimating the fair value of short-lived exchange traded options that have no vesting restrictions and are fully transferable. In addition, option-pricing models require the input of subjective assumptions, including the option’s expected life and the price volatility of the underlying stock. The stock options have a ten-year term and vesting terms of five years.
A summary of the changes in the employee stock options during fiscal years 2019 and 2020 is presented below:
|
|
|
|
|
|
|
|
|
|
|
|
|
Options Outstanding
|
|
Number of former parent shares
(in thousands)
|
|
Weighted-
average exercise
price per former parent share
|
Balance as of November 30, 2018
|
92
|
|
$
|
86.87
|
|
Options granted
|
30
|
|
110.44
|
Balance as of November 30, 2019
|
122
|
|
92.68
|
Options granted
|
—
|
|
|
—
|
|
Balance as of November 30, 2020
|
122
|
|
$
|
92.68
|
|
A summary of the changes in the employee stock options during fiscal year 2021 is presented below:
|
|
|
|
|
|
|
|
|
|
|
|
|
Options Outstanding
|
|
Number of shares
(in thousands)
|
|
Weighted-
average exercise
price per share
|
Balance as of December 1, 2020 (converted from former parent in connection with the spin-off) (1)
|
684
|
|
|
$
|
45.84
|
|
Options granted
|
26
|
|
|
119.72
|
Options exercised
|
(269)
|
|
|
43.34
|
Balance as of November 30, 2021
|
441
|
|
$
|
51.75
|
|
(1)Amounts represent Concentrix awards, including those held by TD SYNNEX employees.
The weighted-average grant date fair value of the stock options granted during fiscal year 2021 is $38.15. As of November 30, 2021, 441 options were outstanding with a weighted-average life of 6.55 years and an aggregate pre-tax intrinsic value of $50,235. As of November 30, 2021, 266 options were vested and exercisable with a weighted-average life of 5.95 years, a weighted-average exercise price of $49.23 per share, and an aggregate pre-tax intrinsic value of $31,041.
As of November 30, 2021, the unamortized share-based compensation expense related to unvested stock options under the Concentrix Stock Incentive Plan was $1,779, which will be recognized over an estimated weighted-average amortization period of 3.00 years.
Restricted Stock Awards, Restricted Stock Units and Performance-Based Restricted Stock Units
The fair value of restricted stock awards and restricted stock units granted under the Concentrix Stock Incentive Plan in fiscal year 2021 were determined based on the Company’s stock price at the date of grant. The awards are expensed on a straight line basis over the vesting term, typically four or five years. The holders of restricted stock awards are entitled to the same voting, dividend and other rights as the Company’s common stockholders.
For performance-based restricted stock units, the grant date fair value assumes that the targeted performance goals will be achieved. The performance-based restricted stock units will vest, if at all, upon achievement of certain annual financial targets during the three-year period ending November 30, 2023.
A summary of the changes in the non-vested restricted stock awards, restricted stock units, and performance-based restricted stock units during fiscal years 2019 and 2020 is presented below:
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of
former parent shares
(in thousands)
|
|
Weighted-average,
grant-date
fair value per former parent share
|
Non-vested as of November 30, 2018
|
324
|
|
|
$
|
97.53
|
|
Awards granted
|
205
|
|
|
110.39
|
Units granted
|
181
|
|
|
97.33
|
Awards and units vested
|
(61)
|
|
|
94.36
|
Awards and units cancelled/forfeited
|
(57)
|
|
|
96.78
|
Non-vested as of November 30, 2019
|
591
|
|
|
102.12
|
Awards granted
|
7
|
|
|
78.47
|
Units granted
|
1
|
|
|
83.88
|
Awards and units vested
|
(110)
|
|
|
102.77
|
Awards and units cancelled/forfeited
|
(31)
|
|
|
102.04
|
Non-vested as of November 30, 2020
|
458
|
|
|
$
|
101.57
|
|
A summary of the changes in the non-vested restricted stock awards, restricted stock units, and performance-based stock units during fiscal year 2021, including the results of the conversion of awards and stock units previously discussed, is presented below:
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of shares
(in thousands)
|
|
Weighted-average,
grant-date
fair value per share
|
Balance as of December 1, 2020 (converted from former parent in connection with the spin-off) (1)
|
827
|
|
|
$
|
51.53
|
|
Awards granted
|
495
|
|
|
134.65
|
Units granted (2)
|
226
|
|
|
154.53
|
Awards and units vested
|
(504)
|
|
|
61.95
|
Awards and units cancelled/forfeited
|
(64)
|
|
|
84.20
|
Non-vested as of November 30, 2021
|
980
|
|
|
$
|
109.92
|
|
(1)Amounts represent Concentrix awards, including those held by TD SYNNEX employees.
(2)For performance-based restricted stock units, the maximum number of shares that can be awarded upon full vesting of the grants is included.
As of November 30, 2021, there was $99,570 of total unamortized share-based compensation expense related to non-vested restricted stock awards, restricted stock units and performance-based restricted stock units granted under the Concentrix Stock Incentive Plan. That cost is expected to be recognized over an estimated weighted-average amortization period of 3.05 years.
NOTE 5—BALANCE SHEET COMPONENTS:
Cash, cash equivalents and restricted cash:
The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the consolidated balance sheets that sum to the total of the same amounts shown in the consolidated statements of cash flows:
|
|
|
|
|
|
|
|
|
|
|
|
|
As of November 30,
|
|
2021
|
|
2020
|
Cash and cash equivalents
|
$
|
182,038
|
|
|
$
|
152,656
|
|
Restricted cash included in other current assets
|
972
|
|
|
3,695
|
|
Cash, cash equivalents and restricted cash
|
$
|
183,010
|
|
|
$
|
156,351
|
|
Restricted cash balances relate primarily to restrictions placed on cash deposits by banks as collateral for the issuance of bank guarantees and the terms of a government grant.
Accounts receivable, net:
Accounts receivable, net is comprised of the following as of November 30, 2021 and 2020:
|
|
|
|
|
|
|
|
|
|
|
|
|
As of November 30,
|
|
2021
|
|
2020
|
Billed accounts receivable
|
$
|
714,032
|
|
|
$
|
644,789
|
|
Unbilled accounts receivable
|
499,342
|
|
|
445,655
|
|
Less: Allowance for doubtful accounts
|
(5,421)
|
|
|
(8,963)
|
|
Accounts receivable, net
|
$
|
1,207,953
|
|
|
$
|
1,081,481
|
|
Allowance for doubtful trade receivables:
Presented below is a progression of the allowance for doubtful trade receivable:
|
|
|
|
|
|
Balance at November 30, 2018
|
$
|
1,000
|
|
Additions
|
5,134
|
|
Write-offs and reclassifications
|
(79)
|
|
Balance at November 30, 2019
|
6,055
|
|
Additions
|
8,140
|
|
Write-offs and reclassifications
|
(5,232)
|
|
Balance at November 30, 2020
|
8,963
|
|
Reductions
|
(202)
|
|
Write-offs and reclassifications
|
(3,340)
|
|
Balance at November 30, 2021
|
$
|
5,421
|
|
Property and equipment, net:
The following tables summarize the carrying amounts and related accumulated depreciation for property and equipment as of November 30, 2021 and 2020:
|
|
|
|
|
|
|
|
|
|
|
|
|
As of November 30,
|
|
2021
|
|
2020
|
Land
|
$
|
27,677
|
|
|
$
|
29,000
|
|
Equipment, computers and software
|
488,270
|
|
|
476,243
|
|
Furniture and fixtures
|
90,442
|
|
|
90,944
|
|
Buildings, building improvements and leasehold improvements
|
364,166
|
|
|
336,194
|
|
Construction-in-progress
|
10,741
|
|
|
10,115
|
|
Total property and equipment, gross
|
$
|
981,296
|
|
|
$
|
942,496
|
|
Less: Accumulated depreciation
|
(574,152)
|
|
|
(490,847)
|
|
Property and equipment, net
|
$
|
407,144
|
|
|
$
|
451,649
|
|
Shown below are the countries where 10% or more of the Company’s property and equipment, net are located as of November 30, 2021 and 2020:
|
|
|
|
|
|
|
|
|
|
|
|
|
As of November 30,
|
|
2021
|
|
2020
|
Property and equipment, net:
|
|
|
|
United States
|
$
|
101,333
|
|
|
$
|
149,903
|
|
Philippines
|
87,548
|
|
|
87,686
|
|
India
|
46,167
|
|
|
46,642
|
|
Others
|
172,096
|
|
|
167,418
|
|
Total
|
$
|
407,144
|
|
|
$
|
451,649
|
|
Accumulated other comprehensive income (loss):
The components of accumulated other comprehensive income (loss) (“AOCI”), net of taxes, were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrecognized
gains (losses) on
defined benefit
plan, net
of taxes
|
|
Unrealized gains
(losses)
on cash flow
hedges, net of
taxes
|
|
Foreign currency
translation
adjustment and other,
net of taxes
|
|
Total
|
Balance, November 30, 2019
|
$
|
(29,940)
|
|
|
$
|
17,523
|
|
|
$
|
(37,665)
|
|
|
$
|
(50,082)
|
|
Other comprehensive income (loss) before reclassification
|
(8,644)
|
|
|
34,508
|
|
|
43,196
|
|
|
69,060
|
|
Reclassification of (gains) losses from other comprehensive income (loss)
|
—
|
|
|
(22,792)
|
|
|
—
|
|
|
(22,792)
|
|
Balance, November 30, 2020
|
$
|
(38,584)
|
|
|
$
|
29,239
|
|
|
$
|
5,531
|
|
|
$
|
(3,814)
|
|
Other comprehensive income (loss) before reclassification
|
15,839
|
|
|
(8,396)
|
|
|
(51,909)
|
|
|
(44,466)
|
|
Reclassification of gains from other comprehensive income (loss)
|
—
|
|
|
(22,246)
|
|
|
—
|
|
|
(22,246)
|
|
Balance, November 30, 2021
|
$
|
(22,745)
|
|
|
$
|
(1,403)
|
|
|
$
|
(46,378)
|
|
|
$
|
(70,526)
|
|
Refer to Note 7 for the location of gains and losses from cash flow hedges reclassified from other comprehensive income (loss) to the consolidated statements of operations. Reclassifications of amortization of
actuarial (gains) losses of defined benefit plans is recorded in “Other expense (income), net” in the consolidated statement of operations.
Restructuring:
The following table presents the activity related to liabilities for restructuring charges of previous acquisitions for the fiscal years ended November 30, 2021 and 2020:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Severance and benefits
|
|
Facility and exit costs
|
|
Total
|
Accrued balance as of November 30, 2019
|
$
|
2,828
|
|
|
$
|
14,164
|
|
|
$
|
16,992
|
|
Additional (release of) accrual during the period
|
(584)
|
|
|
12,155
|
|
|
11,571
|
|
Cash payments
|
(2,244)
|
|
|
(8,509)
|
|
|
(10,753)
|
|
Accrued balance as of November 30, 2020
|
$
|
—
|
|
|
$
|
17,810
|
|
|
$
|
17,810
|
|
Release of accrual during the period
|
—
|
|
|
(248)
|
|
|
(248)
|
|
Cash payments
|
—
|
|
|
(5,156)
|
|
|
(5,156)
|
|
Accrued balance as of November 30, 2021
|
$
|
—
|
|
|
$
|
12,406
|
|
|
$
|
12,406
|
|
NOTE 6—GOODWILL AND INTANGIBLE ASSETS:
Goodwill
The Company tests goodwill for impairment annually as of the fourth quarter of its fiscal year and at other times if events have occurred or circumstances exist that indicate the carrying value of goodwill may no longer be recoverable. Goodwill impairment testing is performed at the reporting unit level. Based on the current year assessment, we concluded that no impairment charges were necessary for the Company’s reporting unit. We have not recorded any impairment charges related to goodwill during the three-year period ended November 30, 2021.
Below is a progression of goodwill for fiscal years 2021 and 2020:
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Years Ended November 30,
|
|
2021
|
|
2020
|
Balance, beginning of year
|
$
|
1,836,050
|
|
|
$
|
1,829,328
|
|
Acquisitions
|
3,502
|
|
|
—
|
|
Divestitures
|
(14,690)
|
|
|
—
|
|
Foreign currency translation
|
(11,360)
|
|
|
6,722
|
|
Balance, end of year
|
$
|
1,813,502
|
|
|
$
|
1,836,050
|
|
Other Intangible Assets
The Company’s other intangible assets, primarily acquired through business combinations, are subject to amortization and are evaluated periodically if events or circumstances indicate a possible inability to recover their carrying amounts. No impairment charges were recognized in any period presented. As of November 30, 2021 and 2020, the Company’s other intangible assets consisted of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of November 30, 2021
|
|
As of November 30, 2020
|
|
Gross
amounts
|
|
Accumulated
amortization
|
|
Net
amounts
|
|
Gross
amounts
|
|
Accumulated
amortization
|
|
Net
amounts
|
Customer relationships
|
$
|
1,347,961
|
|
|
$
|
(694,701)
|
|
|
$
|
653,260
|
|
|
$
|
1,389,341
|
|
|
$
|
(595,024)
|
|
|
$
|
794,317
|
|
Technology
|
10,835
|
|
|
(8,900)
|
|
|
1,935
|
|
|
14,830
|
|
|
(11,045)
|
|
|
3,785
|
|
Trade names
|
6,724
|
|
|
(6,391)
|
|
|
333
|
|
|
6,846
|
|
|
(5,989)
|
|
|
857
|
|
|
$
|
1,365,520
|
|
|
$
|
(709,992)
|
|
|
$
|
655,528
|
|
|
$
|
1,411,017
|
|
|
$
|
(612,058)
|
|
|
$
|
798,959
|
|
Amortization expense for intangible assets was $136,939, $147,283, and $166,606 for the fiscal years ended November 30, 2021, 2020 and 2019, respectively, and the related estimated expense for the five subsequent fiscal years and thereafter is as follows:
|
|
|
|
|
|
Fiscal Years Ending November 30,
|
|
2022
|
$
|
114,593
|
|
2023
|
100,590
|
|
2024
|
84,268
|
|
2025
|
74,320
|
|
2026
|
61,402
|
|
Thereafter
|
220,355
|
|
Total
|
$
|
655,528
|
|
The remaining weighted average amortization period for customer relationships and other intangible assets is approximately 11 years.
NOTE 7—DERIVATIVE INSTRUMENTS:
In the ordinary course of business, the Company is exposed to foreign currency risk and credit risk. The Company enters into transactions, and owns monetary assets and liabilities, that are denominated in currencies other than the legal entity’s functional currency. The Company may enter into forward contracts, option contracts, or other derivative instruments to offset a portion of the risk on expected future cash flows, earnings, net investments in certain non-U.S. legal entities and certain existing assets and liabilities. However, the Company may choose not to hedge certain exposures for a variety of reasons including, but not limited to, accounting considerations and the prohibitive economic cost of hedging particular exposures. There can be no assurance the hedges will offset more than a portion of the financial impact resulting from movements in foreign currency exchange or interest rates. Generally, the Company does not use derivative instruments to cover equity risk and credit risk. The Company’s hedging program is not used for trading or speculative purposes.
All derivatives are recognized on the consolidated balance sheets at their fair values. Changes in the fair value of derivatives are recorded in the consolidated statements of operations, or as a component of AOCI in the consolidated balance sheets, as discussed below.
Cash Flow Hedges
To protect gross margins from fluctuations in foreign currency exchange rates, certain of the Company’s legal entities with functional currencies that are not in U.S. dollars may hedge a portion of forecasted revenue or costs not denominated in the entities’ functional currencies. These instruments mature at various dates through November 2023. Gains and losses on cash flow hedges are recorded in AOCI until the hedged item is recognized in earnings. Deferred gains and losses associated with cash flow hedges of foreign currency revenue are recognized as a component of “Revenue” in the same period as the related revenue is recognized, and deferred gains and losses related to cash flow hedges of costs are recognized as a component of “Cost of revenue” and/or “Selling, general and administrative expenses” in the same period as the related costs are recognized. Derivative instruments designated as cash flow hedges must be de-designated as hedges when it is probable the forecasted hedged transaction will not occur in the initially identified time period or within a subsequent two-month time period. Deferred gains and losses in AOCI associated with such derivative instruments are reclassified into earnings in the period of de-designation. Any subsequent changes in fair value of such derivative instruments are recorded in earnings unless they are re-designated as hedges of other transactions.
Non-Designated Derivatives
The Company uses short-term forward contracts to offset the foreign exchange risk of assets and liabilities denominated in currencies other than the functional currency of the respective entities. These contracts, which are not designated as hedging instruments, mature or settle within twelve months. Derivatives that are not designated as hedging instruments are adjusted to fair value through earnings in the financial statement line item to which the derivative relates.
Fair Values of Derivative Instruments in the Consolidated Balance Sheets
The fair values of the Company’s derivative instruments are disclosed in Note 8—Fair Value Measurements and summarized in the table below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Value as of
|
Balance Sheet Line Item
|
|
November 30, 2021
|
|
November 30, 2020
|
Derivative instruments not designated as hedging instruments:
|
|
|
|
|
Foreign exchange forward contracts (notional value)
|
|
$
|
1,415,447
|
|
|
$
|
1,153,352
|
|
Other current assets
|
|
10,058
|
|
|
15,666
|
|
Other accrued liabilities
|
|
12,542
|
|
|
6,215
|
|
Derivative instruments designated as cash flow hedges:
|
|
|
|
|
Foreign exchange forward contracts (notional value)
|
|
$
|
918,097
|
|
|
$
|
814,731
|
|
Other current assets and other assets
|
|
7,851
|
|
|
38,212
|
|
Other accrued liabilities and other long-term liabilities
|
|
9,736
|
|
|
309
|
|
Volume of activity
The notional amounts of foreign exchange forward contracts represent the gross amounts of foreign currency, including, principally, the Philippine peso, the Indian rupee, the euro, the British pound, the Canadian dollar, and the Japanese yen that will be bought or sold at maturity. The notional amounts for outstanding derivative instruments provide one measure of the transaction volume outstanding and do not represent the amount of the Company’s exposure to credit or market loss. The Company’s exposure to credit loss and market risk will vary over time as currency exchange rates change.
The Effect of Derivative Instruments on AOCI and the Consolidated Statements of Operations
The following table shows the gains and losses, before taxes, of the Company’s derivative instruments designated as cash flow hedges and not designated as hedging instruments in other comprehensive income (“OCI”), and the consolidated statements of operations for the periods presented:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Years Ended November 30,
|
|
Location of gain (loss) in statement of operations
|
|
2021
|
|
2020
|
|
2019
|
Derivative instruments designated as cash flow hedges:
|
|
|
|
|
|
|
|
(Losses) gains recognized in OCI:
|
|
|
|
|
|
|
|
Foreign exchange forward contracts
|
|
|
$
|
(11,105)
|
|
|
$
|
45,986
|
|
|
$
|
20,772
|
|
|
|
|
|
|
|
|
|
Gains (losses) reclassified from AOCI into income:
|
|
|
|
|
|
|
|
Foreign exchange forward contracts
|
|
|
|
|
|
|
|
Gain reclassified from AOCI into income
|
Revenue for services
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
127
|
|
Gain reclassified from AOCI into income
|
Cost of revenue for services
|
|
21,138
|
|
|
21,532
|
|
|
16,454
|
|
Gain reclassified from AOCI into income
|
Selling, general and administrative expenses
|
|
8,606
|
|
|
8,841
|
|
|
6,767
|
|
Gain reclassified from AOCI into income
|
Other expense (income), net
|
|
—
|
|
|
—
|
|
|
36
|
|
Total
|
|
|
$
|
29,744
|
|
|
$
|
30,373
|
|
|
$
|
23,384
|
|
|
|
|
|
|
|
|
|
Derivative instruments not designated as hedging instruments:
|
|
|
|
|
|
|
|
(Loss) gain recognized from foreign exchange forward contracts, net(1)
|
Other expense (income), net
|
|
$
|
(2,880)
|
|
|
$
|
32,150
|
|
|
$
|
20,833
|
|
(1) The gains and losses largely offset the currency gains and losses that resulted from changes in the assets and liabilities denominated in nonfunctional currencies.
There were no material gain or loss amounts excluded from the assessment of effectiveness. Existing net losses in AOCI that are expected to be reclassified into earnings in the normal course of business within the next twelve months are $968.
Offsetting of Derivatives
In the consolidated balance sheets, the Company does not offset derivative assets against liabilities in master netting arrangements.
Credit exposure for derivative financial instruments is limited to the amounts, if any, by which the counterparties’ obligations under the contracts exceed the Company’s obligations to the counterparties. The Company manages the potential risk of credit losses through careful evaluation of counterparty credit standing and selection of counterparties from a limited group of financial institutions.
NOTE 8—FAIR VALUE MEASUREMENTS:
The Company’s fair value measurements are classified and disclosed in one of the following three categories:
Level 1: Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities;
Level 2: Quoted prices in markets that are not active, or inputs which are observable, either directly or indirectly, for substantially the full term of the asset or liability; and
Level 3: Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (i.e., supported by little or no market activity).
The following table summarizes the valuation of the Company’s investments and financial instruments that are measured at fair value on a recurring basis:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of November 30, 2021
|
|
As of November 30, 2020
|
|
|
Fair value measurement category
|
|
|
Fair value measurement category
|
|
Total
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash equivalents
|
$
|
77,332
|
|
|
$
|
77,332
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
60,242
|
|
|
$
|
60,242
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Foreign government bond
|
1,446
|
|
|
1,446
|
|
|
—
|
|
|
—
|
|
|
1,355
|
|
|
1,355
|
|
|
—
|
|
|
—
|
|
Forward foreign currency exchange contracts
|
17,909
|
|
|
—
|
|
|
17,909
|
|
|
—
|
|
|
53,878
|
|
|
—
|
|
|
53,878
|
|
|
—
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Forward foreign currency exchange contracts
|
$
|
22,278
|
|
|
$
|
—
|
|
|
$
|
22,278
|
|
|
$
|
—
|
|
|
$
|
6,524
|
|
|
$
|
—
|
|
|
$
|
6,524
|
|
|
$
|
—
|
|
The Company’s cash equivalents consist primarily of highly liquid investments in money market funds and term deposits with maturity periods of three months or less. The carrying values of cash equivalents approximate fair value since they are near their maturity. Investment in foreign government bond classified as an available-for-sale debt security is recorded at fair value based on quoted market prices. The fair values of forward exchange contracts are measured based on the foreign currency spot and forward rates. Fair values of long-term foreign currency exchange contracts are measured using valuations based upon quoted prices for similar assets and liabilities in active markets and are valued by reference to similar financial instruments, adjusted for terms specific to the contracts. The effect of nonperformance risk on the fair value of derivative instruments was not material as of November 30, 2021 and 2020.
The carrying values of term deposits with maturities less than one year, accounts receivable and accounts payable approximate fair value due to their short maturities and interest rates which are variable in nature. The carrying values of the outstanding balance on the Term Loan under the Company’s Credit Facility and the outstanding balance on the Securitization Facility approximate their fair values since they bear interest rates that are similar to existing market rates.
During fiscal years 2021, 2020 and 2019, there were no transfers between the fair value measurement category levels.
NOTE 9—BORROWINGS:
Borrowings consist of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
As of November 30,
|
|
2021
|
|
2020
|
Credit Facility - current portion of Term Loan component
|
$
|
—
|
|
|
$
|
33,750
|
|
Current portion of long term debt
|
$
|
—
|
|
|
$
|
33,750
|
|
|
|
|
|
Credit Facility - Term Loan component
|
$
|
700,000
|
|
|
$
|
866,250
|
|
Securitization Facility
|
105,000
|
|
|
250,000
|
|
Long-term debt, before unamortized debt discount and issuance costs
|
805,000
|
|
|
1,116,250
|
|
Less: unamortized debt discount and issuance costs
|
(2,983)
|
|
|
(4,888)
|
|
Long-term debt, net
|
$
|
802,017
|
|
|
$
|
1,111,362
|
|
Credit Facility
On October 16, 2020, Concentrix entered into a senior secured credit facility, which provides for the extension of revolving loans of up to $600,000 (the “Revolver”) and term loan borrowings of up to $900,000 (the “Term Loan” and, together with the Revolver, the “Credit Facility”). On November 30, 2020, in connection with the spin-off, the Company incurred $900,000 of initial Term Loan borrowings under the Credit Facility. Substantially all of the proceeds from such indebtedness, net of debt issuance costs, were transferred to TD SYNNEX on November 30, 2020 to eliminate debt owed by Concentrix to TD SYNNEX and in exchange for the contribution of certain Concentrix trademarks from TD SYNNEX to Concentrix.
Beginning May 31, 2021, the outstanding principal of the Term Loan was payable in quarterly installments of $11,250, with the unpaid balance due in full on the maturity date. Concentrix may prepay the loans under the Credit Facility at any time without penalty, other than breakage fees. During the fiscal year ended November 30, 2021, the Company paid $200,000 of the principal balance on the Term Loan, including $166,250 of voluntary prepayments.
Concentrix may request, subject to obtaining commitments from any participating lenders and certain other conditions, incremental commitments to increase the amount of the Revolver or Term Loan available under the Credit Facility in an aggregate principal amount equal to $450,000, plus an additional amount, so long as after giving effect to the incurrence of such additional amount, the pro forma first lien leverage ratio (as defined in the Credit Facility) would not exceed 3.00 to 1.00.
Obligations under the Credit Facility are secured by substantially all of the assets of Concentrix and certain of its U.S. subsidiaries and are guaranteed by certain of its U.S. subsidiaries.
Borrowings under the Credit Facility that were LIBOR rate loans bore interest at a per annum rate equal to the applicable LIBOR rate (but not less than 0.25%), plus an applicable margin, which ranged from 1.25% to 2.25%, based on Concentrix’ consolidated leverage ratio. Borrowings under the Credit Facility that were not LIBOR rate loans bore interest at a per annum rate equal to (i) the greatest of (a) the Federal Funds Rate in effect on such day plus ½ of 1.00%, (b) the rate of interest last publicly announced by Bank of America as its “prime rate” and (c) the LIBOR rate plus 1.00%, plus (ii) an applicable margin, which ranged from 0.25% to 1.25%, based on Concentrix’ consolidated leverage ratio. Commitments under the Revolver are subject to a commitment fee on the unused portion of the Revolver, which fee ranged from 25 to 45 basis points, based on Concentrix’ consolidated leverage ratio.
The Credit Facility and the Amended Credit Facility (as defined below) contain various loan covenants that restrict the ability of Concentrix and its subsidiaries to take certain actions, including, incurrence of indebtedness, creation of liens, mergers or consolidations, dispositions of assets, repurchase or redemption of capital stock, making
certain investments, entering into certain transactions with affiliates or changing the nature of their business. In addition, the Credit Facility and the Amended Credit Facility contain financial covenants that require Concentrix to maintain at the end of each fiscal quarter, (i) a consolidated leverage ratio (as defined in the Credit Facility) not to exceed 3.75 to 1.0 and (ii) a consolidated interest coverage ratio (as defined in the Credit Facility) equal to or greater than 3.00 to 1.0. The Credit Facility and the Amended Credit Facility also contain various customary events of default, including payment defaults, defaults under certain other indebtedness, and a change of control of Concentrix.
At November 30, 2021 and 2020, no amounts were outstanding under the Revolver.
Securitization Facility
On October 30, 2020, Concentrix entered into a $350,000 accounts receivable securitization facility (the “Securitization Facility”) pursuant to certain agreements, including a Receivables Financing Agreement and a Receivables Purchase Agreement. On November 30, 2020, in connection with the spin-off, the Company incurred $250,000 of borrowings under the Securitization Facility. Substantially all of the proceeds from such indebtedness were transferred to TD SYNNEX on November 30, 2020 to eliminate debt owed by Concentrix to TD SYNNEX and in exchange for the contribution of certain Concentrix trademarks from TD SYNNEX to Concentrix.
Under the Securitization Facility, Concentrix and certain of its subsidiaries sell or otherwise transfer all of their accounts receivable to a special purpose bankruptcy-remote subsidiary of Concentrix (the “Borrower”) that grants a security interest in the receivables to the lenders in exchange for available borrowings of up to $350,000. The amount received under the Securitization Facility is recorded as debt on the Company’s consolidated balance sheet. Borrowing availability under the Securitization Facility may be limited by the Company’s accounts receivable balances, changes in the credit ratings of the clients comprising the receivables, client concentration levels in the receivables, and certain characteristics of the accounts receivable being transferred (including factors tracking performance of the accounts receivable over time). The Securitization Facility has a termination date of October 28, 2022. Amounts drawn under this Securitization Facility have been classified as long-term debt within the consolidated balance sheet based on the Company’s ability and intent to refinance on a long-term basis as of November 30, 2021.
Borrowings under the Securitization Facility bear interest with respect to loans that are funded through the issuance of commercial paper at the applicable commercial paper rate plus a spread of 1.05% and, otherwise, at a per annum rate equal to the applicable LIBOR rate plus a spread of 1.15%. Concentrix is also obligated to pay a monthly undrawn fee that ranges from 30 to 37.5 basis points based on the portion of the Securitization Facility that is undrawn.
The Securitization Facility contains various affirmative and negative covenants, including a consolidated leverage ratio covenant that is consistent with the Credit Facility and customary events of default, including payment defaults, defaults under certain other indebtedness, a change in control of Concentrix, and certain events negatively affecting the overall credit quality of the transferred accounts receivable.
The Borrower’s sole business consists of the purchase or acceptance through capital contributions of the receivables and related security from Concentrix and its subsidiaries and the subsequent retransfer of or granting of a security interest in such receivables and related security to the administrative agent under the Securitization Facility for the benefit of the lenders. The Borrower is a separate legal entity with its own separate creditors who will be entitled, upon its liquidation, to be satisfied out of the Borrower’s assets prior to any assets or value in the Borrower becoming available to the Borrower’s equity holders, and the assets of the Borrower are not available to pay creditors of Concentrix and its subsidiaries.
Covenant compliance
As of November 30, 2021, Concentrix was in compliance with all covenants for the above arrangements.
Future principal payments
As of November 30, 2021, future principal payments under the above loans for the subsequent fiscal years are as follows:
|
|
|
|
|
|
|
Amount
|
Fiscal Years Ending November 30,
|
|
2022
|
$
|
105,000
|
|
2023
|
—
|
|
2024
|
—
|
|
2025
|
700,000
|
|
Total
|
$
|
805,000
|
|
Amended Credit Facility
On December 27, 2021, in connection with the closing of the acquisition of PK, Concentrix entered into an amendment of the Credit Facility (as amended, the “Amended Credit Facility”) (i) to refinance the Term Loan with a new term loan, which was fully advanced, in the aggregate outstanding principal amount of $2,100,000 (the “New Term Loan”), (ii) to increase the Revolver to $1,000,000 (iii) to extend the maturity of the Credit Facility from November 30, 2025 to December 27, 2026, (iv) to replace LIBOR with SOFR (the Secured Overnight Financing Rate) as the primary reference rate used to calculate interest on the loans under the Credit Facility, and (v) to modify the commitment fee on the unused portion of the Revolver and the margins in excess of the reference rates at which the loans under the Credit Facility bear interest. The proceeds from the New Term Loan and additional borrowings on the Securitization Facility were used to repay the existing Term Loan and to finance the acquisition of PK, including the repayment of certain indebtedness of PK and the payment of fees and expenses in connection therewith.
Borrowings under the Amended Credit Facility bear interest, in the case of SOFR rate loans, at a per annum rate equal to the applicable SOFR rate (but not less than 0.0%), plus an adjustment of between 0.10% and 0.25% depending on the interest period of each SOFR loan, plus an applicable margin, which ranges from 1.25% to 2.00%, based on Concentrix’ consolidated leverage ratio. Borrowings under the Amended Credit Facility that are not SOFR rate loans bear interest at a per annum rate equal to (i) the greatest of (a) the Federal Funds Rate in effect on such day plus ½ of 1.00%, (b) the rate of interest last publicly announced by Bank of America as its “prime rate” and (c) the term SOFR rate plus 1.00%, plus (ii) an applicable margin, which ranges from 0.25% to 1.00%, based on Concentrix’ consolidated leverage ratio. As amended, the commitment fee on the unused portion of the Revolver ranges from 22.5 to 30 basis points, based on Concentrix’ consolidated leverage ratio.
Beginning August 31, 2022, the outstanding principal of the New Term Loan is payable in quarterly installments of $26.25 million, with the unpaid balance due in full on the maturity date.
NOTE 10—REVENUE:
Disaggregated revenue
In the following tables, the Company’s revenue is disaggregated by primary industry verticals and geographic location:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Years Ended November 30,
|
|
2021
|
|
2020
|
|
2019
|
Industry vertical:
|
|
|
|
|
|
Technology and consumer electronics
|
$
|
1,759,203
|
|
|
$
|
1,422,817
|
|
|
$
|
1,283,084
|
|
Communications and media
|
1,005,283
|
|
|
954,234
|
|
|
1,142,242
|
|
Retail, travel and ecommerce
|
985,550
|
|
|
796,324
|
|
|
763,265
|
|
Banking, financial services and insurance
|
862,033
|
|
|
712,469
|
|
|
676,246
|
|
Healthcare
|
489,855
|
|
|
392,686
|
|
|
369,187
|
|
Other
|
485,091
|
|
|
441,004
|
|
|
473,888
|
|
Total
|
$
|
5,587,015
|
|
|
$
|
4,719,534
|
|
|
$
|
4,707,912
|
|
The following table presents revenue by geographical location where the Company’s services are delivered. Shown below are the countries that account for the Company’s revenue for the periods presented:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Years Ended November 30,
|
|
2021
|
|
2020
|
|
2019
|
Revenue by geography:
|
|
|
|
|
|
Philippines
|
$
|
1,335,326
|
|
|
$
|
1,205,764
|
|
|
$
|
1,255,937
|
|
United States
|
884,777
|
|
|
812,903
|
|
|
942,779
|
|
India
|
723,495
|
|
|
615,291
|
|
|
631,534
|
|
Canada
|
338,255
|
|
|
215,248
|
|
|
218,206
|
|
Great Britain
|
307,109
|
|
|
235,006
|
|
|
228,643
|
|
Others
|
1,998,053
|
|
|
1,635,322
|
|
|
1,430,813
|
|
Total
|
$
|
5,587,015
|
|
|
$
|
4,719,534
|
|
|
$
|
4,707,912
|
|
Deferred revenue contract liabilities and deferred costs to obtain or fulfill a contract are not material.
NOTE 11—TRANSACTIONS WITH FORMER PARENT:
The Company provides certain services related to its core business to TD SYNNEX, its former parent. Revenue from CX services to former parent is included in the statements of operations. The cost associated with such services is reported as cost of revenue in the statements of operations. The Company purchases certain products from TD SYNNEX and records compensation expense for share-based awards granted by TD SYNNEX to Concentrix employees. Prior to November 30, 2020, the Company received allocations of corporate expenses by way of a monthly management fee and received financing for acquisition and operations under the terms of intra-TD SYNNEX group borrowing arrangements.
Prior to December 1, 2020, the Company consisted of the CX business of TD SYNNEX and thus, transactions with TD SYNNEX were considered related party transactions. On December 1, 2020, in connection with the spin-
off, the Company became an independent publicly-traded company. The following table presents the Company’s related party transactions with TD SYNNEX prior to the spin-off.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Years Ended November 30,
|
|
|
2020
|
|
2019
|
Revenue from customer experience services to Parent
|
|
$
|
20,855
|
|
|
$
|
20,585
|
|
Purchases from Parent and its non-Concentrix subsidiaries
|
|
—
|
|
|
4
|
|
Interest expense on borrowings from Parent
|
|
50,615
|
|
|
95,395
|
|
Interest income on borrowings made to Parent
|
|
2,065
|
|
|
2,066
|
|
Corporate allocations
|
|
1,574
|
|
|
1,574
|
|
Share-based compensation
|
|
15,914
|
|
|
10,554
|
|
As of November 30, 2020, the payable to former parent and its non-Concentrix subsidiaries was primarily trade in nature.
Prior to the spin-off, TD SYNNEX had issued guarantees to certain of the Company’s clients to guarantee the performance obligations of the Company’s legal entities. These TD SYNNEX guarantees were released or replaced by Concentrix guarantees on or prior to the spin-off.
In connection with the spin-off, on November 30, 2020, the Company entered into a separation and distribution agreement, an employee matters agreement, a tax matters agreement and a commercial agreement with TD SYNNEX to set forth the principal actions to be taken in connection with the spin-off and define the Company’s ongoing relationship with TD SYNNEX after the spin-off.
NOTE 12—PENSION AND EMPLOYEE BENEFITS PLANS:
The Company has 401(k) plans in the United States under which eligible employees may contribute up to the maximum amount as provided by law. Employees become eligible to participate in these plans on the first day of the month after their employment date. The Company may make discretionary contributions under the plans. Employees in most of the Company’s non-U.S. legal entities are covered by government mandated defined contribution plans. During fiscal years 2021, 2020 and 2019, the Company contributed $72,561, $64,286 and $43,963, respectively, to defined contribution plans.
Defined Benefit Plans
The Company has defined benefit pension and retirement plans for eligible employees of certain U.S. and non-U.S. legal entities. For eligible employees in the U.S., the Company maintains a frozen defined benefit pension plan (“the cash balance plan”), which includes both a qualified and non-qualified portion. The pension benefit formula for the cash balance plan is determined by a combination of compensation, age-based credits and annual guaranteed interest credits. The qualified portion of the cash balance plan has been funded through contributions made to a trust fund.
The Company maintains funded or unfunded defined benefit pension or retirement plans for certain eligible employees in the Philippines, Malaysia, India, and France. Benefits under these plans are primarily based on years of service and compensation during the years immediately preceding retirement or termination of participation in the plans.
The Company’s measurement date for all defined benefit plans and other post-retirement benefits is November 30. The plan assumptions for both the U.S. and non-U.S. defined benefit pension plans are evaluated annually and are updated as deemed necessary. Net benefit costs related to defined benefit plans were $13,427 $13,602 and $9,731, during fiscal years 2021, 2020 and 2019, respectively.
Components of pension cost for the Company’s defined benefit plans are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Years Ended November 30,
|
|
2021
|
|
2020
|
|
2019
|
Service cost
|
$
|
8,148
|
|
|
$
|
7,498
|
|
|
$
|
5,797
|
|
Interest cost on projected benefit obligation
|
6,284
|
|
|
8,385
|
|
|
10,266
|
|
Expected return on plan assets
|
(6,032)
|
|
|
(6,403)
|
|
|
(9,091)
|
|
Amortization and deferrals, net
|
4,542
|
|
|
2,851
|
|
|
822
|
|
Settlement charge
|
485
|
|
|
1,271
|
|
|
1,937
|
|
Total pension cost
|
$
|
13,427
|
|
|
$
|
13,602
|
|
|
$
|
9,731
|
|
The status of the Company’s defined benefit plans is summarized below:
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Years Ended November 30,
|
|
2021
|
|
2020
|
Change in Benefit Obligation:
|
|
|
|
Benefit obligation at beginning of year
|
$
|
281,957
|
|
|
$
|
261,028
|
|
Service cost
|
8,148
|
|
|
7,498
|
|
Interest cost
|
6,284
|
|
|
8,385
|
|
Actuarial (gain) loss
|
(6,679)
|
|
|
23,776
|
|
Benefits paid
|
(14,844)
|
|
|
(12,906)
|
|
Settlements
|
(5,893)
|
|
|
(7,579)
|
|
Foreign currency adjustments
|
(2,353)
|
|
|
1,755
|
|
Projected obligation at end of year
|
$
|
266,620
|
|
|
$
|
281,957
|
|
|
|
|
|
Change in Plan Assets:
|
|
|
|
Fair value of plan assets at beginning of year
|
$
|
147,558
|
|
|
$
|
145,645
|
|
Actual return on assets
|
13,534
|
|
|
13,718
|
|
Settlements
|
(5,893)
|
|
|
(7,579)
|
|
Employer contributions
|
14,563
|
|
|
3,152
|
|
Benefits paid
|
(7,711)
|
|
|
(7,149)
|
|
Foreign currency adjustments
|
(120)
|
|
|
(229)
|
|
Fair value of plan assets at end of year
|
$
|
161,931
|
|
|
$
|
147,558
|
|
|
|
|
|
Funded Status of Plans:
|
|
|
|
Unfunded status
|
$
|
104,689
|
|
|
$
|
134,399
|
|
Amounts recognized in the consolidated balance sheet and recorded within other accrued liabilities and other long-term liabilities as of November 30, 2021 and 2020 consist of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
As of November 30,
|
|
2021
|
|
2020
|
Current liability
|
$
|
15,884
|
|
|
$
|
10,451
|
|
Non-current liability
|
88,805
|
|
|
123,948
|
|
Total
|
$
|
104,689
|
|
|
$
|
134,399
|
|
The following weighted-average rates were used in determining the benefit obligations as of November 30, 2021 and 2020:
|
|
|
|
|
|
|
|
|
|
|
|
|
As of November 30,
|
|
2021
|
|
2020
|
Discount rate
|
1.2% - 5.3%
|
|
0.3% - 4.7%
|
Interest crediting rate for cash balance plan
|
4.0
|
%
|
|
4.0
|
%
|
Expected rate of future compensation growth
|
1.8% - 8.5%
|
|
1.8% - 8.5%
|
The following weighted-average rates were used in determining the pension costs for the fiscal years ended November 30, 2021 and 2020:
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Years Ended November 30,
|
|
2021
|
|
2020
|
Discount rate
|
0.3% - 4.8%
|
|
0.6% - 6.0%
|
Interest crediting rate for cash balance plan
|
4.0
|
%
|
|
4.0
|
%
|
Expected return on plan assets
|
1.0% - 7.5%
|
|
4.5% - 7.5%
|
Expected rate of future compensation growth
|
1.8% - 8.5%
|
|
1.8% - 8.5%
|
For the cash balance plan, the discount rate reflects the rate at which benefits could effectively be settled and is based on current investment yields of high-quality corporate bonds. The Company uses an actuarially-developed yield curve approach to match the timing of cash flows of expected future benefit payments by applying specific spot rates along the yield curve to determine the assumed discount rate.
The range of discount rates utilized in determining the pension cost and projected benefit obligation of the Company’s defined benefit plans reflects a lower prevalent rate applicable to the frozen cash balance plan for eligible employees in U.S. and a higher applicable rate for the unfunded defined benefit plan for certain eligible employees in the Philippines, France and Malaysia. The plans outside the U.S. represented approximately 25% and 24% of the Company’s total projected benefit obligation for all defined benefit plans as of November 30, 2021 and 2020, respectively.
Plan Assets
As of November 30, 2021 and 2020, plan assets for the cash balance plan consisted of common/collective trusts (of which approximately 60% are invested in equity backed funds and approximately 40% are invested in funds in fixed income instruments) and a private equity fund. The Company’s targeted allocation was 60% equity and 40% fixed income. The investment objectives for the plan assets are to generate returns that will enable the plan to meet its future obligations. The Company’s expected long-term rate of return was determined based on the asset mix of the plan, projected returns, past performance and other factors. The following table sets forth by level within the fair
value hierarchy, total plan assets at fair value as of November 30, 2021 and 2020, including the cash balance plan and other funded benefit plans:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investments
|
|
As of November 30, 2021
|
|
As of Quoted Prices in Active Markets for Identical Assets
(Level 1)
|
|
As of Significant Other Observable Inputs (Level 2)
|
|
As of Significant Unobservable Inputs (Level 3)
|
Cash and cash equivalents
|
|
$
|
3,383
|
|
|
$
|
3,383
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Common/collective trusts:
|
|
|
|
|
|
|
|
|
Fixed Income
|
|
59,955
|
|
|
—
|
|
|
59,955
|
|
|
—
|
|
U.S. large cap
|
|
39,318
|
|
|
—
|
|
|
39,318
|
|
|
—
|
|
U.S. small cap
|
|
10,100
|
|
|
—
|
|
|
10,100
|
|
|
—
|
|
International equity
|
|
39,930
|
|
|
—
|
|
|
39,930
|
|
|
—
|
|
Governmental bonds
|
|
5,493
|
|
|
—
|
|
|
5,493
|
|
|
—
|
|
Corporate bonds
|
|
3,528
|
|
|
—
|
|
|
3,528
|
|
|
—
|
|
Investment funds
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Limited partnership
|
|
224
|
|
|
—
|
|
|
—
|
|
|
224
|
|
Total investments
|
|
$
|
161,931
|
|
|
$
|
3,383
|
|
|
$
|
158,324
|
|
|
$
|
224
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Investments
|
|
As of November 30, 2020
|
|
As of Quoted Prices in Active Markets for Identical Assets
(Level 1)
|
|
As of Significant Other Observable Inputs (Level 2)
|
|
As of Significant Unobservable Inputs (Level 3)
|
Cash and cash equivalents
|
|
$
|
3,404
|
|
|
$
|
3,404
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Common/collective trusts:
|
|
|
|
|
|
|
|
|
Fixed Income
|
|
50,986
|
|
|
—
|
|
|
50,986
|
|
|
—
|
|
U.S. large cap
|
|
43,020
|
|
|
—
|
|
|
43,020
|
|
|
—
|
|
U.S. small cap
|
|
9,662
|
|
|
—
|
|
|
9,662
|
|
|
—
|
|
International equity
|
|
31,892
|
|
|
—
|
|
|
31,892
|
|
|
—
|
|
Governmental bonds
|
|
3,094
|
|
|
—
|
|
|
3,094
|
|
|
—
|
|
Corporate bonds
|
|
5,232
|
|
|
—
|
|
|
5,232
|
|
|
—
|
|
Investment funds
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
Limited partnership
|
|
268
|
|
|
—
|
|
|
—
|
|
|
268
|
|
Total investments
|
|
$
|
147,558
|
|
|
$
|
3,404
|
|
|
$
|
143,886
|
|
|
$
|
268
|
|
The Company’s cash balance plan holds level 2 investments in common/collective trust funds that are public investment vehicles valued using a net asset value (NAV) provided by the manager of each fund. The NAV is based on the underlying net assets owned by the fund, divided by the number of shares outstanding. The NAV’s unit price is quoted on a private market that may not be active. However, the NAV is based on the fair value of the underlying securities within the fund, which are traded on an active market, and valued at the closing price reported on the active market on which those individual securities are traded. The significant investment strategies of the funds are as described in the financial statements provided by each fund. There are no restrictions on redemptions from these funds. Level 3 investments are equity based funds that primarily invest in domestic early stage capital funds.
Benefit Payments
The following table details expected benefit payments for the cash balance plan and other defined benefit plans:
|
|
|
|
|
|
Fiscal Years Ending November 30,
|
|
2022
|
$
|
34,451
|
|
2023
|
30,264
|
|
2024
|
27,446
|
|
2025
|
25,292
|
|
2026
|
23,467
|
|
Thereafter
|
97,363
|
|
Total
|
$
|
238,283
|
|
The Company expects to make approximately $8,871 in contributions during fiscal year 2022.
NOTE 13—LEASES:
The Company leases certain of its facilities and equipment under operating lease agreements, which expire in various periods through 2035. The Company’s finance leases are not material.
The following table presents the various components of lease costs:
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Years Ended November 30,
|
|
2021
|
|
2020
|
Operating lease cost
|
$
|
203,508
|
|
|
$
|
202,852
|
|
Short-term lease cost
|
15,767
|
|
|
9,917
|
|
Variable lease cost
|
40,215
|
|
|
41,060
|
|
Sublease income
|
(1,738)
|
|
|
(1,668)
|
|
Total operating lease cost
|
$
|
257,752
|
|
|
$
|
252,161
|
|
The following table presents a maturity analysis of expected undiscounted cash flows for operating leases on an annual basis for the next five fiscal years and thereafter as of November 30, 2021:
|
|
|
|
|
|
Fiscal Years Ending November 30,
|
|
2022
|
$
|
185,065
|
|
2023
|
149,084
|
|
2024
|
110,781
|
|
2025
|
72,724
|
|
2026
|
29,204
|
|
Thereafter
|
20,810
|
|
Total payments
|
567,668
|
|
Less: imputed interest*
|
(59,868)
|
|
Total present value of lease payments
|
$
|
507,800
|
|
*Imputed interest represents the difference between undiscounted cash flows and discounted cash flows.
The following amounts were recorded in the consolidated balance sheet as of November 30, 2021 and 2020:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of November 30,
|
Operating leases
|
|
Balance sheet location
|
|
2021
|
|
2020
|
Operating lease ROU assets
|
|
Other assets, net
|
|
$
|
489,171
|
|
|
$
|
506,368
|
|
Current operating lease liabilities
|
|
Other accrued liabilities
|
|
153,329
|
|
|
163,052
|
|
Non-current operating lease liabilities
|
|
Other long-term liabilities
|
|
354,471
|
|
|
373,644
|
|
The Company decided to cease-use, sublease or abandon leases prior to the end of their lease terms at certain of its sites and recorded impairment losses during the fiscal year ended November 30, 2020 related to the exit of leased facilities. These losses are recorded as a component of selling, general and administrative expenses. As the fair value of the ROU assets was less than the carrying value, the Company recognized an impairment of ROU assets of approximately $9.3 million, reducing the carrying value of the ROU assets to its estimated fair value. The fair value of the ROU assets that the Company intends to sublease was estimated using level 3 inputs such as market comparables to estimate future cash flows expected from sublease income over the remaining lease terms.
The following table presents supplemental cash flow information related to the Company’s operating leases. Cash payments related to variable lease costs and short-term leases are not included in the measurement of operating lease liabilities, and, as such, are excluded from the amounts below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Years Ended November 30,
|
Cash flow information
|
|
2021
|
|
2020
|
Cash paid for amounts included in the measurement of lease liabilities
|
|
$
|
200,096
|
|
|
$
|
206,585
|
|
Non-cash ROU assets obtained in exchange for lease liabilities
|
|
156,406
|
|
|
147,292
|
|
The weighted-average remaining lease term and discount rate as of November 30, 2021 and 2020, respectively, were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of November 30,
|
Operating lease term and discount rate
|
|
2021
|
|
2020
|
Weighted-average remaining lease term (years)
|
|
3.81
|
|
3.97
|
Weighted-average discount rate
|
|
5.82
|
%
|
|
6.97
|
%
|
NOTE 14—INCOME TAXES:
The sources of income before the provision for income taxes are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Years Ended November 30,
|
|
2021
|
|
2020
|
|
2019
|
United States
|
$
|
66,274
|
|
|
$
|
(64,491)
|
|
|
$
|
(121,886)
|
|
Foreign
|
489,422
|
|
|
332,386
|
|
|
326,302
|
|
Total income before income taxes
|
$
|
555,696
|
|
|
$
|
267,895
|
|
|
$
|
204,416
|
|
Provision for income taxes consists of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Years Ended November 30,
|
|
2021
|
|
2020
|
|
2019
|
Current tax provision (benefit):
|
|
|
|
|
|
Federal
|
$
|
54,809
|
|
|
$
|
22,336
|
|
|
$
|
34,076
|
|
State
|
8,058
|
|
|
10
|
|
|
(6,260)
|
|
Foreign
|
112,981
|
|
|
100,588
|
|
|
75,717
|
|
|
$
|
175,848
|
|
|
$
|
122,934
|
|
|
$
|
103,533
|
|
Deferred tax provision (benefit):
|
|
|
|
|
|
Federal
|
$
|
(19,119)
|
|
|
$
|
49
|
|
|
$
|
(19,139)
|
|
State
|
(2,798)
|
|
|
(336)
|
|
|
362
|
|
Foreign
|
(3,812)
|
|
|
(19,563)
|
|
|
2,496
|
|
|
(25,729)
|
|
|
(19,850)
|
|
|
(16,281)
|
|
Total income tax provision
|
$
|
150,119
|
|
|
$
|
103,084
|
|
|
$
|
87,252
|
|
Provision for income taxes for fiscal years 2020 and 2019 was increased by an adjustment of $26,823 ($17,203 current tax expense plus $9,600 deferred tax expense) and $23,807 ($33,407 current tax expense offset by $9,600 deferred tax benefit), respectively, to reflect the hypothetical tax impact if Concentrix was not part of TD SYNNEX’ U.S. consolidated group and thereby suffered a much higher U.S. foreign tax credit limitation. The offset to the hypothetical tax expense was reflected in the former parent company investment balance, a component of equity on the consolidated balance sheet.
The following presents the breakdown of net deferred tax liabilities after netting by taxing jurisdiction:
|
|
|
|
|
|
|
|
|
|
|
|
|
As of November 30,
|
|
2021
|
|
2020
|
Deferred tax assets
|
$
|
48,413
|
|
|
$
|
47,423
|
|
Deferred tax liabilities
|
109,471
|
|
|
153,560
|
|
Total net deferred tax liabilities
|
$
|
61,058
|
|
|
$
|
106,137
|
|
Net deferred tax liabilities consist of the following:
|
|
|
|
|
|
|
|
|
|
|
|
|
As of November 30,
|
|
2021
|
|
2020
|
Assets:
|
|
|
|
Net operating losses
|
$
|
68,360
|
|
|
$
|
75,799
|
|
Accruals and other reserves
|
48,469
|
|
|
43,973
|
|
Depreciation and amortization
|
12,625
|
|
|
7,762
|
|
U.S. interest limitation carry forward
|
984
|
|
|
—
|
|
Share-based compensation expense
|
4,464
|
|
|
3,964
|
|
Deferred revenue
|
4,629
|
|
|
2,421
|
|
Tax credits
|
2,506
|
|
|
1,817
|
|
Foreign tax credit
|
2,359
|
|
|
5,829
|
|
Operating lease liabilities
|
90,270
|
|
|
104,429
|
|
Other
|
16,607
|
|
|
8,271
|
|
Gross deferred tax assets
|
251,273
|
|
|
254,265
|
|
Valuation allowance
|
(31,016)
|
|
|
(45,026)
|
|
Total deferred tax assets
|
$
|
220,257
|
|
|
$
|
209,239
|
|
Liabilities:
|
|
|
|
Intangible assets
|
$
|
160,802
|
|
|
$
|
183,970
|
|
Unremitted non-US earnings
|
32,199
|
|
|
28,882
|
|
Operating lease right-of-use assets
|
88,314
|
|
|
99,604
|
|
Other
|
—
|
|
|
2,920
|
|
Total deferred tax liabilities
|
281,315
|
|
|
315,376
|
|
Net deferred tax liabilities
|
$
|
61,058
|
|
|
$
|
106,137
|
|
The valuation allowance relates primarily to certain state and foreign net operating loss carry forwards, foreign deferred items and state credits. The Company’s assessment is that it is not more likely than not that these deferred tax assets will be realized.
A reconciliation of the statutory U.S. federal income tax rate to the Company’s effective income tax rate is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Years Ended November 30,
|
|
2021
|
|
2020
|
|
2019
|
Federal statutory income tax rate
|
21.0
|
%
|
|
21.0
|
%
|
|
21.0
|
%
|
State taxes, net of federal income tax benefit
|
0.6
|
%
|
|
(0.2)
|
%
|
|
(2.2)
|
%
|
International rate difference
|
(1.0)
|
%
|
|
1.3
|
%
|
|
(1.9)
|
%
|
Withholding taxes
|
0.4
|
%
|
|
0.8
|
%
|
|
1.2
|
%
|
Uncertain tax benefits
|
0.3
|
%
|
|
0.9
|
%
|
|
5.0
|
%
|
Changes in valuation allowance
|
(1.6)
|
%
|
|
0.5
|
%
|
|
2.7
|
%
|
Contingent debentures
|
—
|
%
|
|
—
|
%
|
|
(0.2)
|
%
|
Adjustments related to the Tax Cuts and Jobs Act
|
2.8
|
%
|
|
3.3
|
%
|
|
8.4
|
%
|
Hypothetical current tax expense recorded for separate return basis presentation
|
—
|
%
|
|
10.0
|
%
|
|
11.6
|
%
|
Other(1)
|
4.5
|
%
|
|
0.9
|
%
|
|
(2.9)
|
%
|
Effective income tax rate
|
27.0
|
%
|
|
38.5
|
%
|
|
42.7
|
%
|
(1) Includes additional tax gain on the sale of CIS for the fiscal year ended November 30, 2021.
The Company’s U.S. business has sufficient cash flow and liquidity to fund its operating requirements and the Company expects and intends that profits earned outside the United States will be fully utilized and reinvested outside of the United States with the exception of earnings of certain previously acquired non-U.S. entities. The Company has recorded deferred tax liabilities related to non-U.S. withholding taxes on the earnings likely to be repatriated in the future.
As of November 30, 2021, the Company had approximately $1,684,899 of undistributed earnings of its non-U.S. subsidiaries for which it has not provided for non-U.S. withholding taxes and state taxes because such earnings are intended to be reinvested indefinitely in international operations. It is not practicable to determine the amount of applicable taxes that would be due if such earnings were distributed. Accordingly, the Company has not provisioned U.S. state taxes and non-U.S. withholding taxes on the non-U.S. legal entities for which the earnings are permanently reinvested.
As of November 30, 2021, the Company had net operating loss carry forwards of approximately $48,737 and $26,228 for federal and state purposes, respectively. The federal net operating loss carry forward and the state net operating loss carry forwards will both start expiring in the fiscal year ending November 30, 2022. The Company also had approximately $139,754 of foreign net operating loss carry forwards that will also start expiring in fiscal year ending November 30, 2022 if not used. In addition, the Company has approximately $5,273 of various federal and state income tax credit carry forwards that, if not used, will begin expiring in the fiscal year ending November 30, 2022. Utilization of the acquired loss carry forwards may be limited pursuant to Section 382 of the Internal Revenue Code of 1986.
The Company enjoys tax holidays in certain jurisdictions, primarily China, Costa Rica, Nicaragua and the Philippines. The tax holidays provide for lower or zero rates of taxation and require various thresholds of investment and business activities in those jurisdictions. The estimated tax benefits from the above tax holidays for fiscal years 2021, 2020, and 2019 were approximately $9,160, $12,850, and $8,247, respectively.
The aggregate changes in the balances of gross unrecognized tax benefits, excluding accrued interest and penalties, during fiscal years 2021, 2020, and 2019 were as follows:
|
|
|
|
|
|
Balance as of November 30, 2018
|
$
|
38,675
|
|
Additions based on tax positions related to the current year
|
10,753
|
|
Net additions for tax positions of prior years and acquisition
|
4,198
|
|
Lapse of statute of limitations
|
(4,698)
|
|
Balance as of November 30, 2019
|
48,928
|
|
Additions based on tax positions related to the current year
|
5,081
|
|
Additions for tax positions of prior years and acquisition
|
4,108
|
|
Settlements
|
(144)
|
|
Lapse of statute of limitations
|
(10,061)
|
|
Changes due to translation of foreign currencies
|
1
|
|
Balance as of November 30, 2020
|
47,913
|
|
Additions based on tax positions related to the current year
|
3,602
|
|
Reductions for tax positions of prior years
|
(1,638)
|
|
Settlements
|
(2,108)
|
|
Lapse of statute of limitations
|
(7,872)
|
|
Changes due to translation of foreign currencies
|
104
|
|
Balance as of November 30, 2021
|
$
|
40,001
|
|
The Company conducts business globally and files income tax returns in various U.S. and non-U.S. jurisdictions. The Company is subject to continuous examination and audits by various tax authorities. Significant audits are underway in the United States and India. The Company is not aware of any material exposures arising from these tax audits or in other jurisdictions not already provided for.
Although timing of the resolution of audits and/or appeals is highly uncertain, the Company believes it is reasonably possible that the total amount of unrecognized tax benefits as of November 30, 2021 could decrease between $6,464 and $13,447 in the next twelve months. The Company is no longer subject to U.S. federal income tax audit for returns covering years through fiscal year 2017. The Company is no longer subject to non-U.S. or U.S. state income tax audits for returns covering years through fiscal year 2012 and fiscal year 2014, respectively.
The liability for unrecognized tax benefits was $56,308 and $62,315 at November 30, 2021 and November 30, 2020, respectively, and is included in other long-term liabilities in the consolidated balance sheets. As of November 30, 2021 and 2020, $48,438 and $54,910 of the total unrecognized tax benefits, net of federal benefit, would affect the effective tax rate, if realized. The Company’s policy is to include interest and penalties related to income taxes, including unrecognized tax benefits, within the provision for income taxes. As of November 30, 2021 and 2020, the Company had accrued $16,306 and $14,402, respectively, in income taxes payable related to accrued interest and penalties.
Under the tax matters agreement with TD SYNNEX, the Company generally has liability and is required to indemnify TD SYNNEX for (1) any taxes incurred in the ordinary course of the Company’s business by the Company or its subsidiaries and (2) a portion of the taxes for tax periods that ended on or prior to the distribution related to transactions between Concentrix and TD SYNNEX or their respective subsidiaries, or other transactions in which both Concentrix and TD SYNNEX or their respective subsidiaries received a financial benefit.
NOTE 15—COMMITMENTS AND CONTINGENCIES:
From time to time, the Company receives notices from third parties, including clients and suppliers, seeking indemnification, payment of money or other actions in connection with claims made against them. Also, from time to time, the Company has been involved in various bankruptcy preference actions where the Company was a supplier to the companies now in bankruptcy. In addition, the Company is subject to various other claims, both asserted and unasserted, that arise in the ordinary course of business. The Company evaluates these claims and records the related liabilities. It is possible that the ultimate liabilities could differ from the amounts recorded.
Under the separation and distribution agreement with TD SYNNEX, the Company agreed to indemnify TD SYNNEX, each of its subsidiaries and each of their respective directors, officers and employees from and against all liabilities allocated to Concentrix under the separation and distribution agreement, which are generally those liabilities that relate to the CX business and the Company’s business activities, whether incurred prior to or after the spin-off.
Under the tax matters agreement with TD SYNNEX, if the spin-off fails to qualify for tax-free treatment, the Company is generally required to indemnify TD SYNNEX for any taxes resulting from the spin-off (and related costs and other damages) to the extent such amounts result from (1) an acquisition of all or a portion of the Company’s equity securities or assets by any means, (2) any action or failure to act by the Company after the distribution affecting the voting rights of the Company’s stock, (3) other actions or failures to act by the Company, or (4) certain breaches of the Company’s agreements and representations in the tax matters agreement. The Company’s indemnification obligations to TD SYNNEX and its subsidiaries, officers, directors and employees are not limited by any maximum amount.
The Company does not believe that the above commitments and contingencies will have a material adverse effect on the Company’s results of operations, financial position or cash flows.
NOTE 16—EARNINGS PER SHARE:
Basic and diluted earnings per common share (“EPS”) are computed using the two-class method, which is an earnings allocation formula that determines EPS for each class of common stock and participating securities.
Basic EPS is generally computed by dividing net income attributable to common stockholders by the weighted-average number of shares of common stock outstanding during the period. Diluted earnings per common share is generally computed by dividing net income attributable to common stockholders by the weighted-average number of shares of common stock outstanding during the period, increased to include the number of shares of common stock that would have been outstanding had potential dilutive shares of common stock been issued. The dilutive effect of restricted stock units and stock options are reflected in diluted net income per share by applying the treasury stock method. There were no Concentrix equity awards outstanding prior to the spin-off, thus the computation of basic and diluted earnings per common share for all prior year periods disclosed is calculated using the shares issued in connection with the spin-off of 51.6 million shares.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fiscal Years Ended November 30,
|
|
2021
|
|
2020
|
|
2019
|
Basic earnings per common share:
|
|
|
|
|
|
Net income
|
$
|
405,577
|
|
|
$
|
164,811
|
|
|
117,164
|
|
Less: net income allocated to participating securities(1)
|
(5,785)
|
|
|
—
|
|
|
—
|
|
Net income attributable to common stockholders
|
$
|
399,792
|
|
|
$
|
164,811
|
|
|
$
|
117,164
|
|
|
|
|
|
|
|
Weighted average common shares - basic
|
51,355
|
|
|
51,602
|
|
|
51,602
|
|
|
|
|
|
|
|
Basic earnings per common share
|
$
|
7.78
|
|
|
$
|
3.19
|
|
|
$
|
2.27
|
|
|
|
|
|
|
|
Diluted earnings per common share:
|
|
|
|
|
|
Net income
|
$
|
405,577
|
|
|
$
|
164,811
|
|
|
$
|
117,164
|
|
Less: net income allocated to participating securities(1)
|
(5,724)
|
|
|
—
|
|
|
—
|
|
Net income attributable to common stockholders
|
$
|
399,853
|
|
|
$
|
164,811
|
|
|
$
|
117,164
|
|
|
|
|
|
|
|
Weighted-average number of common shares - basic
|
51,355
|
|
|
51,602
|
|
|
51,602
|
|
Effect of dilutive securities:
|
|
|
|
|
|
Stock options and restricted stock units
|
559
|
|
|
—
|
|
|
—
|
|
Weighted-average number of common shares - diluted
|
51,914
|
|
|
51,602
|
|
|
51,602
|
|
|
|
|
|
|
|
Diluted earnings per common share
|
$
|
7.70
|
|
|
$
|
3.19
|
|
|
$
|
2.27
|
|
(1) Restricted stock awards granted to employees by the Company are considered participating securities.
NOTE 17—STOCKHOLDERS’ EQUITY:
Share repurchase program
In September 2021, the Company’s board of directors authorized the Company to purchase up to $500,000 of the Company’s outstanding shares of common stock from time to time as market and business conditions warrant, including through open market purchases or Rule 10b5-1 trading plans. The repurchase program has no termination date and may be suspended or discontinued at any time. During the fiscal year ended November 30, 2021, the Company repurchased 138 aggregate shares of its common stock for an aggregate purchase price of $25,100. The share repurchases were made on the open market and the shares repurchased by the Company are held in treasury for general corporate purposes.
Dividends
In September 2021, the board of directors declared a quarterly cash dividend of $0.25 per share. The dividend was paid in November 2021, to stockholders of record at the close of business on October 22, 2021. On January 18, 2022, the Company announced a cash dividend of $0.25 per share to stockholders of record as of January 28, 2022, payable on February 8, 2022.