INCOME TAXES:
The sources of income before the provision for income taxes and non-controlling interest are as follows:
|
| | | | | | | | | | | |
| Fiscal Years Ended November 30, |
| 2017 | | 2016 | | 2015 |
United States | $ | 257,837 |
| | $ | 185,936 |
| | $ | 197,406 |
|
Foreign | 206,894 |
| | 170,128 |
| | 129,789 |
|
| $ | 464,731 |
| | $ | 356,064 |
| | $ | 327,195 |
|
Provision for income taxes consists of the following:
|
| | | | | | | | | | | |
| Fiscal Years Ended November 30, |
| 2017 | | 2016 | | 2015 |
Current tax provision: | | | | | |
Federal | $ | 105,879 |
| | $ | 68,309 |
| | $ | 65,101 |
|
State | 17,900 |
| | 8,241 |
| | 15,179 |
|
Foreign | 65,000 |
| | 51,918 |
| | 43,805 |
|
| $ | 188,779 |
| | $ | 128,468 |
| | $ | 124,085 |
|
Deferred tax provision (benefit): | | | | | |
Federal | $ | (16,303 | ) | | $ | 3,383 |
| | $ | (3,536 | ) |
State | (1,379 | ) | | (1,608 | ) | | (173 | ) |
Foreign | (7,539 | ) | | (9,184 | ) | | (1,788 | ) |
| $ | (25,221 | ) | | $ | (7,409 | ) | | $ | (5,497 | ) |
| | | | | |
Total tax provision | $ | 163,558 |
| | $ | 121,059 |
| | $ | 118,588 |
|
The following presents the breakdown net deferred tax liabilities:
|
| | | | | | | |
| As of November 30, |
| 2017 | | 2016 |
Deferred tax assets | $ | 31,687 |
| | $ | 58,564 |
|
Deferred tax liabilities | (113,527 | ) | | (58,639 | ) |
Total net deferred tax liabilities | $ | (81,840 | ) | | $ | (75 | ) |
Net deferred tax liabilities consist of the following:
|
| | | | | | | |
| As of November 30, |
| 2017 | | 2016 |
Assets: | | | |
Inventory reserves | $ | 15,591 |
| | $ | 10,804 |
|
Allowance for doubtful accounts and sales return reserves | 14,819 |
| | 10,444 |
|
Other reserves and accruals | 45,711 |
| | 21,950 |
|
State tax credits | 10,063 |
| | 5,345 |
|
Deferred and prepaid compensation | 6,661 |
| | 10,569 |
|
Net operating losses | 14,537 |
| | 19,243 |
|
Deferred revenue | 7,000 |
| | 4,255 |
|
Share-based compensation expense | 7,709 |
| | 6,558 |
|
Others | 6,969 |
| | 4,449 |
|
Gross deferred tax assets | 129,060 |
| | 93,617 |
|
Valuation allowance | (18,604 | ) | | (21,176 | ) |
Total deferred tax assets | $ | 110,456 |
| | $ | 72,441 |
|
Liabilities: | | | |
Depreciation and amortization | $ | (28,043 | ) | | $ | (6,231 | ) |
Intangible assets | (164,253 | ) | | (66,285 | ) |
Total deferred tax liabilities | $ | (192,296 | ) | | $ | (72,516 | ) |
Net deferred tax liabilities | $ | (81,840 | ) | | $ | (75 | ) |
The valuation allowance relates primarily to certain foreign net operating loss carry forward, 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 United States federal income tax rate to the Company’s effective income tax rate is as follows:
|
| | | | | | | | |
| Fiscal Years Ended November 30, |
| 2017 | | 2016 | | 2015 |
Federal statutory income tax rate | 35.0 | % | | 35.0 | % | | 35.0 | % |
State taxes, net of federal income tax benefit | 2.9 |
| | 2.3 |
| | 2.5 |
|
Foreign taxes | (3.2 | ) | | (4.7 | ) | | (1.3 | ) |
Others | 0.5 |
| | 1.4 |
| | — |
|
Effective income tax rate | 35.2 | % | | 34.0 | % | | 36.2 | % |
The Company’s United States 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. Accordingly, the Company has not provisioned United States taxes and foreign withholding taxes on non-U.S. subsidiaries for which the earnings are permanently reinvested. The Company estimates that its total undistributed earnings upon which it has not provided deferred tax is approximately $771,721 as of November 30, 2017. It is not currently practical to estimate the amount of income tax that might be payable if any earnings were to be distributed by individual foreign subsidiaries. As discussed in Note 18—Subsequent Events, undistributed earnings and profits of foreign subsidiaries will be taxed in fiscal year 2018. The Company is currently analyzing its impact and will provide additional disclosure in the fiscal 2018 first quarter Form 10-Q.
As of November 30, 2017, the Company had net operating loss carry forward of approximately $15,521 and $13,166 for federal and state purposes, respectively. The federal net operating loss carry forward will start expiring in fiscal year ending November 30, 2021, if not used and the state net operating loss carry forward will start expiring in fiscal year ending November 30, 2018, if not used. The Company also had $46,492 of foreign net operating loss carry forward, primarily from SYNNEX Infotec Japan and Concentrix entities that will also start expiring in fiscal year ending November 30, 2018, if not used. In addition, the Company has $1,014 of various state income tax credit carry forwards that if not used, will begin expiring in fiscal year ending November 30, 2020.
The Company enjoys tax holidays in certain jurisdictions including China, Costa Rica, Nicaragua and 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 range of tax benefits from the above tax holidays on diluted earnings per share for fiscal years 2017, 2016, and 2015 were approximately $0.07 to $0.08, $0.07 to $0.08 and $0.03 to $0.04 respectively.
The aggregate changes in the balances of gross unrecognized tax benefits, excluding accrued interest and penalties, during fiscal years 2017, 2016, and 2015 were as follows:
|
| | | |
Balance as of November 30, 2014 | $ | 21,874 |
|
Additions based on tax positions related to the current year | 3,485 |
|
Additions for tax positions of prior years | 923 |
|
Lapse of statute of limitations | (3,441 | ) |
Changes due to translation of foreign currencies | (26 | ) |
Balance as of November 30, 2015 | 22,815 |
|
Additions based on tax positions related to the current year | 6,727 |
|
Additions for tax positions of prior years | 5,613 |
|
Lapse of statute of limitations | (2,241 | ) |
Changes due to translation of foreign currencies | (140 | ) |
Balance as of November 30, 2016 | 32,774 |
|
Additions based on tax positions related to the current year | 9,022 |
|
Additions for tax positions of prior years | 231 |
|
Settlements | (1,624 | ) |
Lapse of statute of limitations | (2,300 | ) |
Changes due to translation of foreign currencies | 179 |
|
Balance as of November 30, 2017 | $ | 38,282 |
|
The Company conducts business globally and files income tax returns in various U.S. and foreign tax jurisdictions. The Company is subject to continuous examination and audits by various tax authorities. In the United States, the Company is subject to examination and audits by tax authorities for tax years after fiscal year ended 2014. The Company is subject to various audits in other tax jurisdictions. As of November 30, 2017, the Company is unable to estimate the range of any possible adjustments. 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, 2017 will not materially change in the next twelve months.
As of November 30, 2017, the total uncertain tax position is $38,282, of which $37,540 of the 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, 2017 and 2016, the Company had accrued $5,867 and $4,461, respectively, in income taxes payable related to accrued interest.