☒ | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
2022
☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Delaware | 38-1886260 | |||||||
(State or other jurisdiction of
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10560 Dr. Martin Luther King, Jr. Street
Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||||||||
Common Stock, $0.001 par value per share | JBL | New York Stock Exchange |
Large accelerated filer | ☒ | Accelerated filer | ☐ | |||||||||||||
Non-accelerated filer | ☐ | Smaller reporting company | ☐ | |||||||||||||
Emerging growth company | ☐ |
The registrant’s definitive
2019
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For a further list and description of various risks, factors and uncertainties that could cause future results or events to differ materially from those expressed or implied in our forward-looking statements, see the “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” sections contained in this document, and any subsequent reports on Form10-Q and Form8-K, and other filings we make with the Securities and Exchange Commission (“SEC”). Given these risks and uncertainties, the reader should not place undue reliance on these forward-looking statements.
All forward-looking statements included in this Annual Report onForm 10-K are made only as of the date of this Annual Report onForm 10-K, and we do not undertake any obligation to publicly update or correct any forward-looking statements to reflect events or circumstances that subsequently occur, or of which we hereafter become aware. You should read this document completely and with the understanding that our actual future results or events may be materially different from what we expect. All forward-looking statements attributable to us are expressly qualified by these cautionary statements.
We conduct our operations in facilities that are located worldwide, including but not limited to China, Hungary,Ireland, Malaysia, Mexico, Singapore, and the United States. Our global manufacturing production sites allow customers to manufacture products simultaneously in the optimal locations for their products. Our global presence is key to assessing and executing on our business opportunities.
For the fiscal year ended August 31, 2022, we had net revenues of $33.5 billion and net income attributable to Jabil Inc. of $996 million.
In recent years, the industry has expanded to include customers that require products and services beyond electronic components including plastics and metal components, packaging, and injection molding.
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•Automation, including automated tooling
•Electronic interconnection
•Advanced polymer and metal material science
•Single/multi-shot injection molding, stamping andin-mold labeling
•Multi-axis computer numerical control
•Vacuum metallization
•Physical vapor deposition
•Digital printing
•Anodization
•Thermal-plastic composite formation
•Plastic with embedded electronics
•Metal and plastic covers with insert-molded or dies-casting features for assembly
•Display cover with integrated touch sensor
•Material processing research (including plastics, metal, glass and ceramic)
Fiscal Year Ended August 31, | ||||||||||||
2019 | 2018 | 2017 | ||||||||||
Apple, Inc. | 22 | % | 28 | % | 24 | % |
Fiscal Year Ended August 31, | |||||||||||||||||
2022 | 2021 | 2020 | |||||||||||||||
Apple, Inc. | 19 | % | 22 | % | 20 | % | |||||||||||
Backlog
Our order backlog as of August 31, 2019 and 2018 was valued at approximately $6.2 billion and $6.8 billion, respectively. Our order backlog is expected to be filled within the current fiscal year. Although our backlog consists of firm purchase orders, the level of backlog at any particular time may not be necessarily indicative of future sales. Given the nature of our relationships with our customers, and the fact that we generally do not enter into long-term purchase commitments with our customers, we frequently allow our customers to cancel or reschedule deliveries, and therefore, backlog is often not a meaningful indicator of future financial results.
Proprietary Rights
Employees
Region | Number of Employees | |||||||
Asia | 182 | |||||||
Americas | 51 | |||||||
Europe | 17 | |||||||
Total(1) | 250 |
competitive and consistent with employee positions, skill levels, experience, knowledge and geographic location.
Sergio A. Cadavid (age 63)
Brenda Chamulak (age 48) was named Senior Vice President, Chief Executive Officer, Jabil Packaging Solutions in July 2018. Prior to joining Jabil, Ms. Chamulak was Vice President and General Manager of Personal Care & Home Care, a business unit of Aptar Inc., a global supplier of dispensing and sealing solutions based in Crystal Lake, Illinois. Ms. Chamuluk served as the President, Global Market Development for Aptar’s Beauty + Home, Personal Care Business Unit from 2016 to 2017 and served as the General Manager, Aptar Midland from 2013 to 2016. She joined Aptar in 1992 and held positions of increasing responsibility with Aptar. Ms. Chamulak has a B.A. in Marketing and International Business from Carthage CollegePhoenix and an MBA from Marquette University.
the University of Florida’s Warrington School of Business.
Bruce A. JohnsonRoberto Ferri (age 63)57) was named Senior Vice President, Chief Human ResourcesSales and Marketing Officer in January 2017.2020 and previously served as Senior Vice President, Sales from July 2015. Mr. JohnsonFerri joined Jabil in 20152001 as Vice President, Human Resources. Prior to joining Jabil, Mr. Johnson was Chief Organizational Effectiveness Officer/Executive Vice President, Human Resources for C&S Wholesale Grocers, Inc., a wholesale distributor of food and grocery items with headquarters in Keene, New Hampshire from 2007 to 2014. Mr. Johnson also served in senior roles at The Timberland Company, a footwear and apparel designer, retailer and manufacturer in New Hampshire, and E.I. Du Pont De Nemours and Company (Du Pont) in Delaware.Sales. He holds a Bachelor of Artsdegree in Historyeconomics and marketing from Middlebury College in Vermont.
SDA Bocconi, Italy.
Michael J. Loparco
Wright State University.
Alessandro Parimbelli
Courtney J. Ryan (age 49) was named Executive Vice President, Corporate Development/Chief of Staff in July 2016. Mr. Ryan joined Jabil in 1993 as a Quality Engineer and worked his way through various operations and business development management positions. He was named Senior Vice President, Global Business Units in 2007. Mr. Ryan served as Executive Vice President, Chief Executive Officer, Nypro from July 2013 to June 2016. Mr. Ryan holds an MBA with a concentration in Decision and Information Science and a Bachelor of Arts in Economics, both from the University of Florida. He also serves on the University of Florida’s MBA and Supply Chain Advisory Board.
Daryn Smith (age 49)52) was named Senior Vice President, Enterprise & Commercial Controller effectivein June 2018 and assumed leadership of Corporate Development and M&A in September 2018. Mr. Smith2020. He served as Chief Financial Officer of EMS from June 2013 through June 2018. Mr. Smith joined Jabil in 2002 and he has held various leadership roles in Risk and Assurance, Financial Planning and Analysis, and Controllership for Jabil. Prior to joining Jabil, Mr. Smith was with the Assurance and Advisory Services practice for Arthur Andersen.2002. He holds a Bachelor’sBachelor's degree in Accounting from the University of South Florida and an MBA from the University of Florida.
May Yap (age 52) was named Senior Vice President, Chief Information Officer in September 2020. She joined Jabil in 2014 as Vice President and CIO of Jabil Green Point. Ms. Yap holds an MBA and a master’s degree in Computer Science from University of Hull and a doctorate in business administration and management from New York University.
Our annualbusiness that we will seek and quarterly operating results are affected by a number of factors, including:
adverse changes in current macro-economic conditions, both in the U.S.accept, production schedules and internationally;
how well we executelocations, component procurement commitments, personnel needs and other resource requirements, based on our strategy and operating plans, and the impactestimate of changes in our business model;
the volume and timing of orders placed by our customers;
customer requirements. Our inability to forecast the level of capacitycustomer orders with certainty makes it difficult to schedule production and maximize utilization of our manufacturing facilitiescapacity and associatedsupply chain capabilities.
the composition of the costs of revenue among materials, labor and manufacturing overhead;
price competition;
changesa reduction in customer demand, particularly a reduction in demand for a product that represents a significant amount of revenue, can harm our gross profit margins and results of operations. In the past, we have also been required to increase staffing and other expenses in order to meet anticipated demand. On occasion, customers have required rapid increases in production for one or more of their products or services, as well as the volatility of these changes;
changes in demand inrequested that we relocate our customers’ end markets, as well as the volatility of these changes;
manufacturing operations or transfer manufacturing from one facility to another, which stresses our exposure to financially-troubled customers;
any potential future termination, or substantial winding down, of significant customer relationships;
our level of experience in manufacturing particular products;
the degree of automation used in our assembly process;
the efficiencies achieved in managing inventoriesresources and property, plant and equipment;
significant costs incurred in acquisitions and other transactions;
fluctuations in the cost and availability of materials;
adverse changes in political conditions, both in the U.S. and internationally, including among other things, adverse changes in tax laws and rates (and government interpretations thereof), adverse changes in trade policies and adverse changes in fiscal and monetary policies;
seasonality in customers’ product demand;
the timing of expenditures in anticipation of increased sales, customer product delivery requirements and shortages of components or labor;
changes in stock-based compensation expense due to changes in the expected vesting of performance-based equity awards comprising a portion of such stock-based compensation expense; and
failure to comply with foreign laws, which could result in increased costs and/or taxes.
Any one or a combination of these factors could adversely affect our annual and quarterly results of operations in the future. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Results of Operations.”
If we do not manage our growth effectively, our profitability could decline.
Our business at times experiences periods of rapid growth which can place considerable demands upon our management team and our operational, financial and management information systems. Our ability to manage growth effectively requires us to continue to implement and improve these systems; avoid cost overruns; maintain customer, supplier and other favorable business relationships during transition periods; efficiently and effectively dedicate resources to existing customers as well as new projects; acquire or construct additional facilities; occasionally transfer operations to different facilities; acquire equipment in anticipation of demand; procure materials and components; continue to develop the management skills of our managers and supervisors; adapt relatively quickly to new markets or technologies and continue to hire, train, motivate and manage our employees. Our failure to effectively manage growth, as well as our failure to realize the anticipated benefits of the actions we take to try to manage our growth, could have a material adverse effect on our results of operations. See “Management’s Discussion
Our global operations expose us to the COVID-19 pandemic, which has had and will continue to have an adverse impact on our employees, operations, supply chain and distribution system. While we have taken numerous steps to mitigate the impact of the pandemic on our results of operations, there can be no assurance that these efforts will be successful. To date, COVID-19 has increased our expenses, primarily related to additional labor costs and the procurement of personal protection equipment for our employees globally, and has caused a reduction in factory utilization due to travel disruptions and restrictions.
Consolidation among
Our customers face numerous competitive challenges, which may materially adversely affect their businesspurchase the components and ours.
Factors adversely affecting our customers may also adversely affect us. These factors include:
recessionary periods in our customers’ markets;
the inability of our customersmaterials needed to adapt to rapidly changing technology and evolving industry standards, which may contribute to short product life cycles or shifts in our customers’ strategies;
the inability of our customers to develop, market or gain commercial acceptance of theirmanufacture customer products some of which are new and untested;
the potential that our customers’ products become commoditized or obsolete;
loss of business or a reduction in pricing power experienced by our customers;
the emergence of new business models or more popular products and shifting patterns of demand; and
a highly-competitive consumer products industry, which is often subject to shorter product lifecycles, shiftingend-user preferences and higher revenue volatility.
If our customers are unsuccessful in addressing these competitive challenges, their businesses may be materially adversely affected, reducing the demand for our services, decreasing our revenues or altering our production cycles and inventory management, each of whichat favorable prices. Accordingly, certain component price increases could adversely affect our ability to cover fixed costs and our gross profit margins and results of operations.
Most
Most of our customers do not commitredesign or reconfigure products to firm production schedules for more than one quarter. We make significant decisions, including determining the levels of business that we will seek and accept, production schedules and locations, component procurement commitments, personnel needs and other resource requirements, based on our estimate of customer requirements. Our inability to forecast the level of customer orders with certainty makes it difficult to schedule production and maximize utilization of our manufacturing capacity.accommodate a substitute component. In the past wethere have been requiredindustry wide conditions, natural disasters and global events that have caused material and component shortages and shortages from the COVID-19 pandemic are ongoing. In fiscal year 2022, our supply chain was impacted by component shortages, most notably in the semiconductor industry. Our production of a customer’s product has and could again be negatively impacted by any quality, reliability or availability issues with any of our component suppliers. The financial condition of our suppliers could affect their ability to increase staffingsupply us with components and other expensestheir ability to satisfy any warranty obligations they may have, which could have a material adverse effect on our results of operations.
Customers have canceled their orders, changed production quantities or designs, delayed production, changed their sourcing strategy and terminated their relationships with us. We cannot assure you that present or future customers will not terminate their service arrangements with us or significantly change, reduce, cancel or delay the amount of services ordered. Such changes, delays and cancellations have led to,incur additional inventory carrying costs and may lead in the futurecause us to a decline in our production and our possessionexperience inventory obsolescence, both of excess or obsolete inventory that wewhich may not be able to sell torecoverable from our customers or third parties. This may result in write downsand could adversely affect our
inventories, reduction in the number of products that we sell, delays in payment for inventory that we purchased, and reductions in the use of our manufacturing facilities. As many of our costs and operating expenses are relatively fixed, a reduction in customer demand, particularly a reduction in demand for a product that represents a significant amount of revenue, can harm our gross profit margins and results of operations.
In addition, we sometimes experience difficulty forecasting the timing of our receipt of payment from customers. The necessary process to begin manufacturing can be lengthy. Because we make capital expenditures during thisramping-up process and do not receive payment until after we produce and ship the customer’s products, any delays or unanticipated costs in theramping-up process may have a significant adverse effect on our cash flows and our results of operations. Servicing our largest customers may also A component shortage will require us to increaselook to second tier vendors or to procure components through brokers. These components may be of lesser quality than those we have historically purchased and could cause us to incur costs to bring such components up to our capital expenditures.
quality levels or to replace defective ones. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Business – Components Procurement.”
Exposure to financially troubled customers or suppliers may adversely affectexposure and has impacted our financial results.
We provide manufacturing services to companies and industries that haveresults in the past, and may in the future, experience financial difficulty. If our customers experience financial difficulty, we could have difficulty recovering amounts owed to us from these customers, or demand for our products from these customers could decline. Additionally, if our suppliers experience financial difficulty, we could have difficulty sourcing supplies necessary to fulfill production requirements. If one or more of our customers were to become insolvent or otherwise were unable to pay for the services provided by us on a timely basis, or at all, our operating results and financial condition could be adversely affected. Such adverse effects could include one or more of the following: an increase in our provision for doubtful accounts, a charge for inventory writeoffs, a reduction in revenue, and an increase in our working capital requirements due to higher inventory levels and increases in days our accounts receivable are outstanding. In addition, because we securitize certain of our accounts receivable, our securitization programs could be negatively affected by customer financial difficulty affecting the recovery of a significant amount of receivables.
past.
We compete with numerous other diversified manufacturing service providers, electronic manufacturing services, and design providers and others.
•respond more quickly to new or emerging technologies or changes in customer requirements;
•have technological expertise, engineering capabilities and/or manufacturing resources that are greater than ours;
•have greater name recognition, critical mass and geographic market presence;
•be better able to take advantage of acquisition opportunities;
•devote greater resources to the development, promotion and sale of their services and execution of their strategy;
•be better positioned to compete on price for their services;
•have excess capacity, and be better able to utilize such excess capacity;
•have lower cost structures as a result of their geographic location or the services they provide;
•be willing or able to make sales or provide services at lower margins than we do;
•have increased vertical capabilities providing them greater cost savings.
•hire, retain and expand our pool of qualified engineering and technical personnel;
•maintain and continually improve our technological expertise;
•develop and market manufacturing services that meet changing customer needs; and
•anticipate and respond to technological changes in manufacturing processes on a cost-effective and timely basis.
Although we use the assembly and testing technologies, equipment and processes that are currently required by our customers, we cannot be certain that we will be able to maintain or develop the capabilities required by our customers in the future. The emergence of new technology, industry standards or customer requirements may render our equipment, inventory or processes obsolete or noncompetitive. The acquisition and implementation of new technologies and equipment and the offering of new or additional services to our customers may require significant expense or capital investment, which could reduce our operating margins and our operating results. In facilities that we newly establish or acquire, we may not be able to insert or maintain our engineering, technological and manufacturing process expertise. Our failure to anticipate and adapt to our customers’ changing technological needs and requirements or to hire sufficient personnel to maintain our engineering, technological and manufacturing expertise could have a material adverse effect on our results of operations.
Efficient component and material purchasing is critical to our manufacturing processes and contractual arrangements. A shortage of components or an increase in price could interrupt our operations and reduce our profit, increase our inventory carrying costs, increase our risk of exposure to inventory obsolescence and cause us to purchase components of a lesser quality.
Strategic and efficient component and materials purchasing is an aspect of our strategy. When prices rise, they may impact our margins and results of operations if we are not able to pass the increases through to our customers or otherwise offset them. Most of our significant long-term customer contracts permit quarterly or other periodic prospective adjustments to pricing based on decreases and increases in component prices and other factors; however, we typically bear the risk of component price increases that occur between any suchre-pricings or, if suchre-pricing is not permitted, during the balance of the term of the particular customer contract. There can be no assurance that we will continue to be able to purchase the components and materials needed to manufacture customer products at favorable prices. Accordingly, certain component price increases could adversely affect our gross profit margins and results of operations.
Some of the products we manufacture require one or more components that are only available from a single source. Some of these components are subject to supply shortages from time to time. In some cases, supply shortages will substantially curtail production of all assemblies using a particular component. A supply shortage can also increase our cost of goods sold if we have to pay higher prices for components in limited supply, or cause us to have to redesign or reconfigure products to accommodate a substitute component. In the past there have been industry wide conditions, natural disasters and global events that have caused material shortages. Our production of a customer’s product could be negatively impacted by any quality, reliability or availability issues with any of our component suppliers. The financial condition of our suppliers could affect their ability to supply us with components and their ability to satisfy any warranty obligations they may have, which could have a material adverse effect on our results of operations.
If a component shortage is threatened or anticipated, we may purchase such components early to avoid a delay or interruption in our operations. Purchasing components early may cause us to incur additional inventory carrying costs and may cause us to experience inventory obsolescence, both of which may not be recoverable from our customers and could adversely affect our gross profit margins and net income. A component shortage may also require us to look to second tier vendors or to procure components through brokers with whom we are not familiar. These components may be of lesser quality than those we have historically purchased and could cause us to incur costs to bring such components up to our quality levels or to replace defective ones. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Business – Components Procurement.”
•difficulties in staffing and managing foreign operations and attempting to ensure compliance with our policies, procedures, and applicable local laws;
•less flexible employee relationships that can be difficult and expensive to terminate due to, among other things, labor laws and regulations;
•labor unrest and dissatisfaction, including potential labor strikes or claims;
•increased scrutiny by the media and other third parties of labor practices within our industry (including working conditions, compliance with employment and labor laws and compensation) which may result in allegations of violations, more stringent and burdensome labor laws and regulations, higher labor costs and/or loss of revenues if our customers become dissatisfied with our labor practices and diminish or terminate their relationship with us;
•burdens of complying with a wide variety of foreign laws, including those relating to export and import duties, domestic and foreign import and export controls, trade barriers (including tariffs and quotas), environmental policies and privacy issues, and local statutory corporate governance rules;
•risk ofnon-compliance with the U.S. Foreign Corrupt Practices Act (the “FCPA”) or similar regulations in other jurisdictions;
•less favorable, less predictable, or relatively undefined, intellectual property laws;
•lack of sufficient or available locations from which to operate or inability to renew leases on terms that are acceptable to us or at all;
•unexpected changes in regulatory requirements and laws or government or judicial interpretations of such regulatory requirements and laws and adverse trade policies, and adverse changes to any of the policies of either the U.S. or any of the foreign jurisdictions in which we operate;
•adverse changes in tax rates or accounting rules and the manner in which the U.S. and other countries tax multinational companies or interpret their tax laws or accounting rules or restrictions on the transfer of funds to us from our operations outside the U.S.;
•limitations on imports or exports of components or products, or other trade sanctions;
•political and economic instability and unsafe working conditions;
•geopolitical unrest, including the invasion of Ukraine, the possibility of military activity in countries near or adjacent to Ukraine, and the sanctions and other actions taken by the European Union, the United States, and other governments around the world in response;
•inadequate infrastructure for our operations (e.g., lack of adequate power, water, transportation and raw materials);
•legal or political constraints on our ability to maintain or increase prices;
•health concerns, epidemics and related government actions;
•increased travel costs and difficulty in coordinating our communications and logistics across geographic distances and multiple time zones;
•longer customer payment cycles and difficulty collecting trade accounts receivable;
•fluctuations in currency exchange rates;
•economies that are emerging or developing or that may beare subject to greater currency volatility, negative growth, high inflation, limited availability of foreign exchange and other risks;
•international trade disputes could result in tariffs and other protectionist measures that could adversely affect our business. Tariffs could increase the costs of the components and raw materials we use in the manufacturing process as well as import and export costs for finished products. Countries could adopt other protectionist measures that could limit our ability to manufacture products or provide services. Increased costs to our U.S. customers who use ournon-U.S. manufacturing sites and components may adversely impact demand for our services and our results of operation and financial condition. Additionally, international trade disputes may cause our customers to decide to relocate the manufacturing of their products to another location, either within country, or into a new country. Relocations may require considerable management time as well as expenses related to market, personnel and facilities development before any significant revenue is generated, which may negatively affect our margin. Furthermore, there can be no
In particular, a significant portion of our manufacturing, design, support and storage operations are conducted in our facilities in China, and revenues associated with our China operations are important to our success. Therefore, our business, financial condition and results of operations may be materially adversely affected by economic, political, legal, regulatory, competitive, infrastructure and other factors in China. International trade disputes or political differences with China could result in tariffs and other measures that could adversely affect the Company’s business. The Chinese economy differs from the economies of most developed countries in many respects, including the level of government involvement and control over economic growth. In addition, our operations in China are governed by Chinese laws, rules and regulations, some of which are relatively new. The Chinese legal system continues to rapidly evolve, which may result in uncertainties with respect to the interpretation and enforcement of Chinese laws, rules and regulations that could have a material adverse effect on our business. China experiences high turnover of direct labor in the manufacturing sector due to the intensely competitive and fluid market for labor, and the retention of adequate labor is a challenge. If our labor turnover rates are higher than we expect, or we otherwise fail to adequately manage our labor needs, then our business and results of operations could be adversely affected. We are also subject to risks associated with our subsidiaries organized in China. For example, regulatory and registration requirements and government approvals affect the financing that we can provide to our subsidiaries. If we fail to receive required registrations and approvals to fund our subsidiaries organized in China, or if our ability to remit currency out of China is limited, then our business and liquidity could be adversely affected.
•Financial risks, such as: (1) overpayment; (2) an increase in our expenses and working capital requirements; (3) exposure to liabilities of the acquired businesses, with contractually-based time and monetary limitations on a seller’s obligation to indemnify us; (4) integration costs or failure to achieve synergy targets; (5) incurrence of additional debt; (6) valuation of goodwill and other intangible assets; (7) possible adverse tax and accounting effects; (8) the risk that we acquire manufacturing facilities and assume significant contractual and other obligations with no guaranteed levels of revenue; (9) the risk that, in the future, we may have to close or sell acquired facilities at our cost, which may include substantial employee severance costs and asset write-offs, which have resulted, and may result, in our incurring significant losses; and (10) costs associated with environmental risks including fines, remediation andclean-up.
•Operating risks, such as: (1) the diversion of management’s attention and resources to the integration of the acquired businesses and their employees and to the management of expanding operations; (2) the risk that the acquired businesses will fail to maintain the quality of services that we have historically provided; (3) the need to implement
Although we conduct what we believe to be a prudent level of due diligence regarding the businesses we purchase, in light of the circumstances of each transaction, an unavoidable level of risk remains regarding the actual condition of these businesses. Until we actually assume operating control of such businesses and their assets and operations, we may not be able to ascertain the actual value or understand the potential liabilities of the acquired entities and their operations.
We have expanded the primary scope of our acquisitions strategy beyond focusing on acquisition opportunities presented by companies divesting internal manufacturing operations. As we continue to pursue acquisitions that diversify our business into new industry sectors with new customers and services, the amount and scope of the risks associated may extend beyond those that we have traditionally faced in making acquisitions. These risks include greater uncertainties in the financial benefits and potential liabilities associated with this expanded base of acquisitions.
Over the past several
When financial markets experience significant turmoil, the financial arrangements we may need to enter into, refinance or repay and our customers may be adversely affected.
Credit market turmoil could negatively impact the counterparties and lenders to our forward foreign exchange contracts, trade accounts receivable securitization and sale programs, unsecured credit and term loan facilities, commercial paper program, various foreign subsidiary credit facilities and other debt facilities. These potential negative impacts could limit our ability to borrow under these financing agreements, contracts, facilities and programs or renew or obtain future additional financing. Credit market turmoil could also negatively impact certain of our customers and certain of their respective customers, which could cause them to reduce or cancel their orders and have a negative effect on our results of operations.
We can offer no assurance under the uncommitted trade accounts receivable sales programs that if we attempt to sell receivables through such programs in the future that we will receive funding from the associated banks, which would require us to utilize other available sources of liquidity, including our revolving credit facilities.
We are subject to extensive government regulations and industry standards and the terms of complex contracts; a failure to comply with current and future regulations and standards, or the terms of our contractual arrangements, could have an adverse effect on our business, customer relationships, reputation and profitability.
We are subject to extensive government regulation and industry standards relating to the products we design and manufacture as well as how we conduct our business, including regulations and standards relating to labor and employment practices, workplace health and safety, the environment, sourcing and import/export practices, the market sectors we support, privacy and data protection, the regulations that apply to government contracts, and many other facets of our operations. The regulatory climate in the U.S. and other countries has become increasingly complex and fragmented, and regulatory activity has increased in recent periods. Failure or noncompliance with such regulations or standards could have an adverse effect on our reputation, customer relationships, profitability and results of operations. In addition, we regularly enter into a large number of complex contractual arrangements as well as operate pursuant to the terms of a significant number of ongoing intricate contractual arrangements. Our failure or our customers’ failure to comply with the terms of such arrangements could expose us to claims or other demands and could have an adverse effect on our reputation, customer relationships, profitability and results of operations.
If we manufacture products containing design or manufacturing defects, demand for our services may decline, our reputation may be damaged and we may be subject to liability claims.
Our customers’ products and the manufacturing processes and design services that we use to produce them often are highly complex. Defects in the products we manufacture or design, whether caused by a design, manufacturing or component failure or error, or deficiencies in our manufacturing processes, may result in delayed shipments to customers or reduced or canceled customer orders. If these defects or deficiencies are significant, our business reputation may also be damaged. The failure of the products that we manufacture or of our manufacturing processes or facilities may subject us to regulatory enforcement, fines or penalties and, in some cases, require us to shut down, temporarily halt operations or incur considerable expense to correct a manufacturing process or facility. In addition, these defects may result in liability claims against us, expose us to liability to pay for the recall or remanufacture of a product or adversely affect product sales or our reputation. Even if our customers are responsible for the defects or defective specifications, they may not, or may not have resources to, assume responsibility for any costs or liabilities arising from these defects, which could expose us to additional liability claims. Any of these actions could increase our expenses, reduce our revenue or damage our reputation as a supplier to these customers.
We may face heightened liability risks specific to our medical device business as a result of additional healthcare regulatory related compliance requirements and the potential severe consequences (e.g., death or serious injury) that could result from manufacturing defects or malfunctions of the medical devices we manufacture or design.
As a service provider engaged in the business of designing and manufacturing medical devices for our customers, we have compliance requirements in addition to those relating to other industries we serve within our business. We are required to register with the U.S. Food and Drug Administration (“FDA”) and are subject to periodic inspection by the FDA for compliance with the FDA’s Quality System Regulation (“QSR”), including current Good Manufacturing Practices (cGMPs). This regulation establishes requirements for manufacturers of medical devices to implement design and process manufacturing controls, quality control, labeling, handling and documentation procedures. The FDA, through periodic inspections and post-market surveillance, continuously and rigorously monitors compliance with these QSR requirements and other applicable regulatory requirements. If any FDA inspection reveals noncompliance, and we do not address the FDA’s concerns to its satisfaction, the FDA may elect to take enforcement action against us, including issuing inspection observations or a notice of violation or a warning letter, imposing fines, bringing an action against the Company and its officers, requiring a recall of the products we manufactured, issuing an import detention on products entering the U.S. from an offshore facility or temporarily halting operations at or shutting down a manufacturing facility.
Beyond the FDA, our medical device business is also subject to applicable state and foreign regulatory requirements. Within the European Union (“EU”), we are required to fulfill certain internationally recognized standards and must undergo periodic inspections to obtain and maintain certifications to these standards. Continued noncompliance to the EU regulations could stop the flow of products into the EU from us or from our customers. In China, the Safe Food and Drug Administration controls and regulates the manufacture and commerce of healthcare products. We must comply with the regulatory laws applicable to medical device manufactures or our ability to manufacture products in China could be impacted. In Japan, the Pharmaceutical Affairs Laws regulate the manufacture and commerce of healthcare products. These regulations also require that subcontractors manufacturing products intended for sale in Japan register with authorities and submit to regulatory audits. Other foreign countries where we operate have similar laws regarding the regulation of medical device manufacturing. In the event of any noncompliance with these requirements, interruption of our operations and/or ability to allow commerce in these markets could occur, which in turn could cause our reputation and business to suffer.
Compliance or the failure to comply with current and future environmental, health and safety, product stewardship and producer responsibility laws or regulations could cause us significant expense.
We are subject to a variety of federal, state, local and foreign environmental, health and safety, product stewardship and producer responsibility laws and regulations, including those relating to the use, generation, storage, discharge and disposal of hazardous chemicals used during our manufacturing process, those governing worker health and safety, those requiring design changes, supply chain investigation or conformity assessments and those relating to the recycling or reuse of products we manufacture. If we fail to comply with any present or future regulations or timely obtain any needed permits, we could become subject to liabilities, and we could face fines or penalties, the suspension of production, or prohibitions on sales of products we manufacture. In addition, such regulations could restrict our ability to expand our facilities or could require us to acquire costly equipment, or to incur other significant expenses, including expenses associated with the recall of anynon-compliant product or with changes in our operational, procurement and inventory management activities.
Certain environmental laws impose liability for the costs of investigation, removal and remediation of hazardous or toxic substances on an owner, occupier or operator of real estate, or on parties who arranged for hazardous substance treatment or disposal, even if such person or company was unaware of, or not responsible for, contamination at the affected site. Soil and groundwater contamination may have occurred at or near, or may have arisen from, some of our facilities. From time to time we investigate, remediate and monitor soil and groundwater contamination at certain of our operating sites. In certain instances where contamination existed prior to our ownership or occupation of a site, landlords or former owners have retained some contractual responsibility for contamination and remediation. However, failure of such persons to perform those obligations could result in us being required to address such contamination. As a result, we may incurclean-up costs in such potential removal or remediation efforts. In other instances, we may be responsible forclean-up costs and other liabilities, including the possibility of claims due to health risks by both employees andnon-employees, as well as other third-party claims in connection with contaminated sites.
In addition, there is an increasing governmental focus around the world on global warming and environmental impact issues, which may result in new environmental, health and safety regulations that may affect us, our suppliers and our customers. This could cause us to incur additional direct costs for compliance, as well as increased indirect costs resulting from our customers, suppliers or both incurring additional compliance costs that get passed on to us. These costs may adversely impact our operations and financial condition.
We have limited insurance coverage for potential environmental liabilities associated with current operations and we do not anticipate increasing such coverage in the future.
Our manufacturing, production and design processes and services may result in exposure to intellectual property infringement and other claims.
Providing manufacturing services can expose us to potential claims that products, designs or manufacturing processes we use infringe third party intellectual property rights. Even though many of our manufacturing services contracts require our customers to indemnify us for infringement claims relating to their products, including associated product specifications and designs, a particular customer may not, or may not have the resources to, assume responsibility for such claims. In addition, we may be responsible for claims that our manufacturing processes or components used in manufacturing infringe third party intellectual property rights. Providing turnkey design solutions, and design and other services can expose us to different or greater potential liabilities than those we face providing just manufacturing services, including an increase in exposure to potential claims that products we design or supply, or materials or components we use, infringe third party intellectual property rights. Infringement claims could subject us to significant liability for damages, potential injunctive action, or hamper our normal operations such as by interfering with the availability of components. Regardless of the merits of any such claim, it could be time-consuming and expensive to resolve, and have a material adverse effect on our results of operations and financial position. In the event of such a claim, we may spend significant amounts of money and effort to developnon-infringing alternatives or obtain and maintain licenses. We may not be successful in developing such alternatives or obtaining and maintaining such licenses on reasonable terms or at all. Our customers may be required to or decide to discontinue products that are alleged to be infringing, and such discontinuance may result in a significant decrease in our business and/or could have a material adverse effect on our results of operations and financial position. These risks may be heightened in connection with our customer relationships with emerging companies.
Components we purchase, products we design and/or manufacture and/or services we provide may infringe the intellectual property rights of third parties, some of whom may hold key intellectual property rights in areas in which we operate. Our customers or suppliers could also become subject to infringement claims. Patent clearance or licensing activities, if any, may be inadequate to anticipate and avoid third party claims. Additionally, customers for our services in which we have significant technology contributions, typically require that we indemnify them against the risk of intellectual property infringement. If any claims are brought against our customers, our suppliers or us for such infringement, regardless of their merits, we could be required to expend significant resources in the defense or settlement of such claims, or in the defense or
settlement of related indemnification claims. In the event of a claim, we may be required to spend significant amounts of money and effort to developnon-infringing alternatives or obtain and maintain licenses. We may not be successful in developing such alternatives or obtaining or maintaining such licenses on reasonable terms or at all. We, our suppliers or our customers may be required to or decide to discontinue products, and such discontinuance may result in a significant decrease in our business, and could have a material adverse effect on our results of operations and financial position.
The success of certain aspects of our business depends in part on our ability to obtain, protect and leverage intellectual property rights.
In certain circumstances, we strive to obtain and protect certain intellectual property rights related to solutions, designs, processes and products that we create. We believe that obtaining a significant level of protected proprietary technology may give us a competitive advantage. In addition to selectively relying on patent rights, we rely on unpatented proprietaryknow-how and trade secrets, and employ various methods, includingnon-disclosure agreements with our customers, employees and suppliers and our internal security systems, policies and procedures to protect ourknow-how and trade secrets. However, we cannot be certain the measures we employ will result in protected intellectual property rights or will result in the prevention of unauthorized use of our technology. If we are unable to obtain and protect intellectual property rights embodied within our solutions, designs, processes and products, this could reduce or eliminate competitive advantages of our proprietary technology, which would harm our business and could have a material adverse effect on our results of operations and financial position.
Even if we take steps to protect certain intellectual property rights, these mechanisms may not afford complete or sufficient protection, and misappropriation may still occur. Further, there can be no assurance that we will be able to acquire or enforce our patent or other rights, if any, and that others will not independently develop similarknow-how and trade secrets, or develop better solutions, designs, processes and products than us. We have not historically sought patent protection for many of our proprietary processes, designs or other patentable intellectual property. Further, we may not be able to prevent current and former employees, contractors and other parties from breachingnon-disclosure agreements and misappropriating proprietary information. If any of the foregoing occur, it could impair our ability to compete with others in our industry, result in a significant decrease in our business and/or could have material adverse effect on our results of operations and financial position.
Any delay in the implementation of our information systems could disrupt our operations and cause unanticipated increases in our costs.
ramifications under certain customer contract provisions) and poor publicity and any of these could adversely affect our financial results. In addition, we must comply with increasingly complex regulations intended to protect business and personal data in the U.S. and elsewhere. Compliance with these regulations can be costly and any failure to comply could result in legal and reputational risks as well as penalties, fines and damages that could adversely affect our financial results.
changes.
rate could be adversely impacted if these provisions are adopted. As this framework is subject to further negotiation and implementation by each member country, the timing and ultimate impacts of any such changes on our tax obligations are uncertain.
•limit our flexibility in planning for, or reacting to changes in, our business;
•make us more vulnerable in the event of a downturn in our business; and
•impact certain financial covenants that we are subject to in connection with our debt and asset-backed securitization programs.
In addition, the U. K.’s Financial Conduct Authority, which regulates LIBOR, announced that it intends to phase out LIBOR by the end of 2021. The U.S. Federal Reserve has begun publishing a Secured Overnight Funding Rate (“SOFR”), which is intended to replace U.S. dollar LIBOR. Plans for alternative reference rates for other currencies have also been announced. At this time, we cannot predict how markets will respond to these proposed alternative rates or the effect of any changes to LIBOR or the discontinuation of LIBOR. If LIBOR is no longer available or if our lenders have increased costs due to changes in LIBOR, we may experience potential increases in interest rates on our variable rate debt, which could adversely impact our interest expense, results of operations and cash flows.
Energy price increases may negatively impact our results of operations.
Certain of the components that we use in our manufacturing activities are petroleum-based. In addition, we, along with our suppliers and customers, rely on various energy sources (including oil) in our facilities and transportation activities. An increase in energy prices, which have been volatile historically, could cause an increase in our raw material costs and transportation costs. In addition, increased transportation costs of certain of our suppliers and customers could be passed along to us. We may not be able to increase our product prices enough to offset these increased costs. In addition, any increase in our product prices may reduce our future customer orders and profitability.
We are subject to risks associated with natural disasters, climate change and global events.
Location | Approximate Square Footage | ||||||||||
Asia | 33 | ||||||||||
Americas | 13 | ||||||||||
Europe | 4 | ||||||||||
Total(1)(2) | 50 |
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performance and global economic conditions.
Comparison of 5 Year Cumulative Total Return
August 31 | 2014 | 2015 | 2016 | 2017 | 2018 | 2019 | ||||||||||||||||||
Jabil Inc. | $ | 100 | $ | 91 | $ | 101 | $ | 152 | $ | 145 | $ | 143 | ||||||||||||
S&P MidCap 400 Index – Total Returns | 100 | 100 | 112 | 126 | 151 | 142 | ||||||||||||||||||
Peer Group | 100 | 88 | 91 | 145 | 110 | 82 |
August 31 | 2017 | 2018 | 2019 | 2020 | 2021 | 2022 | |||||||||||||||||||||||||||||
Jabil Inc. | $ | 100 | $ | 95 | $ | 94 | $ | 113 | $ | 205 | $ | 201 | |||||||||||||||||||||||
S&P MidCap 400 Index – Total Returns | $ | 100 | $ | 120 | $ | 112 | $ | 117 | $ | 169 | $ | 152 | |||||||||||||||||||||||
Peer Group | $ | 100 | $ | 73 | $ | 56 | $ | 65 | $ | 102 | $ | 98 |
Period | Total Number of Shares Purchased(1) | Average Price Paid per Share | Total Number of Shares Purchased as Part of Publicly Announced Program(2) | Approximate Dollar Value of Shares that May Yet Be Purchased Under the Program (in thousands)(2) | ||||||||||||
June 1, 2019 - June 30, 2019 | 45 | $ | 26.92 | — | $ | — | ||||||||||
July 1, 2019 - July 31, 2019 | 633 | $ | 30.92 | — | $ | — | ||||||||||
August 1, 2019 - August 31, 2019 | — | $ | — | — | $ | — | ||||||||||
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Total | 678 | $ | 30.65 | — |
Period | Total Number of Shares Purchased(1) | Average Price Paid per Share | Total Number of Shares Purchased as Part of Publicly Announced Program(2)(3) | Approximate Dollar Value of Shares that May Yet Be Purchased Under the Program (in millions)(2)(3) | |||||||||||||||||||
June 1, 2022 - June 30, 2022 | 1,819,451 | $ | 57.39 | 1,817,573 | $ | 378 | |||||||||||||||||
July 1, 2022 - July 31, 2022 | 930,339 | $ | 52.12 | 922,590 | $ | 330 | |||||||||||||||||
August 1, 2022 - August 31, 2022 | 1,091,549 | $ | 61.59 | 1,091,549 | $ | 263 | |||||||||||||||||
Total | 3,841,339 | $ | 57.31 | 3,831,712 |
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(1)The purchases include amounts that are attributable to 9,627 shares surrendered to us by employees to satisfy, in connection with the vesting of restricted stock units and the exercise of stock options and stock appreciation rights, their tax withholding obligations.
The following selected data is derived from our Consolidated Financial Statements. This data should be read in conjunction with the Consolidated Financial Statements and notes thereto incorporated into Item 8, “Financial Statements and Supplementary Data” and with Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”
Fiscal Year Ended August 31, | ||||||||||||||||||||
2019 | 2018 | 2017 | 2016 | 2015 | ||||||||||||||||
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Consolidated Statement of Operations Data: | ||||||||||||||||||||
Net revenue | $ | 25,282,320 | $ | 22,095,416 | $ | 19,063,121 | $ | 18,353,086 | $ | 17,899,196 | ||||||||||
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Operating income | 701,356 | 542,153 | 410,230 | 522,833 | 555,411 | |||||||||||||||
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Income from continuing operations before tax | 450,704 | 373,401 | 256,233 | 387,045 | 431,646 | |||||||||||||||
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Income from continuing operations, net of tax | 289,474 | 87,541 | 127,167 | 254,896 | 294,185 | |||||||||||||||
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Discontinued operations, net of tax(1) | — | — | — | — | (8,573 | ) | ||||||||||||||
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Net income | 289,474 | 87,541 | 127,167 | 254,896 | 285,612 | |||||||||||||||
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Net income attributable to Jabil Inc. | $ | 287,111 | $ | 86,330 | $ | 129,090 | $ | 254,095 | $ | 284,019 | ||||||||||
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Earnings per share attributable to the stockholders of Jabil Inc.: | ||||||||||||||||||||
Basic: | ||||||||||||||||||||
Income from continuing operations, net of tax | $ | 1.85 | $ | 0.50 | $ | 0.71 | $ | 1.33 | $ | 1.51 | ||||||||||
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Discontinued operations, net of tax(1) | $ | — | $ | — | $ | — | $ | — | $ | (0.04 | ) | |||||||||
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Net income | $ | 1.85 | $ | 0.50 | $ | 0.71 | $ | 1.33 | $ | 1.47 | ||||||||||
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Diluted: | ||||||||||||||||||||
Income from continuing operations, net of tax | $ | 1.81 | $ | 0.49 | $ | 0.69 | $ | 1.32 | $ | 1.49 | ||||||||||
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Discontinued operations, net of tax(1) | $ | — | $ | — | $ | — | $ | — | $ | (0.04 | ) | |||||||||
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Net income | $ | 1.81 | $ | 0.49 | $ | 0.69 | $ | 1.32 | $ | 1.45 | ||||||||||
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August 31, | ||||||||||||||||||||
2019 | 2018 | 2017 | 2016 | 2015 | ||||||||||||||||
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Consolidated Balance Sheets Data: | ||||||||||||||||||||
Working capital(2) | $ | (187,020 | ) | $ | 319,050 | $ | (243,910 | ) | $ | 280,325 | $ | 191,168 | ||||||||
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Total assets | $ | 12,970,475 | $ | 12,045,641 | $ | 11,095,995 | $ | 10,322,677 | $ | 9,591,600 | ||||||||||
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Current installments of notes payable and long-term debt | $ | 375,181 | $ | 25,197 | $ | 444,255 | $ | 44,689 | $ | 321,964 | ||||||||||
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Notes payable and long-term debt, less current installments | $ | 2,121,284 | $ | 2,493,502 | $ | 1,606,017 | $ | 2,046,655 | $ | 1,308,663 | ||||||||||
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Total Jabil Inc. stockholders’ equity | $ | 1,887,443 | $ | 1,950,257 | $ | 2,353,514 | $ | 2,438,171 | $ | 2,314,856 | ||||||||||
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Common stock shares outstanding | 153,520 | 164,588 | 177,728 | 186,998 | 192,068 | |||||||||||||||
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2019 | 2018 | 2017 | 2016 | 2015 | ||||||||||||||||
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Consolidated Cash Flow Data: | ||||||||||||||||||||
Investing activities: | ||||||||||||||||||||
Acquisition of property, plant and equipment | $ | (1,005,480 | ) | $ | (1,036,651 | ) | $ | (716,485 | ) | $ | (924,239 | ) | $ | (963,145 | ) | |||||
Proceeds and advances from sale of property, plant and equipment | $ | 218,708 | $ | 350,291 | $ | 175,000 | $ | 26,031 | $ | 15,784 | ||||||||||
Financing activities: | ||||||||||||||||||||
Payments to acquire treasury stock | $ | (350,323 | ) | $ | (450,319 | ) | $ | (306,640 | ) | $ | (148,340 | ) | $ | (85,576 | ) |
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COVID-19
Fiscal Year Ended August 31, | ||||||||||||
2019 | 2018 | 2017 | ||||||||||
Net revenue | $ | 25,282,320 | $ | 22,095,416 | $ | 19,063,121 | ||||||
Gross profit | $ | 1,913,401 | $ | 1,706,792 | $ | 1,545,643 | ||||||
Operating income | $ | 701,356 | $ | 542,153 | $ | 410,230 | ||||||
Net income attributable to Jabil Inc. | $ | 287,111 | $ | 86,330 | $ | 129,090 | ||||||
Earnings per share – basic | $ | 1.85 | $ | 0.50 | $ | 0.71 | ||||||
Earnings per share – diluted | $ | 1.81 | $ | 0.49 | $ | 0.69 |
Fiscal Year Ended August 31, | |||||||||||||||||
2022 | 2021 | 2020 | |||||||||||||||
Net revenue | $ | 33,478 | $ | 29,285 | $ | 27,266 | |||||||||||
Gross profit | $ | 2,632 | $ | 2,359 | $ | 1,931 | |||||||||||
Operating income | $ | 1,393 | $ | 1,055 | $ | 500 | |||||||||||
Net income attributable to Jabil Inc. | $ | 996 | $ | 696 | $ | 54 | |||||||||||
Earnings per share – basic | $ | 7.06 | $ | 4.69 | $ | 0.36 | |||||||||||
Earnings per share – diluted | $ | 6.90 | $ | 4.58 | $ | 0.35 |
Three Months Ended | ||||||||||||||||||||||||||||||||
August 31, | May 31, | August 31, 2021 | ||||||||||||||||||||||||||||||
Sales cycle(1) | 32 days | 37 days | 19 days | |||||||||||||||||||||||||||||
Inventory turns (annualized)(2) | 5 turns | |||||||||||||||||||||||||||||||
Days in accounts receivable(3) | 40 days | 35 days | 38 days | |||||||||||||||||||||||||||||
Days in inventory(4) | 79 days | |||||||||||||||||||||||||||||||
Days in accounts payable(5) | 87 days |
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(1)The sales cycle is calculated as the sum of days in accounts receivable and days in inventory, less the days in accounts payable; accordingly, the variance in the sales cycle quarter over quarter is a direct result of changes in these indicators.
Effective September 1, 2018, our revenue recognition accounting policies changed in conjunction with the adoption of the new revenue recognition standard. For further discussion, refer to Note 18—“Revenue” to the Consolidated Financial Statements. We derive substantially all of our revenue from production and product management services (collectively referred to as “manufacturing services”), which encompasses the act of producing tangible products that are built to customer specifications, which are then provided to the customer.
We generally enter into manufacturing service contracts with our customers that provide the framework under which business will be conducted and customer purchase orders will be received for specific quantities and with predominantly fixed pricing. As a result, we consider our contract with a customer to be the combination of the manufacturing service contract and the purchase order, or any agreements or other similar documents.
The majority of our manufacturing service contracts relate to manufactured products which have no alternative use and for which we have an enforceable right to payment for the work completed to date. As a result, revenue is recognized over time when or as we transfer control of the promised products or services (known as performance obligations) to our customers. For certain other contracts with customers that do not meet the over time revenue recognition criteria, transfer of control occurs at a point in time which generally occurs upon delivery and transfer of risk and title to the customer.
Most of our contracts have a single performance obligation as the promise to transfer the individual manufactured product or service is capable of being distinct and is distinct within the context of the contract. For the majority of customers, performance obligations are satisfied over time based on the continuous transfer of control as manufacturing services are performed and are generally completed in less than one year.
We also derive revenue to a lesser extent from electronic design services to certain customers. Revenue from electronic design services is generally recognized over time as the services are performed.
Certain contracts with customers include variable consideration, such as rebates, discounts, or returns. We recognize estimates of this variable consideration that are not expected to result in a significant revenue reversal in the future, primarily based on the most likely level of consideration to be paid to the customer under the specific terms of the underlying programs.
Allowance for Doubtful Accounts
We maintain an allowance for doubtful accounts related to receivables not expected to be collected from our customers. This allowance is based on management’s assessment of specific customer balances after considering the age of receivables and financial stability of the customer. If there is an adverse change in the financial condition and circumstances of our customers, or if actual defaults are higher than provided for, an addition to the allowance may be necessary.
Inventory Valuation
We review property, plant and equipment and amortizable intangible assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of property, plant and equipment is measured by comparing its carrying value to the undiscounted projected cash flows that the asset(s) or asset group(s) are expected to generate. If the carrying amount of an asset or an asset group is not recoverable, we recognize an impairment loss based on the excess of the carrying amount of the long-lived asset or asset group over its respective fair value, which is generally determined as either the present value of estimated future cash flows or the appraised value. The impairment analysis is based on significant assumptions of future results made by management, including revenue and cash flow projections. Circumstances that may lead to impairment of property, plant and equipment include unforeseen decreases in future performance or industry demand and the restructuring of our operations resulting from a change in our business strategy or adverse economic conditions.
We review amortizable intangible assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.
equal to that excess.
analysis.
Consolidated Financial Statements. Our judgments regarding future taxable income as well as tax positions taken or expected to be taken in a tax return may change due to changes in market conditions, changes in tax laws or other factors. If our assumptions and consequently our estimates change in the future, the valuation allowances and/or tax reserves established may be increased or decreased, resulting in a respective increase or decrease in income tax expense. For further discussion related to our income taxes, refer to Note 415 — “Income Taxes” to the Consolidated Financial Statements.
See
2020
.Fiscal Year Ended August 31, | Change | |||||||||||||||||||
(dollars in millions) | 2019 | 2018 | 2017 | 2019 vs. 2018 | 2018 vs. 2017 | |||||||||||||||
Net revenue | $ | 25,282.3 | $ | 22,095.4 | $ | 19,063.1 | 14.4 | % | 15.9 | % |
2019
Fiscal Year Ended August 31, | Change | ||||||||||||||||||||||||||||
(dollars in millions) | 2022 | 2021 | 2020 | 2022 vs. 2021 | 2021 vs. 2020 | ||||||||||||||||||||||||
Net revenue | $ | 33,478 | $ | 29,285 | $ | 27,266 | 14.3 | % | 7.4 | % | |||||||||||||||||||
2021
Effective September 1, 2018, our revenue recognition accounting policies changedwe expect higher gross margins and lower cash used in conjunction with the adoption of the new revenue recognition standard. Subsequent to adoption, we recognize revenue over time as manufacturing services are performed for the majority of our contracts with customers, which results in revenue being recognized earlier than under the previous guidance. Revenue for all other contracts with customers will be recognized at a point in time, upon transfer of control of the product to the customer, which is effectively no change to our historical accounting. For further discussion of the new revenue recognition standard, refer to Note 18—“Revenue” to the Consolidated Financial Statements.
The following table sets forth, for the periods indicated, revenue by segment expressed as a percentage of net revenue:
Fiscal Year Ended August 31, | ||||||||||||
2019 | 2018 | 2017 | ||||||||||
EMS | 61 | % | 56 | % | 58 | % | ||||||
DMS | 39 | % | 44 | % | 42 | % | ||||||
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Total | 100 | % | 100 | % | 100 | % | ||||||
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Fiscal Year Ended August 31, | |||||||||||||||||
2022 | 2021 | 2020 | |||||||||||||||
EMS | 50 | % | 47 | % | 52 | % | |||||||||||
DMS | 50 | % | 53 | % | 48 | % | |||||||||||
Total | 100 | % | 100 | % | 100 | % |
Fiscal Year Ended August 31, | ||||||||||||
2019 | 2018 | 2017 | ||||||||||
Foreign source revenue | 87.7 | % | 91.7 | % | 91.4 | % |
Fiscal Year Ended August 31, | |||||||||||||||||
2022 | 2021 | 2020 | |||||||||||||||
Foreign source revenue | 83.9 | % | 83.6 | % | 82.6 | % | |||||||||||
Fiscal Year Ended August 31, | ||||||||||||
(dollars in millions) | 2019 | 2018 | 2017 | |||||||||
Gross profit | $ | 1,913.4 | $ | 1,706.8 | $ | 1,545.6 | ||||||
Percent of net revenue | 7.6 | % | 7.7 | % | 8.1 | % |
2019
Fiscal Year Ended August 31, | |||||||||||||||||
(dollars in millions) | 2022 | 2021 | 2020 | ||||||||||||||
Gross profit | $ | 2,632 | $ | 2,359 | $ | 1,931 | |||||||||||
Percent of net revenue | 7.9 | % | 8.1 | % | 7.1 | % |
For the fiscal year ended August 31, 2019, gross profit for our DMS segment increased as a percentage of net revenue due to improved profitability across the various businesses. This increase was offset by a decrease in gross2021
Selling, General and Administrative
Fiscal Year Ended August 31, | Change | |||||||||||||||||||
(dollars in millions) | 2019 | 2018 | 2017 | 2019 vs. 2018 | 2018 vs. 2017 | |||||||||||||||
Selling, general and administrative | $ | 1,111.3 | $ | 1,050.7 | $ | 907.7 | $ | 60.6 | $ | 143.0 |
2019 vs. 2018
Selling, general and administrative expenses increased duringdecreased for the fiscal year ended August 31, 20192022 compared to the fiscal year ended August 31, 2018. The increase is predominantly2021, primarily due to (i) a $48.4 million increase in salaryproduct mix.
Fiscal Year Ended August 31, | Change | ||||||||||||||||||||||||||||
(in millions) | 2022 | 2021 | 2020 | 2022 vs. 2021 | 2021 vs. 2020 | ||||||||||||||||||||||||
Selling, general and administrative | $ | 1,154 | $ | 1,213 | $ | 1,175 | $ | (59) | $ | 38 |
awards granted during the second quarter of fiscal year 2021.
Fiscal Year Ended August 31, | ||||||||||||
(dollars in millions) | 2019 | 2018 | 2017 | |||||||||
Research and development | $ | 42.9 | $ | 38.5 | $ | 29.7 | ||||||
Percent of net revenue | 0.2 | % | 0.2 | % | 0.2 | % |
2019Fiscal Year Ended August 31, (dollars in millions) 2022 2021 2020 Research and development $ 33 $ 34 $ 43 Percent of net revenue 0.1 % 0.1 % 0.2 %
2021
2021.
Fiscal Year Ended August 31, | Change | |||||||||||||||||||
(dollars in millions) | 2019 | 2018 | 2017 | 2019 vs. 2018 | 2018 vs. 2017 | |||||||||||||||
Amortization of intangibles | $ | 31.9 | $ | 38.5 | $ | 35.5 | $ | (6.6 | ) | $ | 3.0 |
2019
Fiscal Year Ended August 31, | Change | ||||||||||||||||||||||||||||
(in millions) | 2022 | 2021 | 2020 | 2022 vs. 2021 | 2021 vs. 2020 | ||||||||||||||||||||||||
Amortization of intangibles | $ | 34 | $ | 47 | $ | 56 | $ | (13) | $ | (9) |
2021
In the fourth quarter of fiscal year 2019, we made a strategic decision that the indefinite-lived trade name of $72.5 million acquired during the acquisition of Nypro would be phased out over the next four years. In connection with a strategic shift to further diversify our portfolio, focus on innovation and technology within our healthcare business and as a result of the strategic collaboration with a certain medical device company, we decided to implement a rebranding initiative to Jabil Healthcare. Management believes the name change better leverages the Jabil brand and the full range of services available to our customers.
As a result of our decision to rebrand, we determined the indefinite-lived trade name should no longer be classified as an indefinite-lived intangible asset. As such, this trade name was assigned a four-year estimated useful life and will be amortized on an accelerated basis. See Note 6 – “Goodwill and Other Intangible Assets” to the Consolidated Financial Statements for further discussion.
name.
Fiscal Year Ended August 31, | ||||||||||||
(dollars in millions) | 2019 | 2018 | 2017(2) | |||||||||
Employee severance and benefit costs | $ | 16.0 | $ | 16.3 | $ | 56.8 | ||||||
Lease costs | — | 1.6 | 4.0 | |||||||||
Assetwrite-off costs | (3.6 | ) | 16.2 | 94.3 | ||||||||
Other costs | 13.5 | 2.8 | 5.3 | |||||||||
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Total restructuring and related charges(1) | $ | 25.9 | $ | 36.9 | $ | 160.4 | ||||||
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Fiscal Year Ended August 31, | ||||||||||||||||||||
(in millions) | 2022(1) | 2021 | 2020 | |||||||||||||||||
Employee severance and benefit costs | $ | 18 | $ | 5 | $ | 94 | ||||||||||||||
Lease costs | — | (1) | 8 | |||||||||||||||||
Asset write-off costs | — | 5 | 33 | |||||||||||||||||
Other costs | — | 1 | 22 | |||||||||||||||||
Total restructuring, severance and related charges(2) | $ | 18 | $ | 10 | $ | 157 |
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2017 Restructuring Plan
On September 15, 2016, our Board
The 2017 Restructuring Plan, totaling $195.0 million in restructuringseverance and related costs, is complete as of August 31, 2019.
2020 Restructuring Plan
On September 20, 2019, our Board of Directors formally approved a restructuring plan to realign our global capacity support infrastructure, particularly in our mobility footprint in China, in order to optimize organizational effectiveness. This action includes headcount reductions and capacity realignment (the “2020 Restructuring Plan”). The 2020 Restructuring Plan reflects our intention only and restructuring decisions, and the timing of such decisions, at certain locationscharges are still subject to consultation with our employees and their representatives.
We currently expect to recognize approximately $85.0 million inpre-tax restructuring and other related costs primarily over the course of our fiscal year 2020. The charges relating to the 2020 Restructuring Plan are currently expected to result in cash expenditures in the range of approximately $30.0 million to $40.0 million that will be payable over the course of our fiscal years 2020 and 2021. The exact timing of these charges and cash outflows, as well as the estimated cost ranges by category type, have not been finalized. This information will be subject to the finalization of timetables for the transition of functions, consultation with employees and their representatives as well as the statutory severance requirements of the particular jurisdictions impacted, and the amount and timing of the actual charges may vary due to a variety of factors. Our estimates for the charges discussed above exclude any potential income tax effects.
Seecosts.
Fiscal Year Ended August 31, | Change | ||||||||||||||||||||||||||||
(in millions) | 2022 | 2021 | 2020 | 2022 vs. 2021 | 2021 vs. 2020 | ||||||||||||||||||||||||
Loss on debt extinguishment | $ | 4 | $ | — | $ | — | $ | 4 | $ | — |
Restructuring of Securities
Fiscal Year Ended August 31, | Change | |||||||||||||||||||
(dollars in millions) | 2019 | 2018 | 2017 | 2019 vs. 2018 | 2018 vs. 2017 | |||||||||||||||
Restructuring of securities loss | $ | 29.6 | $ | — | $ | — | $ | 29.6 | $ | — |
2019 vs. 2018
Restructuring of securities loss increased“make-whole” premium incurred during the fiscal year ended August 31, 20192022, for the redemption of the 4.700% Senior Notes due 2022.
Fiscal Year Ended August 31, | Change | ||||||||||||||||||||||||||||
(in millions) | 2022 | 2021 | 2020 | 2022 vs. 2021 | 2021 vs. 2020 | ||||||||||||||||||||||||
(Gain) loss on securities | $ | — | $ | (2) | $ | 49 | $ | 2 | $ | (51) |
Other Expense
Fiscal Year Ended August 31, | Change | |||||||||||||||||||
(dollars in millions) | 2019 | 2018 | 2017 | 2019 vs. 2018 | 2018 vs. 2017 | |||||||||||||||
Other expense | $ | 53.8 | $ | 37.6 | $ | 28.4 | $ | 16.2 | $ | 9.2 |
2019 vs. 2018
Other expense increasedan investment during the fiscal year ended August 31, 20192021.
Fiscal Year Ended August 31, | Change | ||||||||||||||||||||||||||||
(in millions) | 2022 | 2021 | 2020 | 2022 vs. 2021 | 2021 vs. 2020 | ||||||||||||||||||||||||
Other expense (income) | $ | 12 | $ | (11) | $ | 31 | $ | 23 | $ | (42) | |||||||||||||||||||
Fiscal Year Ended August 31, | Change | ||||||||||||||||||||||||||||
(in millions) | 2022 | 2021 | 2020 | 2022 vs. 2021 | 2021 vs. 2020 | ||||||||||||||||||||||||
Interest income | $ | 5 | $ | 6 | $ | 15 | $ | (1) | $ | (9) | |||||||||||||||||||
Interest Income
Fiscal Year Ended August 31, | Change | |||||||||||||||||||
(dollars in millions) | 2019 | 2018 | 2017 | 2019 vs. 2018 | 2018 vs. 2017 | |||||||||||||||
Interest income | $ | 21.5 | $ | 17.8 | $ | 12.5 | $ | 3.7 | $ | 5.3 |
2019 vs. 2018
Interest income increased during the fiscal year ended August 31, 20192022 compared to the fiscal year ended August 31, 2018 due to increased cash equivalents (investments that are readily convertible to cash with maturity dates of 90 days or less).
2021.
Fiscal Year Ended August 31, | Change | |||||||||||||||||||
(dollars in millions) | 2019 | 2018 | 2017 | 2019 vs. 2018 | 2018 vs. 2017 | |||||||||||||||
Interest expense | $ | 188.7 | $ | 149.0 | $ | 138.1 | $ | 39.7 | $ | 10.9 |
2019
Fiscal Year Ended August 31, | Change | ||||||||||||||||||||||||||||
(in millions) | 2022 | 2021 | 2020 | 2022 vs. 2021 | 2021 vs. 2020 | ||||||||||||||||||||||||
Interest expense | $ | 151 | $ | 130 | $ | 174 | $ | 21 | $ | (44) | |||||||||||||||||||
2021
senior notes.
Fiscal Year Ended August 31, | Change | |||||||||||||||||||
2019 | 2018 | 2017 | 2019 vs. 2018 | 2018 vs. 2017 | ||||||||||||||||
Effective income tax rate | 35.8 | % | 76.6 | % | 50.4 | % | (40.8 | )% | 26.2 | % |
2019
Fiscal Year Ended August 31, | Change | ||||||||||||||||||||||||||||
2022 | 2021 | 2020 | 2022 vs. 2021 | 2021 vs. 2020 | |||||||||||||||||||||||||
Effective income tax rate | 19.1 | % | 26.0 | % | 78.2 | % | (6.9) | % | (52.2) | % | |||||||||||||||||||
2021
Adjusted free cash flow is defined as net cash provided by (used in) operating activities less net capital expenditures (acquisition of property, plant and equipment less proceeds and advances from the sale of property, plant and equipment). We report adjusted free cash flow as we believe this non-GAAP financial measure is useful to investors in measuring our ability to generate cash internally and fund future growth and to provide a return to shareholders.
Fiscal Year Ended August 31, | ||||||||||||
(in thousands, except for per share data) | 2019 | 2018 | 2017 | |||||||||
Operating income (U.S. GAAP) | $ | 701,356 | $ | 542,153 | $ | 410,230 | ||||||
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Amortization of intangibles | 31,923 | 38,490 | 35,524 | |||||||||
Stock-based compensation expense and related charges | 61,346 | 98,511 | 48,544 | |||||||||
Restructuring and related charges | 25,914 | 36,902 | 160,395 | |||||||||
Distressed customer charges(1) | 6,235 | 32,710 | 10,198 | |||||||||
Business interruption and impairment charges, net(2) | (2,860 | ) | 11,299 | — | ||||||||
Acquisition and integration charges(3) | 52,697 | 8,082 | — | |||||||||
Loss on disposal of subsidiaries | — | — | 2,112 | |||||||||
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Adjustments to operating income | 175,255 | 225,994 | 256,773 | |||||||||
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Core operating income(Non-GAAP) | $ | 876,611 | $ | 768,147 | $ | 667,003 | ||||||
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Net income attributable to Jabil Inc. (U.S. GAAP) | $ | 287,111 | $ | 86,330 | $ | 129,090 | ||||||
Adjustments to operating income | 175,255 | 225,994 | 256,773 | |||||||||
Other than temporary impairment on securities | — | — | 11,539 | |||||||||
Restructuring of securities loss(4) | 29,632 | — | — | |||||||||
Adjustment for taxes(5) | (18,633 | ) | 146,206 | (4,726 | ) | |||||||
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Core earnings(Non-GAAP) | $ | 473,365 | $ | 458,530 | $ | 392,676 | ||||||
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Diluted earnings per share (U.S. GAAP) | $ | 1.81 | $ | 0.49 | $ | 0.69 | ||||||
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Diluted core earnings per share(Non-GAAP) | $ | 2.98 | $ | 2.62 | $ | 2.11 | ||||||
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Diluted weighted average shares outstanding used in the calculation of earnings per share (U.S. GAAP andNon-GAAP) | 158,647 | 175,044 | 185,838 | |||||||||
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Fiscal Year Ended August 31, | |||||||||||||||||
(in millions, except for per share data) | 2022 | 2021 | 2020 | ||||||||||||||
Operating income (U.S. GAAP) | $ | 1,393 | $ | 1,055 | $ | 500 | |||||||||||
Amortization of intangibles | 34 | 47 | 56 | ||||||||||||||
Stock-based compensation expense and related charges | 81 | 102 | 83 | ||||||||||||||
Restructuring, severance and related charges(1) | 18 | 10 | 157 | ||||||||||||||
Distressed customer charge | — | — | 15 | ||||||||||||||
Net periodic benefit cost(2) | 17 | 24 | 16 | ||||||||||||||
Business interruption and impairment charges, net | — | (1) | 6 | ||||||||||||||
Acquisition and integration charges | — | 4 | 31 | ||||||||||||||
Adjustments to operating income | 150 | 186 | 364 | ||||||||||||||
Core operating income (Non-GAAP) | $ | 1,543 | $ | 1,241 | $ | 864 | |||||||||||
Net income attributable to Jabil Inc. (U.S. GAAP) | $ | 996 | $ | 696 | $ | 54 | |||||||||||
Adjustments to operating income | 150 | 186 | 364 | ||||||||||||||
Loss on debt extinguishment(3) | 4 | — | — | ||||||||||||||
(Gain) loss on securities | — | (2) | 49 | ||||||||||||||
Net periodic benefit cost(2) | (17) | (24) | (16) | ||||||||||||||
Adjustment for taxes(4) | (28) | (3) | (1) | ||||||||||||||
Core earnings (Non-GAAP) | $ | 1,105 | $ | 853 | $ | 450 | |||||||||||
Diluted earnings per share (U.S. GAAP) | $ | 6.90 | $ | 4.58 | $ | 0.35 | |||||||||||
Diluted core earnings per share (Non-GAAP) | $ | 7.65 | $ | 5.61 | $ | 2.90 | |||||||||||
Diluted weighted average shares outstanding (U.S. GAAP and Non-GAAP) | 144.4 | 152.1 | 155.3 | ||||||||||||||
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ROIC & Core ROIC
Fiscal Year Ended August 31, | ||||||||||||
(in thousands) | 2019 | 2018 | 2017 | |||||||||
Numerator: | ||||||||||||
Operating income (U.S. GAAP) | $ | 701,356 | $ | 542,153 | $ | 410,230 | ||||||
Tax effect (1) | (183,381 | ) | (300,979 | ) | (137,087 | ) | ||||||
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After-tax operating income | 517,975 | 241,174 | 273,143 | |||||||||
x1 | x1 | x1 | ||||||||||
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Annualizedafter-tax operating income | $ | 517,975 | $ | 241,174 | $ | 273,143 | ||||||
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Core operating income(Non-GAAP) | $ | 876,611 | $ | 768,147 | $ | 667,003 | ||||||
Tax effect (2) | (188,722 | ) | (144,261 | ) | (134,930 | ) | ||||||
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After-tax core operating income | 687,889 | 623,886 | 532,073 | |||||||||
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Annualizedafter-tax core operating income | $ | 687,889 | $ | 623,886 | $ | 532,073 | ||||||
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Denominator: | ||||||||||||
Average total Jabil Inc. stockholders’ equity (3) | $ | 1,918,850 | $ | 2,151,886 | $ | 2,395,843 | ||||||
Average notes payable and long-term debt, less current installments (3) | 2,307,393 | 2,063,047 | 1,853,302 | |||||||||
Average current installments of notes payable and long-term debt (3) | 200,189 | 235,348 | 245,654 | |||||||||
Average cash and cash equivalents (3) | (1,210,646 | ) | (1,223,934 | ) | (1,050,989 | ) | ||||||
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Net invested capital base | $ | 3,215,786 | $ | 3,226,347 | $ | 3,443,810 | ||||||
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Return on Invested Capital (U.S. GAAP) | 16.1 | % | 7.5 | % | 7.9 | % | ||||||
Adjustments noted above | 5.3 | % | 11.8 | % | 7.6 | % | ||||||
Core Return on Invested Capital(Non-GAAP) | 21.4 | % | 19.3 | % | 15.5 | % |
Fiscal Year Ended August 31, | |||||||||||||||||
(in millions) | 2022 | 2021 | 2020 | ||||||||||||||
Net cash provided by operating activities (U.S. GAAP) | $ | 1,651 | $ | 1,433 | $ | 1,257 | |||||||||||
Acquisition of property, plant and equipment (“PP&E”)(1) | (1,385) | (1,159) | (983) | ||||||||||||||
Proceeds and advances from sale of PP&E(1) | 544 | 366 | 187 | ||||||||||||||
Adjusted free cash flow (Non-GAAP) | $ | 810 | $ | 640 | $ | 461 |
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Fiscal Year 2019
Three Months Ended | ||||||||||||||||
(in thousands, except for per share data) | August 31, 2019 | May 31, 2019 | February 28, 2019 | November 30, 2018 | ||||||||||||
Net revenue | $ | 6,573,453 | $ | 6,135,602 | $ | 6,066,990 | $ | 6,506,275 | ||||||||
Gross profit(4) | 495,078 | 443,799 | 454,874 | 519,650 | ||||||||||||
Operating income(1)(4) | 189,745 | 140,918 | 153,983 | 216,710 | ||||||||||||
Net income(2)(3)(4) | 53,761 | 44,032 | 67,607 | 124,074 | ||||||||||||
Net income attributable to Jabil Inc.(2)(3)(4) | $ | 52,675 | $ | 43,482 | $ | 67,354 | $ | 123,600 | ||||||||
Earnings per share attributable to the stockholders of Jabil Inc. | ||||||||||||||||
Basic | $ | 0.34 | $ | 0.28 | $ | 0.44 | $ | 0.77 | ||||||||
Diluted | $ | 0.34 | $ | 0.28 | $ | 0.43 | $ | 0.76 |
Fiscal Year 2018
Three Months Ended | ||||||||||||||||
(in thousands, except for per share data) | August 31, 2018 | May 31, 2018 | February 28, 2018 | November 30, 2017 | ||||||||||||
Net revenue | $ | 5,771,831 | $ | 5,436,952 | $ | 5,301,101 | $ | 5,585,532 | ||||||||
Gross profit(4) | 442,147 | 398,227 | 397,133 | 469,285 | ||||||||||||
Operating income(1)(4)(5) | 153,896 | 112,971 | 129,532 | 145,754 | ||||||||||||
Net (loss) income(2)(4)(5) | (56,608 | ) | 42,702 | 37,528 | 63,919 | |||||||||||
Net (loss) income attributable to Jabil Inc.(2)(4)(5) | $ | (57,314 | ) | $ | 42,541 | $ | 37,308 | $ | 63,795 | |||||||
(Loss) earnings per share attributable to the stockholders of Jabil Inc. | ||||||||||||||||
Basic | $ | (0.34 | ) | $ | 0.25 | $ | 0.21 | $ | 0.36 | |||||||
Diluted | $ | (0.34 | ) | $ | 0.25 | $ | 0.21 | $ | 0.35 |
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Three Months Ended | |||||||||||
(in millions, except for per share data) | August 31, 2022 | August 31, 2021 | |||||||||
Net revenue | $ | 9,030 | $ | 7,409 | |||||||
Gross profit | $ | 729 | $ | 587 | |||||||
Operating income | $ | 409 | $ | 265 | |||||||
Net income | $ | 315 | $ | 175 | |||||||
Net income attributable to Jabil Inc. | $ | 315 | $ | 175 | |||||||
Earnings per share attributable to the stockholders of Jabil Inc.: | |||||||||||
Basic | $ | 2.30 | $ | 1.20 | |||||||
Diluted | $ | 2.25 | $ | 1.16 |
During fiscal year 2018, the Company and JJMD entered into a Framework Agreement to form a strategic collaboration and expand our existing relationship. The strategic collaboration expands our medical device manufacturing portfolio, diversification and capabilities.
On February 25, 2019 and April 29, 2019, under the terms of the Framework Agreement, we completed the initial closing and second closing, respectively, of our acquisition of certain assets of JJMD. The preliminary aggregate purchase price paid for both the initial closing and second closing was approximately $153.2 million in cash, which remains subject to certain post-closing adjustments. The acquisition of the JJMD assets has been accounted for as a business combination using the acquisition method of accounting. Total assets acquired of $167.6 million and total liabilities assumed of $14.4 million were recorded at their estimated fair values as of the acquisition dates. The final closing, which is subject to customary closing conditions, is expected to occur during fiscal year 2020.
We are currently evaluating the fair values of the assets and liabilities related to this business combination. The preliminary estimates and measurements are, therefore, subject to change during the measurement period for assets acquired, liabilities assumed and tax adjustments. The results of operations were included in our consolidated financial results beginning on February 25, 2019 for the initial closing and April 29, 2019 for the second closing. We believe it is impracticable to provide pro forma information for the acquisition of JJMD assets.
On September 30, 2019 we completed the third closing of our acquisition of certain assets of JJMD for a cash payment of $117.1 million, primarily for inventory and the assumption of certain employee liabilities. The purchase price for the third closing is subject to certain post-closing adjustments based on conditions within the Framework Agreement.
Refer
cash.
As a result Most of the Tax Act and after theone-time transition tax on our historically untaxed foreign earnings, the cash and cash equivalents held by our foreign subsidiaries will no longer be subject to U.S. federal income tax consequences upon subsequent repatriation to the United States. As a result, most of our cash and cash equivalents as of August 31, 20192022 could be repatriated to the United States without potential tax consequences.
(in thousands) | 8.250% Senior Notes(1) | 5.625% Senior Notes | 4.700% Senior Notes | 4.900% Senior Notes | 3.950% Senior Notes(1) | Borrowings under revolving credit facilities(2)(3)(4) | Borrowings under loans(2)(3) | Total notes payable and credit facilities | ||||||||||||||||||||||||
Balance as of August 31, 2017 | $ | 399,506 | $ | 397,104 | $ | 496,696 | $ | 298,571 | $ | — | $ | — | $ | 458,395 | $ | 2,050,272 | ||||||||||||||||
Borrowings | — | — | — | — | 498,659 | 8,778,855 | 400,000 | 9,677,514 | ||||||||||||||||||||||||
Payments | (400,000 | ) | — | — | — | — | (8,778,855 | ) | (25,907 | ) | (9,204,762 | ) | ||||||||||||||||||||
Other | 494 | 891 | 654 | 243 | (4,451 | ) | — | (2,156 | ) | (4,325 | ) | |||||||||||||||||||||
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Balance as of August 31, 2018 | — | 397,995 | 497,350 | 298,814 | 494,208 | — | 830,332 | 2,518,699 | ||||||||||||||||||||||||
Borrowings | — | — | — | — | — | 11,985,978 | — | 11,985,978 | ||||||||||||||||||||||||
Payments | — | — | — | — | — | (11,985,259 | ) | (25,134 | ) | (12,010,393 | ) | |||||||||||||||||||||
Other | — | 891 | 654 | 243 | 617 | (719 | ) | 495 | 2,181 | |||||||||||||||||||||||
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Balance as of August 31, 2019 | $ | — | $ | 398,886 | $ | 498,004 | $ | 299,057 | $ | 494,825 | $ | — | $ | 805,693 | $ | 2,496,465 | ||||||||||||||||
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Maturity Date | Mar 15, 2018 | Dec 15, 2020 | Sep 15, 2022 | Jul 14, 2023 | Jan 12, 2028 | Nov 8, 2022 and | Nov 8, 2022 and | |||||||||||||||||||||||||
Original Facility/ Maximum Capacity | $ | 400.0 million | | $ | 400.0 million | | $ | 500.0 million | | $ | 300.0 million | | $ | 500.0 million | | $
| 2.6 billion(2)(3) |
| $
| 851.7 million(2)(3) |
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(in millions) | 4.700% Senior Notes(1) | 4.900% Senior Notes | 3.950% Senior Notes | 3.600% Senior Notes | 3.000% Senior Notes | 1.700% Senior Notes | 4.250% Senior Notes(1) | Borrowings under revolving credit facilities(2) | Borrowings under loans | Total notes payable and credit facilities | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Balance as of August 31, 2020 | $ | 499 | $ | 299 | $ | 495 | $ | 495 | $ | 590 | $ | — | $ | — | $ | — | $ | 350 | $ | 2,728 | |||||||||||||||||||||||||||||||||||||||||||||
Borrowings | — | — | — | — | — | 500 | — | 1,224 | — | 1,724 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Payments | — | — | — | — | — | — | — | (1,224) | (350) | (1,574) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Other | — | 1 | 1 | — | 1 | (4) | — | — | 1 | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Balance as of August 31, 2021 | 499 | 300 | 496 | 495 | 591 | 496 | — | — | 1 | 2,878 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Borrowings | — | — | — | — | — | — | 498 | 3,269 | — | 3,767 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Payments | (500) | — | — | — | — | — | — | (3,269) | (1) | (3,770) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Other | 1 | — | 1 | 1 | 1 | 1 | (5) | — | — | — | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Balance as of August 31, 2022 | $ | — | $ | 300 | $ | 497 | $ | 496 | $ | 592 | $ | 497 | $ | 493 | $ | — | $ | — | $ | 2,875 | |||||||||||||||||||||||||||||||||||||||||||||
Maturity Date | Sep 15, 2022 | Jul 14, 2023 | Jan 12, 2028 | Jan 15, 2030 | Jan 15, 2031 | Apr 15, 2026 | May 15, 2027 | Jan 22, 2024 and Jan 22, 2026 | Jul 31, 2026 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Original Facility/ Maximum Capacity(2) | $500 million | $300 million | $500 million | $500 million | $600 million | $500 million | $500 million | $3.8 billion(2) | $2 million |
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(1)On May 4, 2022, we issued $500 million of registered 4.250% Senior Notes due 2027 (the “Green Bonds” or the “4.250% Senior Notes”). On May 31, 2022, the net proceeds from the offering were used to redeem our 4.700% Senior Notes due in 2022 and pay the applicable “make-whole” premium and accrued interest. In addition, we intend to allocate an amount equal to the net proceeds from this offering to finance or refinance eligible expenditures under our new green financing framework. (2)As of August 31, 2022, we had $3.8 billion in available unused borrowing capacity under our revolving credit facilities. The |
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The interest rates on the 2017 Revolving Credit Facility acts as the back-up facility for commercial paper outstanding, if any. We have a borrowing capacity of up to $3.2 billion under our commercial paper program, which was increased from $1.8 billion on February 18, 2022. Commercial paper borrowings rangedwith an original maturity of 90 days or less are recorded net within the Consolidated Statement of Cash Flows, and have been excluded from 3.1% to 5.7% and the 2017 Term Loan Facility ranged from 3.5% to 3.9% during the fiscal year ended August 31, 2019. The interest rate on the 2018 Revolving Credit Facility borrowings ranged from 3.1% to 3.4% and the 2018 Term Loan Facility ranged from 3.3% to 3.8% during the fiscal year ended August 31, 2019.
Additionally, our foreign subsidiaries have various additional credit facilities that finance their future growth and any corresponding working capital needs.
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table above.
We have a shelf registration statement with the SEC registering the potential sale of an indeterminate amount of debt and equity securities in the future to augment our liquidity and capital resources.
Asset-Backed Securitization and Trade Accounts Receivable Sale Programs
We
As of October 1, 2018, approximately $734.2 million of accounts receivable sold under the foreign asset-backed securitization program was exchanged for the outstanding deferred purchase price receivable of $335.5 million. The remaining amount due to theconduits administered by an unaffiliated financial institution of $398.7 million was subsequently settled for $25.2 million of cash and $373.5 million of trade accounts receivable sold to the financial institution. Prior to the amendment, any portion of the purchase price for the receivables not paid in cash upon the sale occurring was recorded ason a deferred purchase price receivable, which was paid from available cash as payments on the receivables were collected. daily basis.
The North Americanglobal asset-backed securitization program was terminated on October 9, 2018 and as of this date approximately $500.0 million of accounts receivable sold under the program was exchanged for the outstanding deferred purchase price receivable of $300.0 million and $200.0 million of cash. The previously sold trade accounts receivable were recorded at fair market value.
On November 27, 2018, we entered intois a new North American asset-backed securitization program. We continuously sell designated pools of trade accounts receivable, at a discount, under our new North American asset-backed securitization program to a special purpose entity, which in turn sells certainwholly-owned subsidiary of the receivables to conduits administered by unaffiliated financial institutions on a monthly basis. ThereCompany and is no longer a deferred purchase price receivable for the North American asset-backed securitization program as the entire purchase price is paidincluded in cash when the receivables are sold. Additionally, certainour Consolidated Financial Statements. Certain unsold receivables covering up to the maximum amount of net cash proceeds available under the domestic, or U.S., portion of our global asset-backed securitization program are pledged as collateral to the unaffiliated financial institution as of August 31, 2019.
Following is a summary of our2022.
Maximum Amount of Net Cash Proceeds (in millions)(1) | Expiration Date | |||||||
North American | $ | 390.0 | November 22, 2021 | |||||
Foreign | $ | 400.0 | September 30, 2021 |
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program -
We terminated the foreign asset-backed securitization program on June 28, 2021. In connection with the termination, we paid approximately $167 million in cash, which consisted of: (i) $68 million for the remittance of collections received prior to June 28, 2021, in ourOursubstantially collected the repurchased receivables from customers.
Trade Accounts Receivable Sale Programs
Program | Maximum Amount (in millions)(1) | Type of Facility | Expiration Date | |||||||||
A | $ | 800.0 | Uncommitted | August 31, 2022 | (2) | |||||||
B | $ | 150.0 | Uncommitted | November 30, 2019 | (3) | |||||||
C | 800.0 | CNY | Uncommitted | June 30, 2020 | ||||||||
D | $ | 100.0 | Uncommitted | May 4, 2023 | (4) | |||||||
E | $ | 50.0 | Uncommitted | August 25, 2020 | ||||||||
F | $ | 150.0 | Uncommitted | January 25, 2020 | (5) | |||||||
G | $ | 50.0 | Uncommitted | February 23, 2023 | (2) | |||||||
H | $ | 100.0 | Uncommitted | August 10, 2020 | (6) | |||||||
I | $ | 100.0 | Uncommitted | July 21, 2020 | (7) | |||||||
J | $ | 740.0 | Uncommitted | February 28, 2020 | (8) | |||||||
K | $ | 110.0 | Uncommitted | April 11, 2020 | (9) |
Program | Maximum Amount(1) | Type of Facility | Expiration Date | ||||||||||||||||||||
A | $ | 700 | Uncommitted | December 5, 2022 | (2) | ||||||||||||||||||
B | $ | 150 | Uncommitted | November 30, 2022 | |||||||||||||||||||
C | 400 | CNY | Uncommitted | August 31, 2023 | |||||||||||||||||||
D | $ | 150 | Uncommitted | May 4, 2023 | (3) | ||||||||||||||||||
E | $ | 150 | Uncommitted | January 25, 2023 | (3) | ||||||||||||||||||
F | $ | 50 | Uncommitted | February 23, 2023 | (4) | ||||||||||||||||||
G | $ | 100 | Uncommitted | August 10, 2023 | (3) | ||||||||||||||||||
H | $ | 550 | Uncommitted | December 4, 2022 | (5) | ||||||||||||||||||
I | $ | 135 | Uncommitted | April 11, 2023 | (6) | ||||||||||||||||||
J | 100 | CHF | Uncommitted | December 5, 2022 | (2) | ||||||||||||||||||
K | $ | 65 | Uncommitted | January 23, 2023 |
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Capital Expenditures
For fiscal year 2020, we anticipate our net capital expenditures will be approximately $800.0 million. Our capital expenditures will support ongoing maintenance in our DMS and EMS segments and investments in new markets. The amount of actual capital expenditures may be affected by general economic, financial, competitive, legislative and regulatory factors, among other things.
Cash Flows
Fiscal Year Ended August 31, | ||||||||||||
2019 | 2018 | 2017 | ||||||||||
Net cash provided by (used in) operating activities | $ | 1,193,066 | $ | (1,105,448 | ) | $ | (1,464,085 | ) | ||||
Net cash (used in) provided by investing activities | (872,454 | ) | 1,240,914 | 2,141,263 | ||||||||
Net cash used in financing activities | (415,772 | ) | (47,044 | ) | (404,546 | ) | ||||||
Effect of exchange rate changes on cash and cash equivalents | 554 | (20,392 | ) | 5,228 | ||||||||
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Net (decrease) increase in cash and cash equivalents | $ | (94,606 | ) | $ | 68,030 | $ | 277,860 | |||||
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Fiscal Year Ended August 31, | |||||||||||||||||
2022 | 2021 | 2020 | |||||||||||||||
Net cash provided by operating activities | $ | 1,651 | $ | 1,433 | $ | 1,257 | |||||||||||
Net cash used in investing activities | (858) | (851) | (921) | ||||||||||||||
Net cash used in financing activities | (888) | (413) | (65) | ||||||||||||||
Effect of exchange rate changes on cash and cash equivalents | 6 | 4 | (40) | ||||||||||||||
Net (decrease) increase in cash and cash equivalents | $ | (89) | $ | 173 | $ | 231 |
The increase in prepaid expenses and other current assets is primarily driven by the timing of payments. The increase in contract assets is primarily due to the timing of billings to our customers.
equipment.
Dividends Paid(1) | Share Repurchases(2) | Total | |||||||||||||||
Fiscal years 2016 – 2020 | $ | 283 | $ | 1,468 | $ | 1,751 | |||||||||||
Fiscal year 2021 | $ | 50 | $ | 428 | $ | 478 | |||||||||||
Fiscal year 2022 | $ | 48 | $ | 696 | $ | 744 | |||||||||||
Total | $ | 381 | $ | 2,592 | $ | 2,973 |
Dividends Paid(1) | Share Repurchases(2) | Total | ||||||||||
Fiscal year 2016 | $ | 62,436 | $ | 148,185 | $ | 210,621 | ||||||
Fiscal year 2017 | $ | 59,959 | $ | 306,397 | $ | 366,356 | ||||||
Fiscal year 2018 | $ | 57,833 | $ | 450,000 | $ | 507,833 | ||||||
Fiscal year 2019 | $ | 52,004 | $ | 350,000 | $ | 402,004 | ||||||
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Total | $ | 232,232 | $ | 1,254,582 | $ | 1,486,814 | ||||||
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dividends paid is due to dividend equivalents for unvested restricted stock units that are paid at the time the awards vest.
In June 2018,July 2021, the Board authorizedof Directors approved an authorization for the repurchase of up to $350.0 million$1.0 billion of our common stock.stock (the “2022 Share Repurchase Program”). As of August 31, 2019,2022, 12.4 million shares had been repurchased for $737 million and $263 million remains available under the total amount authorized by2022 Share Repurchase Program.
In September 2019, the Board authorizedapproved an authorization for the repurchase of up to $600.0 million$1.0 billion of our common stock as part of atwo-year capital allocation framework. From September 24, 2019 through October 14, 2019, we repurchased 874,475 shares, utilizing a total of $30.8 million of the $600.0 million authorized by the Board.
(the “2023 Share Repurchase Program”).
Payments due by period (in thousands) | ||||||||||||||||||||
Total | Less than 1 year | 1-3 years | 3-5 years | After 5 years | ||||||||||||||||
Notes payable and long-term debt | $ | 2,496,465 | $ | 375,181 | $ | 491,655 | $ | 1,134,733 | $ | 494,896 | ||||||||||
Future interest on notes payable and long-term debt(1) | 373,762 | 109,506 | 142,082 | 55,463 | 66,711 | |||||||||||||||
Operating lease obligations | 603,185 | 118,312 | 187,644 | 114,297 | 182,932 | |||||||||||||||
Capital lease obligations | 77,829 | 6,038 | 11,726 | 10,928 | 49,137 | |||||||||||||||
Non-cancelable purchase order obligations(2) | 351,230 | 289,516 | 61,537 | 177 | — | |||||||||||||||
Pension and postretirement contributions and payments(3) | 14,618 | 1,135 | 1,904 | 2,396 | 9,183 | |||||||||||||||
Other(4) | 77,669 | 17,922 | 27,863 | 14,214 | 17,670 | |||||||||||||||
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Total contractual obligations(5) | $ | 3,994,758 | $ | 917,610 | $ | 924,411 | $ | 1,332,208 | $ | 820,529 | ||||||||||
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Payments due by period (in millions) | |||||||||||||||||||||||||||||
Total | Less than 1 year | 1-3 years | 3-5 years | After 5 years | |||||||||||||||||||||||||
Notes payable and long-term debt | $ | 2,875 | $ | 300 | $ | — | $ | 990 | $ | 1,585 | |||||||||||||||||||
Future interest on notes payable and long-term debt(1) | 535 | 98 | 171 | 154 | 112 | ||||||||||||||||||||||||
Operating lease obligations(2) | 587 | 130 | 180 | 103 | 174 | ||||||||||||||||||||||||
Finance lease obligations(2)(3) | 338 | 126 | 109 | 89 | 14 | ||||||||||||||||||||||||
Non-cancelable purchase order obligations(4) | 759 | 539 | 187 | 33 | — | ||||||||||||||||||||||||
Pension and postretirement contributions and payments(5) | 51 | 27 | 4 | 5 | 15 | ||||||||||||||||||||||||
Other(6) | 51 | 25 | 16 | 10 | — | ||||||||||||||||||||||||
Total contractual obligations(7) | $ | 5,196 | $ | 1,245 | $ | 667 | $ | 1,384 | $ | 1,900 |
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(1)Consists of interest on notes payable and long-term debt outstanding as of August 31, 2022. Certain of our notes payable and long-term debt pay interest at variable rates. We have applied estimated interest rates to determine the value of these expected future interest payments.
Swiss franc.
We utilize valuation models to estimate the effects of sudden interest rate changes. The impact of a hypothetical change of 10.0% in variable interest rates would result in an increase or decrease in interest expense of approximately $4.2 million for fiscal year 2020.
The SEC’s general guidance permits the exclusion of an assessment of the effectiveness of a registrant’s controls and procedures as they relate to its internal control over financial reporting for an acquired business during the first year following such acquisition if, among other circumstances and factors, there is not an adequate amount of time between the acquisition date and the date of assessment. On February 25, 2019 and April 29, 2019, we completed the initial closing and second closing, respectively, of our acquisition of certain assets of Johnson & Johnson Medical Devices Companies (“JJMD”). In accordance with the SEC guidance, the scope of our evaluation of internal controls over financial reporting as of August 31, 2019 did not include the internal control over financial reporting of these acquired operations. Assets acquired from JJMD represent 1.8% of our total consolidated assets at August 31, 2019. Net revenue generated by JJMD subsequent to the dates of acquisition represents 1.3% of our consolidated net revenue for the fiscal year ended August 31, 2019. We continue to evaluate internal controls over financial reporting for these acquired operations. From the acquisition dates to August 31, 2019, the processes and systems of the acquired operations did not significantly impact our internal control over financial reporting.
2022.
None.
Amended and Restated Bylaws
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1 |
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2 | Financial Statement Schedule. Our financial statement schedule is included in Part IV of this report on the page indicated by the Index to Consolidated Financial Statements and Schedule. This financial statement schedule should be read in conjunction with our consolidated financial statements, and related notes thereto. |
3 | Exhibits. See Item 15(b) below. |
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Incorporated by Reference Herein | |||||||||||||||||||||||||||||||||||
Exhibit No. | Description | Form | Exhibit | Filing Date/ Period End | |||||||||||||||||||||||||||||||
3.1 | 10-Q | 3.1 | 5/31/2017 | ||||||||||||||||||||||||||||||||
3.2* | |||||||||||||||||||||||||||||||||||
4.1 | Form of Certificate for Shares of the Registrant’s Common Stock. (P) | S-1 | 1 | 3/17/1993 | |||||||||||||||||||||||||||||||
4.2 | 8-K | 4.2 | 1/17/2008 | ||||||||||||||||||||||||||||||||
4.3 | 8-K | 4.1 | 5/4/2022 | ||||||||||||||||||||||||||||||||
4.4 | 8-K | 4.1 | 1/17/2018 | ||||||||||||||||||||||||||||||||
4.5 | 8-K | 4.1 | 1/15/2020 | ||||||||||||||||||||||||||||||||
4.6 | 8-K | 4.1 | 7/13/2020 | ||||||||||||||||||||||||||||||||
4.7 | 8-K | 4.1 | 4/14/2021 | ||||||||||||||||||||||||||||||||
4.8 | 8-K | 4.1 | 5/4/2022 | ||||||||||||||||||||||||||||||||
4.9 | 10-K | 4.9 | 8/31/2021 | ||||||||||||||||||||||||||||||||
10.1† | Restated cash or deferred profit sharing plan under section 401(k). (P) | S-1 | 3/3/1993 | ||||||||||||||||||||||||||||||||
10.2† | Form of Indemnification Agreement between the Registrant and its Officers and Directors. (P) | S-1 | 3/3/1993 | ||||||||||||||||||||||||||||||||
10.3a† | 10-Q | 10.1 | 11/30/2019 | ||||||||||||||||||||||||||||||||
10.3b† | 10-Q | 10.2 | 11/30/2019 | ||||||||||||||||||||||||||||||||
10.3c† | 10-Q | 10.3 | 11/30/2019 | ||||||||||||||||||||||||||||||||
10.3d† | 10-Q | 10.4 | 11/30/2019 | ||||||||||||||||||||||||||||||||
10.3e† | 10-Q | 10.5 | 11/30/2019 | ||||||||||||||||||||||||||||||||
10.3f† | 10-Q | 10.6 | 11/30/2019 | ||||||||||||||||||||||||||||||||
10.3g† | 10-Q | 10.7 | 11/30/2019 | ||||||||||||||||||||||||||||||||
10.4† | 14A | B | 12/9/2020 | ||||||||||||||||||||||||||||||||
10.5† | 14A | A | 12/9/2020 | ||||||||||||||||||||||||||||||||
10.5a† | 10-Q | 10.2 | 2/28/2021 | ||||||||||||||||||||||||||||||||
10.5b† | 10-Q | 10.3 | 2/28/2021 | ||||||||||||||||||||||||||||||||
10.5c† | 10-Q | 10.4 | 2/28/2021 | ||||||||||||||||||||||||||||||||
10.5d† | 10-Q | 10.5 | 2/28/2021 | ||||||||||||||||||||||||||||||||
10.5e† | 10-Q | 10.6 | 2/28/2021 | ||||||||||||||||||||||||||||||||
10.5f† | 10-Q | 10.7 | 2/28/2021 | ||||||||||||||||||||||||||||||||
10.5g†** | 10-Q | 10.1 | 11/30/2021 | ||||||||||||||||||||||||||||||||
10.5h†** | 10-Q | 10.2 | 11/30/2021 | ||||||||||||||||||||||||||||||||
10.5i† | 10-Q | 10.3 | 11/30/2021 | ||||||||||||||||||||||||||||||||
10.5j† | 10-Q | 10.4 | 11/30/2021 | ||||||||||||||||||||||||||||||||
10.5k† | 10-Q | 10.5 | 11/30/2021 | ||||||||||||||||||||||||||||||||
10.5l† | 10-Q | 10.1 | 5/31/2022 | ||||||||||||||||||||||||||||||||
10.6† | S-8 | 4.1 | 2/25/2011 | ||||||||||||||||||||||||||||||||
10.7 | 8-K | 1.1 | 5/4/2022 | ||||||||||||||||||||||||||||||||
21.1* | |||||||||||||||||||||||||||||||||||
23.1* | |||||||||||||||||||||||||||||||||||
24.1* | |||||||||||||||||||||||||||||||||||
31.1* | |||||||||||||||||||||||||||||||||||
31.2* | |||||||||||||||||||||||||||||||||||
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Certain instruments with respect to long-term debt of the Company and its consolidated subsidiaries are not filed herewith pursuant to Item 601(b)(4)(iii) of RegulationS-K since the total amount of securities authorized under each such instrument does not exceed 10% of the total assets of the Company and its subsidiaries on a consolidated basis. The Company agrees to furnish a copy of any such instrument to the SEC upon request.
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(c)Financial Statement Schedules. See Item 15(a) above.
Consolidated Financial Statements: | ||||||||
Consolidated Statements of Operations – Fiscal years ended August 31, | ||||||||
Consolidated Statements of Comprehensive Income – Fiscal years ended August 31, | ||||||||
Consolidated Statements of Stockholders’ Equity – Fiscal years endedAugust 31, | ||||||||
Consolidated Statements of Cash Flows – Fiscal years ended August 31, | ||||||||
Financial Statement Schedule: | ||||||||
As indicated in the accompanying Management’s Report on Internal Control over Financial Reporting, management’s assessment of and conclusion on the effectiveness of internal control over financial reporting did not include the internal controls of the operations acquired from Johnson & Johnson Medical Devices Companies (JJMD), which are included in the 2019 consolidated financial statements of the Company and constituted 1.8% of consolidated total assets as of August 31, 2019 and 1.3% of consolidated net revenue for the year then ended. Our audit of internal control over financial reporting of the Company also did not include an evaluation of the internal control over financial reporting of the operations acquired from JJMD.
COSO criteria.
/s/ ERNST & YOUNG LLP
/s/ ERNST & YOUNG LLP | ||
Adoption of New Accounting Standards
As discussed in Note 18 to the consolidated financial statements, the Company changed its method of accounting for revenue from contracts with customers and certain fulfillment costs in 2019 due to the adoption of ASUNo. 2014-09, Revenue from Contracts with Customers (Topic 606). See below for discussion of our related critical audit matter.
As discussed in Note 2 to the consolidated financial statements, the Company changed its classification of cash receipts on the deferred purchase price receivable on asset-backed securitization transactions in 2019 due to the adoption of ASUNo. 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments.
Matter
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Uncertain Tax Positions | ||||||
Description of the Matter | As disclosed in Note Auditing the tax positions related to certain intercompany transactions was challenging because the recognition and measurement of the tax positions is highly judgmental and is based on interpretations of laws, regulations and tax rulings. | |||||
How We Addressed the Matter in Our Audit | We tested internal controls over the Company’s process to assess the technical merits of tax positions related to certain intercompany transactions and also tested internal controls over the Company’s process to determine the application of the relevant laws, regulations and tax rulings, including management’s process to recognize and measure the related tax positions. In testing the recognition and measurement criteria, we involved tax professionals to assist in assessing the technical merits of the Company’s tax positions. In addition, we used our knowledge of and experience with the application of domestic and international income tax laws by the relevant tax authorities to evaluate the Company’s accounting for those tax positions. We also assessed the Company’s assumptions and data used to measure the amount of tax benefit that qualifies for recognition and tested the clerical accuracy of the calculations. Lastly, we evaluated the Company’s income tax disclosures included in Note |
/s/ ERNST & YOUNG LLP
/s/ ERNST & YOUNG LLP | ||
August 31, | ||||||||
2019 | 2018 | |||||||
ASSETS | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 1,163,343 | $ | 1,257,949 | ||||
Accounts receivable, net of allowance for doubtful accounts | 2,745,226 | 1,693,268 | ||||||
Contract assets | 911,940 | — | ||||||
Inventories, net of reserve for excess and obsolete inventory | 3,023,003 | 3,457,706 | ||||||
Prepaid expenses and other current assets | 501,573 | 1,141,000 | ||||||
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Total current assets | 8,345,085 | 7,549,923 | ||||||
Property, plant and equipment, net of accumulated depreciation | 3,333,750 | 3,198,016 | ||||||
Goodwill | 622,255 | 627,745 | ||||||
Intangible assets, net of accumulated amortization | 256,853 | 279,131 | ||||||
Deferred income taxes | 198,827 | 218,252 | ||||||
Other assets | 213,705 | 172,574 | ||||||
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Total assets | $ | 12,970,475 | $ | 12,045,641 | ||||
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LIABILITIES AND EQUITY | ||||||||
Current liabilities: | ||||||||
Current installments of notes payable and long-term debt | $ | 375,181 | $ | 25,197 | ||||
Accounts payable | 5,166,780 | 4,942,932 | ||||||
Accrued expenses | 2,990,144 | 2,262,744 | ||||||
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Total current liabilities | 8,532,105 | 7,230,873 | ||||||
Notes payable and long-term debt, less current installments | 2,121,284 | 2,493,502 | ||||||
Other liabilities | 163,821 | 94,617 | ||||||
Income tax liabilities | 136,689 | 148,884 | ||||||
Deferred income taxes | 115,818 | 114,385 | ||||||
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Total liabilities | 11,069,717 | 10,082,261 | ||||||
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Commitments and contingencies | ||||||||
Equity: | ||||||||
Jabil Inc. stockholders’ equity: | ||||||||
Preferred stock, $0.001 par value, authorized 10,000,000 shares; no shares issued and outstanding | — | — | ||||||
Common stock, $0.001 par value, authorized 500,000,000 shares; 260,406,796 and 257,130,145 shares issued and 153,520,380 and 164,588,172 shares outstanding at August 31, 2019 and August 31, 2018, respectively | 260 | 257 | ||||||
Additionalpaid-in capital | 2,304,552 | 2,218,673 | ||||||
Retained earnings | 2,037,037 | 1,760,097 | ||||||
Accumulated other comprehensive loss | (82,794 | ) | (19,399 | ) | ||||
Treasury stock at cost, 106,886,416 and 92,541,973 shares as of August 31, 2019 and August 31, 2018, respectively | (2,371,612 | ) | (2,009,371 | ) | ||||
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Total Jabil Inc. stockholders’ equity | 1,887,443 | 1,950,257 | ||||||
Noncontrolling interests | 13,315 | 13,123 | ||||||
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Total equity | 1,900,758 | 1,963,380 | ||||||
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Total liabilities and equity | $ | 12,970,475 | $ | 12,045,641 | ||||
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August 31, 2022 | August 31, 2021 | ||||||||||
ASSETS | |||||||||||
Current assets: | |||||||||||
Cash and cash equivalents | $ | 1,478 | $ | 1,567 | |||||||
Accounts receivable, net of allowance for credit losses | 3,995 | 3,141 | |||||||||
Contract assets | 1,196 | 998 | |||||||||
Inventories, net of reserve for excess and obsolete inventory | 6,128 | 4,414 | |||||||||
Prepaid expenses and other current assets | 1,111 | 757 | |||||||||
Total current assets | 13,908 | 10,877 | |||||||||
Property, plant and equipment, net of accumulated depreciation | 3,954 | 4,075 | |||||||||
Operating lease right-of-use asset | 500 | 390 | |||||||||
Goodwill | 704 | 715 | |||||||||
Intangible assets, net of accumulated amortization | 158 | 182 | |||||||||
Deferred income taxes | 199 | 176 | |||||||||
Other assets | 294 | 239 | |||||||||
Total assets | $ | 19,717 | $ | 16,654 | |||||||
LIABILITIES AND EQUITY | |||||||||||
Current liabilities: | |||||||||||
Current installments of notes payable and long-term debt | $ | 300 | $ | — | |||||||
Accounts payable | 8,006 | 6,841 | |||||||||
Accrued expenses | 5,272 | 3,734 | |||||||||
Current operating lease liabilities | 119 | 108 | |||||||||
Total current liabilities | 13,697 | 10,683 | |||||||||
Notes payable and long-term debt, less current installments | 2,575 | 2,878 | |||||||||
Other liabilities | 272 | 334 | |||||||||
Non-current operating lease liabilities | 417 | 333 | |||||||||
Income tax liabilities | 182 | 178 | |||||||||
Deferred income taxes | 122 | 111 | |||||||||
Total liabilities | 17,265 | 14,517 | |||||||||
Commitments and contingencies | |||||||||||
Equity: | |||||||||||
Jabil Inc. stockholders’ equity: | |||||||||||
Preferred stock, $0.001 par value, authorized 10,000,000 shares; no shares issued and outstanding | — | — | |||||||||
Common stock, $0.001 par value, authorized 500,000,000 shares; 270,891,715 and 267,418,092 shares issued and 135,493,980 and 144,496,077 shares outstanding at August 31, 2022 and August 31, 2021, respectively | — | — | |||||||||
Additional paid-in capital | 2,655 | 2,533 | |||||||||
Retained earnings | 3,638 | 2,688 | |||||||||
Accumulated other comprehensive loss | (42) | (25) | |||||||||
Treasury stock at cost, 135,397,735 and 122,922,015 shares as of August 31, 2022 and August 31, 2021, respectively | (3,800) | (3,060) | |||||||||
Total Jabil Inc. stockholders’ equity | 2,451 | 2,136 | |||||||||
Noncontrolling interests | 1 | 1 | |||||||||
Total equity | 2,452 | 2,137 | |||||||||
Total liabilities and equity | $ | 19,717 | $ | 16,654 |
Fiscal Year Ended August 31, | ||||||||||||
2019 | 2018 | 2017 | ||||||||||
Net revenue | $ | 25,282,320 | $ | 22,095,416 | $ | 19,063,121 | ||||||
Cost of revenue | 23,368,919 | 20,388,624 | 17,517,478 | |||||||||
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Gross profit | 1,913,401 | 1,706,792 | 1,545,643 | |||||||||
Operating expenses: | ||||||||||||
Selling, general and administrative | 1,111,347 | 1,050,716 | 907,702 | |||||||||
Research and development | 42,861 | 38,531 | 29,680 | |||||||||
Amortization of intangibles | 31,923 | 38,490 | 35,524 | |||||||||
Restructuring and related charges | 25,914 | 36,902 | 160,395 | |||||||||
Loss on disposal of subsidiaries | — | — | 2,112 | |||||||||
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| |||||||
Operating income | 701,356 | 542,153 | 410,230 | |||||||||
Restructuring of securities loss | 29,632 | — | — | |||||||||
Other expense | 53,750 | 37,563 | 28,448 | |||||||||
Interest income | (21,460 | ) | (17,813 | ) | (12,525 | ) | ||||||
Interest expense | 188,730 | 149,002 | 138,074 | |||||||||
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| |||||||
Income before income tax | 450,704 | 373,401 | 256,233 | |||||||||
Income tax expense | 161,230 | 285,860 | 129,066 | |||||||||
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| |||||||
Net income | 289,474 | 87,541 | 127,167 | |||||||||
Net income (loss) attributable to noncontrolling interests, net of tax | 2,363 | 1,211 | (1,923 | ) | ||||||||
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| |||||||
Net income attributable to Jabil Inc. | $ | 287,111 | $ | 86,330 | $ | 129,090 | ||||||
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Earnings per share attributable to the stockholders of Jabil Inc.: | ||||||||||||
Basic | $ | 1.85 | $ | 0.50 | $ | 0.71 | ||||||
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Diluted | $ | 1.81 | $ | 0.49 | $ | 0.69 | ||||||
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Weighted average shares outstanding: | ||||||||||||
Basic | 155,613 | 172,237 | 181,902 | |||||||||
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Diluted | 158,647 | 175,044 | 185,838 | |||||||||
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Fiscal Year Ended August 31, | |||||||||||||||||
2022 | 2021 | 2020 | |||||||||||||||
Net revenue | $ | 33,478 | $ | 29,285 | $ | 27,266 | |||||||||||
Cost of revenue | 30,846 | 26,926 | 25,335 | ||||||||||||||
Gross profit | 2,632 | 2,359 | 1,931 | ||||||||||||||
Operating expenses: | |||||||||||||||||
Selling, general and administrative | 1,154 | 1,213 | 1,175 | ||||||||||||||
Research and development | 33 | 34 | 43 | ||||||||||||||
Amortization of intangibles | 34 | 47 | 56 | ||||||||||||||
Restructuring, severance and related charges | 18 | 10 | 157 | ||||||||||||||
Operating income | 1,393 | 1,055 | 500 | ||||||||||||||
Loss on debt extinguishment | 4 | — | — | ||||||||||||||
(Gain) loss on securities | — | (2) | 49 | ||||||||||||||
Other expense (income) | 12 | (11) | 31 | ||||||||||||||
Interest income | (5) | (6) | (15) | ||||||||||||||
Interest expense | 151 | 130 | 174 | ||||||||||||||
Income before income tax | 1,231 | 944 | 261 | ||||||||||||||
Income tax expense | 235 | 246 | 204 | ||||||||||||||
Net income | 996 | 698 | 57 | ||||||||||||||
Net income attributable to noncontrolling interests, net of tax | — | 2 | 3 | ||||||||||||||
Net income attributable to Jabil Inc. | $ | 996 | $ | 696 | $ | 54 | |||||||||||
Earnings per share attributable to the stockholders of Jabil Inc.: | |||||||||||||||||
Basic | $ | 7.06 | $ | 4.69 | $ | 0.36 | |||||||||||
Diluted | $ | 6.90 | $ | 4.58 | $ | 0.35 | |||||||||||
Weighted average shares outstanding: | |||||||||||||||||
Basic | 141.2 | 148.5 | 151.6 | ||||||||||||||
Diluted | 144.4 | 152.1 | 155.3 |
Fiscal Year Ended August 31, | ||||||||||||
2019 | 2018 | 2017 | ||||||||||
Net income | $ | 289,474 | $ | 87,541 | $ | 127,167 | ||||||
Other comprehensive (loss) income: | ||||||||||||
Change in foreign currency translation | (21,729 | ) | (50,151 | ) | 41,244 | |||||||
Change in derivative instruments: | ||||||||||||
Change in fair value of derivatives | (67,773 | ) | 1,225 | 13,434 | ||||||||
Adjustment for net losses (gains) realized and included in net income | 20,259 | (23,076 | ) | 8,749 | ||||||||
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| |||||||
Total change in derivative instruments | (47,514 | ) | (21,851 | ) | 22,183 | |||||||
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| |||||||
Change in available for sale securities: | ||||||||||||
Unrealized (loss) gain on available for sale securities | (24,508 | ) | (8,679 | ) | 10,611 | |||||||
Adjustment for net losses realized and included in net income | 33,333 | — | 10,139 | |||||||||
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| |||||||
Total change in available for sale securities | 8,825 | (8,679 | ) | 20,750 | ||||||||
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| |||||||
Actuarial (loss) gain | (3,012 | ) | 8,194 | 10,372 | ||||||||
Prior service credit (cost) | 35 | (1,532 | ) | (52 | ) | |||||||
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| |||||||
Total other comprehensive (loss) income | (63,395 | ) | (74,019 | ) | 94,497 | |||||||
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| |||||||
Comprehensive income | $ | 226,079 | $ | 13,522 | $ | 221,664 | ||||||
Comprehensive income (loss) attributable to noncontrolling interests | 2,363 | 1,211 | (1,923 | ) | ||||||||
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| |||||||
Comprehensive income attributable to Jabil Inc. | $ | 223,716 | $ | 12,311 | $ | 223,587 | ||||||
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millions)
Fiscal Year Ended August 31, | |||||||||||||||||
2022 | 2021 | 2020 | |||||||||||||||
Net income | $ | 996 | $ | 698 | $ | 57 | |||||||||||
Other comprehensive (loss) income: | |||||||||||||||||
Change in foreign currency translation | (68) | 17 | (21) | ||||||||||||||
Change in derivative instruments: | |||||||||||||||||
Change in fair value of derivatives | 1 | 35 | (6) | ||||||||||||||
Adjustment for net losses (gains) realized and included in net income | 32 | (41) | 14 | ||||||||||||||
Total change in derivative instruments | 33 | (6) | 8 | ||||||||||||||
Change in available for sale securities: | |||||||||||||||||
Unrealized loss on available for sale securities | — | — | (36) | ||||||||||||||
Adjustment for net losses realized and included in net income | — | — | 36 | ||||||||||||||
Total change in available for sale securities | — | — | — | ||||||||||||||
Actuarial gain | 14 | 17 | 62 | ||||||||||||||
Prior service credit (cost) | 4 | (19) | — | ||||||||||||||
Total other comprehensive (loss) income | (17) | 9 | 49 | ||||||||||||||
Comprehensive income | $ | 979 | $ | 707 | $ | 106 | |||||||||||
Comprehensive income attributable to noncontrolling interests | — | 2 | 3 | ||||||||||||||
Comprehensive income attributable to Jabil Inc. | $ | 979 | $ | 705 | $ | 103 |
Fiscal Year Ended August 31, | ||||||||||||
2019 | 2018 | 2017 | ||||||||||
Total stockholders’ equity, beginning balances | $ | 1,963,380 | $ | 2,368,344 | $ | 2,457,497 | ||||||
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| |||||||
Common stock: | ||||||||||||
Beginning balances | 257 | 253 | 250 | |||||||||
Shares issued under employee stock purchase plan | 1 | 1 | 1 | |||||||||
Vesting of restricted stock | 2 | 3 | 2 | |||||||||
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Ending balances | 260 | 257 | 253 | |||||||||
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Additionalpaid-in capital: | ||||||||||||
Beginning balances | 2,218,673 | 2,104,203 | 2,034,525 | |||||||||
Shares issued under employee stock purchase plan | 26,999 | 24,865 | 21,791 | |||||||||
Vesting of restricted stock | (2 | ) | (3 | ) | (2 | ) | ||||||
Recognition of stock-based compensation | 58,882 | 89,608 | 47,889 | |||||||||
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Ending balances | 2,304,552 | 2,218,673 | 2,104,203 | |||||||||
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Retained earnings: | ||||||||||||
Beginning balances | 1,760,097 | 1,730,893 | 1,660,820 | |||||||||
Declared dividends | (51,026 | ) | (57,126 | ) | (59,017 | ) | ||||||
Cumulative effect adjustment for adoption of new accounting standards | 40,855 | — | — | |||||||||
Net income attributable to Jabil Inc. | 287,111 | 86,330 | 129,090 | |||||||||
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Ending balances | 2,037,037 | 1,760,097 | 1,730,893 | |||||||||
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Accumulated other comprehensive (loss) income: | ||||||||||||
Beginning balances | (19,399 | ) | 54,620 | (39,877 | ) | |||||||
Other comprehensive (loss) income | (63,395 | ) | (74,019 | ) | 94,497 | |||||||
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Ending balances | (82,794 | ) | (19,399 | ) | 54,620 | |||||||
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Treasury stock: | ||||||||||||
Beginning balances | (2,009,371 | ) | (1,536,455 | ) | (1,217,547 | ) | ||||||
Purchases of treasury stock under employee stock plans | (11,918 | ) | (22,597 | ) | (12,268 | ) | ||||||
Treasury shares purchased | (350,323 | ) | (450,319 | ) | (306,640 | ) | ||||||
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Ending balances | (2,371,612 | ) | (2,009,371 | ) | (1,536,455 | ) | ||||||
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Noncontrolling interests: | ||||||||||||
Beginning balances | 13,123 | 14,830 | 19,326 | |||||||||
Net income (loss) attributable to noncontrolling interests | 2,363 | 1,211 | (1,923 | ) | ||||||||
Acquisition of noncontrolling interests | 1,112 | — | — | |||||||||
Purchase of noncontrolling interests | — | — | (134 | ) | ||||||||
Disposition of noncontrolling interests | (1,785 | ) | — | — | ||||||||
Declared dividends to noncontrolling interests | (1,500 | ) | (2,920 | ) | (2,293 | ) | ||||||
Foreign currency adjustments attributable to noncontrolling interests | — | 2 | (146 | ) | ||||||||
Other | 2 | — | — | |||||||||
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Ending balances | 13,315 | 13,123 | 14,830 | |||||||||
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Total stockholders’ equity, ending balances | $ | 1,900,758 | $ | 1,963,380 | $ | 2,368,344 | ||||||
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millions)
Fiscal Year Ended August 31, | |||||||||||||||||
2022 | 2021 | 2020 | |||||||||||||||
Total stockholders’ equity, beginning balances | $ | 2,137 | $ | 1,825 | $ | 1,900 | |||||||||||
Common stock: | — | — | — | ||||||||||||||
Additional paid-in capital: | |||||||||||||||||
Beginning balances | 2,533 | 2,414 | 2,305 | ||||||||||||||
Shares issued under employee stock purchase plan | 45 | 39 | 30 | ||||||||||||||
Purchase of noncontrolling interest | — | (14) | — | ||||||||||||||
Recognition of stock-based compensation | 77 | 94 | 79 | ||||||||||||||
Ending balances | 2,655 | 2,533 | 2,414 | ||||||||||||||
Retained earnings: | |||||||||||||||||
Beginning balances | 2,688 | 2,041 | 2,037 | ||||||||||||||
Declared dividends | (46) | (49) | (50) | ||||||||||||||
Net income attributable to Jabil Inc. | 996 | 696 | 54 | ||||||||||||||
Ending balances | 3,638 | 2,688 | 2,041 | ||||||||||||||
Accumulated other comprehensive loss: | |||||||||||||||||
Beginning balances | (25) | (34) | (83) | ||||||||||||||
Total other comprehensive (loss) income | (17) | 9 | 49 | ||||||||||||||
Ending balances | (42) | (25) | (34) | ||||||||||||||
Treasury stock: | |||||||||||||||||
Beginning balances | (3,060) | (2,610) | (2,372) | ||||||||||||||
Purchases of treasury stock under employee stock plans | (44) | (22) | (23) | ||||||||||||||
Treasury shares purchased | (696) | (428) | (215) | ||||||||||||||
Ending balances | (3,800) | (3,060) | (2,610) | ||||||||||||||
Noncontrolling interests: | |||||||||||||||||
Beginning balances | 1 | 14 | 13 | ||||||||||||||
Net income attributable to noncontrolling interests, net of tax | — | 2 | 3 | ||||||||||||||
Purchase of noncontrolling interests | — | (12) | — | ||||||||||||||
Declared dividends to noncontrolling interests | — | (3) | (2) | ||||||||||||||
Ending balances | 1 | 1 | 14 | ||||||||||||||
Total stockholders’ equity, ending balances | $ | 2,452 | $ | 2,137 | $ | 1,825 |
Fiscal Year Ended August 31, | ||||||||||||
2019 | 2018 | 2017 | ||||||||||
Cash flows provided by (used in) operating activities: | ||||||||||||
Net income | $ | 289,474 | $ | 87,541 | $ | 127,167 | ||||||
Adjustments to reconcile net income to net cash provided by (used in) operating activities: | ||||||||||||
Depreciation and amortization | 771,833 | 773,704 | 760,405 | |||||||||
Restructuring and related charges | (3,566 | ) | 16,264 | 94,346 | ||||||||
Recognition of stock-based compensation expense and related charges | 61,346 | 90,664 | 48,544 | |||||||||
Deferred income taxes | 20,998 | 52,705 | (63,001 | ) | ||||||||
Provision for allowance for doubtful accounts | 15,867 | 38,030 | 10,112 | |||||||||
Restructuring of securities loss | 29,632 | — | — | |||||||||
Other, net | 37,017 | (13,600 | ) | 22,109 | ||||||||
Change in operating assets and liabilities, exclusive of net assets acquired: | ||||||||||||
Accounts receivable | (586,511 | ) | (2,334,367 | ) | (2,828,328 | ) | ||||||
Contract assets | (878,469 | ) | — | — | ||||||||
Inventories | 483,074 | (499,105 | ) | (445,089 | ) | |||||||
Prepaid expenses and other current assets | 28,897 | (97,795 | ) | 95,593 | ||||||||
Other assets | (38,188 | ) | (34,747 | ) | (30,413 | ) | ||||||
Accounts payable, accrued expenses and other liabilities | 961,662 | 815,258 | 744,470 | |||||||||
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Net cash provided by (used in) operating activities | 1,193,066 | (1,105,448 | ) | (1,464,085 | ) | |||||||
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Cash flows (used in) provided by investing activities: | ||||||||||||
Acquisition of property, plant and equipment | (1,005,480 | ) | (1,036,651 | ) | (716,485 | ) | ||||||
Proceeds and advances from sale of property, plant and equipment | 218,708 | 350,291 | 175,000 | |||||||||
Cash paid for business and intangible asset acquisitions, net of cash | (153,239 | ) | (109,664 | ) | (36,620 | ) | ||||||
Cash receipts on sold receivables | 96,846 | 2,039,298 | 2,720,728 | |||||||||
Other, net | (29,289 | ) | (2,360 | ) | (1,360 | ) | ||||||
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Net cash (used in) provided by investing activities | (872,454 | ) | 1,240,914 | 2,141,263 | ||||||||
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Cash flows used in financing activities: | ||||||||||||
Borrowings under debt agreements | 11,985,978 | 9,677,424 | 7,434,107 | |||||||||
Payments toward debt agreements | (12,013,004 | ) | (9,206,016 | ) | (7,479,150 | ) | ||||||
Payments to acquire treasury stock | (350,323 | ) | (450,319 | ) | (306,640 | ) | ||||||
Dividends paid to stockholders | (52,004 | ) | (57,833 | ) | (59,959 | ) | ||||||
Net proceeds from exercise of stock options and issuance of common stock under employee stock purchase plan | 26,999 | 24,865 | 21,791 | |||||||||
Treasury stock minimum tax withholding related to vesting of restricted stock | (11,918 | ) | (22,597 | ) | (12,268 | ) | ||||||
Other, net | (1,500 | ) | (12,568 | ) | (2,427 | ) | ||||||
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Net cash used in financing activities | (415,772 | ) | (47,044 | ) | (404,546 | ) | ||||||
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Effect of exchange rate changes on cash and cash equivalents | 554 | (20,392 | ) | 5,228 | ||||||||
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Net (decrease) increase in cash and cash equivalents | (94,606 | ) | 68,030 | 277,860 | ||||||||
Cash and cash equivalents at beginning of period | 1,257,949 | 1,189,919 | 912,059 | |||||||||
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Cash and cash equivalents at end of period | $ | 1,163,343 | $ | 1,257,949 | $ | 1,189,919 | ||||||
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Supplemental disclosure information: | ||||||||||||
Interest paid, net of capitalized interest | $ | 185,696 | $ | 167,278 | $ | 130,635 | ||||||
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Income taxes paid, net of refunds received | $ | 168,053 | $ | 180,423 | $ | 187,871 | ||||||
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millions)
Fiscal Year Ended August 31, | |||||||||||||||||
2022 | 2021 | 2020 | |||||||||||||||
Cash flows provided by operating activities: | |||||||||||||||||
Net income | $ | 996 | $ | 698 | $ | 57 | |||||||||||
Adjustments to reconcile net income to net cash provided by operating activities: | |||||||||||||||||
Depreciation and amortization | 925 | 876 | 795 | ||||||||||||||
Restructuring and related charges | (1) | 5 | 41 | ||||||||||||||
Recognition of stock-based compensation expense and related charges | 81 | 102 | 83 | ||||||||||||||
Deferred income taxes | (13) | (13) | 29 | ||||||||||||||
Loss on sale of property, plant and equipment | — | 14 | 29 | ||||||||||||||
Provision for allowance for doubtful accounts and notes receivable | — | 6 | 32 | ||||||||||||||
(Gain) loss on securities | — | (2) | 49 | ||||||||||||||
Other, net | 10 | 13 | 22 | ||||||||||||||
Change in operating assets and liabilities, exclusive of net assets acquired: | |||||||||||||||||
Accounts receivable | (878) | (283) | (136) | ||||||||||||||
Contract assets | (214) | 116 | (105) | ||||||||||||||
Inventories | (1,725) | (1,276) | (77) | ||||||||||||||
Prepaid expenses and other current assets | (367) | (90) | (144) | ||||||||||||||
Other assets | (29) | (43) | (11) | ||||||||||||||
Accounts payable, accrued expenses and other liabilities | 2,866 | 1,310 | 593 | ||||||||||||||
Net cash provided by operating activities | 1,651 | 1,433 | 1,257 | ||||||||||||||
Cash flows used in investing activities: | |||||||||||||||||
Acquisition of property, plant and equipment | (1,385) | (1,159) | (983) | ||||||||||||||
Proceeds and advances from sale of property, plant and equipment | 544 | 366 | 187 | ||||||||||||||
Cash paid for business and intangible asset acquisitions, net of cash | (18) | (50) | (147) | ||||||||||||||
Repurchase of sold receivables | — | (99) | — | ||||||||||||||
Cash receipts on repurchased receivables | 4 | 95 | — | ||||||||||||||
Other, net | (3) | (4) | 22 | ||||||||||||||
Net cash used in investing activities | (858) | (851) | (921) | ||||||||||||||
Cash flows used in financing activities: | |||||||||||||||||
Borrowings under debt agreements | 3,767 | 1,724 | 12,777 | ||||||||||||||
Payments toward debt agreements | (3,890) | (1,613) | (12,544) | ||||||||||||||
Payments to acquire treasury stock | (696) | (428) | (215) | ||||||||||||||
Dividends paid to stockholders | (48) | (50) | (50) | ||||||||||||||
Net proceeds from exercise of stock options and issuance of common stock under employee stock purchase plan | 45 | 39 | 30 | ||||||||||||||
Treasury stock minimum tax withholding related to vesting of restricted stock | (44) | (22) | (23) | ||||||||||||||
Other, net | (22) | (63) | (40) | ||||||||||||||
Net cash used in financing activities | (888) | (413) | (65) | ||||||||||||||
Effect of exchange rate changes on cash and cash equivalents | 6 | 4 | (40) | ||||||||||||||
Net (decrease) increase in cash and cash equivalents | (89) | 173 | 231 | ||||||||||||||
Cash and cash equivalents at beginning of period | 1,567 | 1,394 | 1,163 | ||||||||||||||
Cash and cash equivalents at end of period | $ | 1,478 | $ | 1,567 | $ | 1,394 | |||||||||||
Supplemental disclosure information: | |||||||||||||||||
Interest paid, net of capitalized interest | $ | 150 | $ | 124 | $ | 183 | |||||||||||
Income taxes paid, net of refunds received | $ | 209 | $ | 211 | $ | 164 |
affect our ability to collect from our customers.
Fulfillment Costs
Asset Class | Estimated Useful Life | |||||
Buildings | Up to 35 years | |||||
Leasehold improvements | Shorter of lease term or useful life of the improvement | |||||
Machinery and equipment | 2 to 10 years | |||||
Furniture, fixtures and office equipment | 5 years | |||||
Computer hardware and software | 3 to 7 years | |||||
Transportation equipment | 3 years |
Certain equipment held under capital leases is classified as property, plant and equipment and the related obligation is recorded as accrued expenses and other liabilities on the Consolidated Balance Sheets. Amortization of assets held under capital leases is included in depreciation expense in the Consolidated Statements of Operations.
equal to that excess.
Long-lived Assets
Foreign Currency Translation Adjustment | Derivative Instruments | Actuarial (Loss) Gain | Prior Service (Cost) Credit | Available for Sale Securities | Total | |||||||||||||||||||
Balance as of August 31, 2018 | $ | 7,431 | $ | 8,116 | $ | (25,021 | ) | $ | (643 | ) | $ | (9,282 | ) | $ | (19,399 | ) | ||||||||
Other comprehensive (loss) income before reclassifications | (21,729 | ) | (67,773 | ) | (3,753 | ) | 79 | (24,508 | ) | (117,684 | ) | |||||||||||||
Amounts reclassified from AOCI | — | 20,259 | 741 | (44 | ) | 33,333 | 54,289 | |||||||||||||||||
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Other comprehensive (loss) income(1) | (21,729 | ) | (47,514 | ) | (3,012 | ) | 35 | 8,825 | (63,395 | ) | ||||||||||||||
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Balance as of August 31, 2019 | $ | (14,298 | ) | $ | (39,398 | ) | $ | (28,033 | ) | $ | (608 | ) | $ | (457 | ) | $ | (82,794 | ) | ||||||
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Foreign Currency Translation Adjustment | Derivative Instruments | Actuarial Gain (Loss) | Prior Service (Cost) Credit | Total | |||||||||||||||||||||||||||||||
Balance as of August 31, 2021 | $ | (20) | $ | (36) | $ | 51 | $ | (20) | $ | (25) | |||||||||||||||||||||||||
Other comprehensive (loss) income before reclassifications | (68) | 1 | 28 | — | (39) | ||||||||||||||||||||||||||||||
Amounts reclassified from AOCI | — | 32 | (14) | 4 | 22 | ||||||||||||||||||||||||||||||
Other comprehensive (loss) income(1) | (68) | 33 | 14 | 4 | (17) | ||||||||||||||||||||||||||||||
Balance as of August 31, 2022 | $ | (88) | $ | (3) | $ | 65 | $ | (16) | $ | (42) |
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(1)Amounts are net of tax, which are immaterial.
Fiscal Year Ended August 31, | ||||||||||||||||
Comprehensive Income Components | Financial Statement Line Item | 2019 | 2018 | 2017 | ||||||||||||
Foreign currency translation adjustment | Operating income | $ | — | $ | — | $ | 5,947 | |||||||||
Realized losses (gains) on derivative instruments:(3) | ||||||||||||||||
Foreign exchange contracts | Cost of revenue | 21,982 | (9,379 | ) | 4,799 | |||||||||||
Interest rate contracts | Interest expense | (1,723 | ) | (13,697 | ) | 3,950 | ||||||||||
Actuarial loss | (1) | 741 | 1,127 | 1,929 | ||||||||||||
Prior service credit | (1) | (44 | ) | (88 | ) | (138 | ) | |||||||||
Available for sale securities | (2) | 33,333 | — | 10,139 | ||||||||||||
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Total amounts reclassified from AOCI(4) | $ | 54,289 | $ | (22,037 | ) | $ | 26,626 | |||||||||
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Fiscal Year Ended August 31, | ||||||||||||||||||||||||||
Comprehensive Income Components | Financial Statement Line Item | 2022 | 2021 | 2020 | ||||||||||||||||||||||
Realized losses (gains) on derivative instruments:(1) | ||||||||||||||||||||||||||
Foreign exchange contracts | Cost of revenue | $ | 30 | $ | (44) | $ | 15 | |||||||||||||||||||
Interest rate contracts | Interest expense | 2 | 3 | (1) | ||||||||||||||||||||||
Actuarial gain | (2) | (14) | (16) | (3) | ||||||||||||||||||||||
Prior service cost | (2) | 4 | 1 | — | ||||||||||||||||||||||
Available for sale securities | (Gain) loss on securities | — | — | 36 | ||||||||||||||||||||||
Total amounts reclassified from AOCI(3) | $ | 22 | $ | (56) | $ | 47 |
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Effective September 1, 2018, the Company’s revenue recognition accounting policies changed in conjunction with the adoption of ASU2014-09, Revenue Recognition (Topic 606). For further discussion, refer to Note 18—“Revenue” to the Consolidated Financial Statements.
The Company also derives revenue to a lesser extent from electronic design services to certain customers. Revenue from electronic design services is generally recognized over time as the services are performed.
The Company records the effects of the Global Intangible Low-Taxed Income (“GILTI”) as a period cost and applies the incremental cash tax savings approach when analyzing the impact GILTI could have on its U.S. valuation allowance. The incremental cash tax savings approach considers the realizable benefit of a net operating loss and deferred tax assets by comparing the incremental cash taxes in the calculation of GILTI with and without the net operating loss and other DTAs.
units.
Fiscal Year Ended August 31, | ||||||||||||
2019 | 2018 | 2017 | ||||||||||
Stock appreciation rights | — | — | 265 | |||||||||
Restricted stock units | 796 | 2,426 | 4,539 |
Fiscal Year Ended August 31, | |||||||||||||||||
2022 | 2021 | 2020 | |||||||||||||||
Restricted stock units | 209.4 | 655.0 | 728.3 | ||||||||||||||
Asset-Backed Securitization Programs
The Company continuously sells designated pools of trade accounts receivable, at a discount, under its foreign asset-backed securitization program to a special purpose entity, which in turn sells certain of the receivables to an unaffiliated financial institution and a conduit administered by an unaffiliated financial institution on a monthly basis. Effective October 1, 2018, the foreign asset-backed securitization program terms were amended and the program was extended to September 30, 2021. In connection with this amendment, there is no longer a deferred purchase price receivable for the foreign asset-backed securitization program as the entire purchase price is paid in cash when the receivables are sold.
As of October 1, 2018, approximately $734.2 million of accounts receivable sold under the foreign asset-backed securitization program was exchanged for the outstanding deferred purchase price receivable of $335.5 million. The remaining amount due to the financial institution of $398.7 million was subsequently settled for $25.2 million of cash and $373.5 million of trade accounts receivable sold to the financial institution. The previously sold trade accounts receivable were recorded at fair market value. Prior to the amendment, any portion of the purchase price for the receivables not paid in cash upon the sale occurring was recorded as a deferred purchase price receivable, which was paid from available cash as payments on the receivables were collected. The amended foreign asset-backed securitization program contains a guarantee of payment by the special purpose entity, in an amount equal to approximately the net cash proceeds under the program. No liability has been recorded for obligations under the guarantee as of August 31, 2019.
The special purpose entity in the foreign asset-backed securitization program is a separate bankruptcy-remote entity whose assets would be first available to satisfy the creditor claims of the unaffiliated financial institution. The Company is deemed the primary beneficiary of this special purpose entity as the Company has both the power to direct the activities of the entity that most significantly impact the entity’s economic performance and the obligation to absorb losses or the right to receive the benefits that could potentially be significant to the entity from the transfer of the trade accounts receivable into the special purpose entity. Accordingly, the special purpose entity associated with the foreign asset-backed securitization program is included in the Company’s Consolidated Financial Statements.
The North American asset-backed securitization program was terminated on October 9, 2018 and as of this date approximately $500.0 million of accounts receivable sold under the program was exchanged for the outstanding deferred purchase price receivable of $300.0 million and $200.0 million of cash. The previously sold trade accounts receivable were recorded at fair market value.
On November 27, 2018, the Company entered into a new North American asset-backed securitization program. The Company continuously sells designated pools of trade accounts receivable, at a discount, under its new North American asset-backed securitization program to a special purpose entity, which in turn sells certain of the receivables to conduits administered by unaffiliated financial institutions on a monthly basis. The special purpose entity in the North American asset-backed securitization program is a wholly-owned subsidiary of the Company and is included in the Company’s Consolidated Financial Statements. There is no longer a deferred purchase price receivable for the North American asset-backed securitization program as the entire purchase price is paid in cash when the receivables are sold. Additionally, certain unsold receivables covering the maximum amount of net cash proceeds available under the program are pledged as collateral to the unaffiliated financial institution as of August 31, 2019.
Following is a summary of the asset-backed securitization programs and key terms:
Maximum Amount of Net Cash Proceeds (in millions)(1) | Expiration Date | |||||||
North American | $ | 390.0 | November 22, 2021 | |||||
Foreign | $ | 400.0 | September 30, 2021 |
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In connection with the asset-backed securitization programs, the Company recognized the following (in millions):
Fiscal Year Ended August 31, | ||||||||||||
2019(3) | 2018 | 2017 | ||||||||||
Trade accounts receivable sold | $ | 4,057 | $ | 8,386 | $ | 8,878 | ||||||
Cash proceeds received(1) | $ | 4,031 | $ | 7,838 | $ | 8,300 | ||||||
Pre-tax losses on sale of receivables(2) | $ | 26 | $ | 15 | $ | 9 | ||||||
Deferred purchase price receivables as of August 31 | $ | — | $ | 533 | $ | 569 |
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The asset-backed securitization programs require compliance with several covenants. The North American asset-backed securitization program covenants include compliance with the interest ratio and debt to EBITDA ratio of the five-year unsecured credit facility amended as of November 8, 2017 (“the 2017 Credit Facility”). The foreign asset-backed securitization program covenants include limitations on certain corporate actions such as mergers and consolidations. As of August 31, 2019 and 2018, the Company was in compliance with all covenants under the asset-backed securitization programs.
Trade Accounts Receivable Sale Programs
Following is a summary of the trade accounts receivable sale programs with unaffiliated financial institutions where the Company may elect to sell receivables and the unaffiliated financial institution may elect to purchase, at a discount, on an
Program | Maximum Amount (in millions)(1) | Type of Facility | Expiration Date | |||||||||
A | $ | 800.0 | Uncommitted | August 31, 2022 | (2) | |||||||
B | $ | 150.0 | Uncommitted | November 30, 2019 | (3) | |||||||
C | 800.0 | CNY | Uncommitted | June 30, 2020 | ||||||||
D | $ | 100.0 | Uncommitted | May 4, 2023 | (4) | |||||||
E | $ | 50.0 | Uncommitted | August 25, 2020 | ||||||||
F | $ | 150.0 | Uncommitted | January 25, 2020 | (5) | |||||||
G | $ | 50.0 | Uncommitted | February 23, 2023 | (2) | |||||||
H | $ | 100.0 | Uncommitted | August 10, 2020 | (6) | |||||||
I | $ | 100.0 | Uncommitted | July 21, 2020 | (7) | |||||||
J | $ | 740.0 | Uncommitted | February 28, 2020 | (8) | |||||||
K | $ | 110.0 | Uncommitted | April 11, 2020 | (9) |
Program | Maximum Amount(1) | Type of Facility | Expiration Date | ||||||||||||||||||||
A | $ | 700 | Uncommitted | December 5, 2022 | (2) | ||||||||||||||||||
B | $ | 150 | Uncommitted | November 30, 2022 | |||||||||||||||||||
C | 400 | CNY | Uncommitted | August 31, 2023 | |||||||||||||||||||
D | $ | 150 | Uncommitted | May 4, 2023 | (3) | ||||||||||||||||||
E | $ | 150 | Uncommitted | January 25, 2023 | (3) | ||||||||||||||||||
F | $ | 50 | Uncommitted | February 23, 2023 | (4) | ||||||||||||||||||
G | $ | 100 | Uncommitted | August 10, 2023 | (3) | ||||||||||||||||||
H | $ | 550 | Uncommitted | December 4, 2022 | (5) | ||||||||||||||||||
I | $ | 135 | Uncommitted | April 11, 2023 | (6) | ||||||||||||||||||
J | 100 | CHF | Uncommitted | December 5, 2022 | (2) | ||||||||||||||||||
K | $ | 65 | Uncommitted | January 23, 2023 |
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Fiscal Year Ended August 31, | ||||||||||||
2019 | 2018 | 2017 | ||||||||||
Trade accounts receivable sold | $ | 6,751 | $ | 5,480 | $ | 2,968 | ||||||
Cash proceeds received | $ | 6,723 | $ | 5,463 | $ | 2,962 | ||||||
Pre-tax losses on sale of receivables(1) | $ | 28 | $ | 17 | $ | 6 |
Fiscal Year Ended August 31, | |||||||||||||||||
2022 | 2021 | 2020 | |||||||||||||||
Trade accounts receivable sold | $ | 8,513 | $ | 4,654 | $ | 8,457 | |||||||||||
Cash proceeds received | $ | 8,504 | $ | 4,651 | $ | 8,440 | |||||||||||
Pre-tax losses on sale of receivables(1) | $ | 9 | $ | 3 | $ | 17 |
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(1)Recorded to other expense within the Consolidated Statements of Operations.
August 31, 2019 | August 31, 2018 | |||||||
Raw materials | $ | 2,310,081 | $ | 2,070,569 | ||||
Work in process | 468,217 | 788,742 | ||||||
Finished goods | 314,258 | 659,335 | ||||||
Reserve for excess and obsolete inventory | (69,553 | ) | (60,940 | ) | ||||
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Inventories, net | $ | 3,023,003 | $ | 3,457,706 | ||||
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4. Income Taxes
Provision for Income Taxes
Income (loss) before income tax expense is summarized below (in thousands):
Fiscal Year Ended August 31, | ||||||||||||
2019 | 2018 | 2017 | ||||||||||
Domestic(1) | $ | (415,707 | ) | $ | (426,897 | ) | $ | (373,690 | ) | |||
Foreign(1) | 866,411 | 800,298 | 629,923 | |||||||||
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$ | 450,704 | $ | 373,401 | $ | 256,233 | |||||||
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Income tax expense (benefit) is summarized below (in thousands):
Fiscal Year Ended August 31, | ||||||||||||
2019 | 2018 | 2017 | ||||||||||
Current: | ||||||||||||
Domestic – federal | $ | (23,675 | ) | $ | 69,080 | $ | 2,436 | |||||
Domestic – state | 1,383 | 134 | 12 | |||||||||
Foreign | 175,993 | 178,790 | 188,872 | |||||||||
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Total current | 153,701 | 248,004 | 191,320 | |||||||||
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Deferred: | ||||||||||||
Domestic – federal | (8,000 | ) | (24,342 | ) | 253 | |||||||
Domestic – state | (2,202 | ) | 93 | 30 | ||||||||
Foreign | 17,731 | 62,105 | (62,537 | ) | ||||||||
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Total deferred | 7,529 | 37,856 | (62,254 | ) | ||||||||
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Total income tax expense | $ | 161,230 | $ | 285,860 | $ | 129,066 | ||||||
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Reconciliation of the U.S. federal statutory income tax rate to the Company’s effective income tax rate is summarized below:
Fiscal Year Ended August 31, | ||||||||||||
2019 | 2018 | 2017 | ||||||||||
U.S. federal statutory income tax rate | 21.0 | % | 25.7 | % | 35.0 | % | ||||||
State income taxes, net of federal tax benefit | (1.7 | ) | (1.5 | ) | (3.3 | ) | ||||||
Impact of foreign tax rates(1)(2) | (9.9 | ) | (19.3 | ) | (42.7 | ) | ||||||
Permanent impact ofnon-deductible cost | 1.8 | 5.9 | 2.9 | |||||||||
Income tax credits(1) | (3.1 | ) | (2.8 | ) | (6.3 | ) | ||||||
Changes in tax rates on deferred tax assets and liabilities(3) | 0.2 | 4.0 | 0.3 | |||||||||
One-time transition tax related to the Tax Act(4) | (0.5 | ) | 62.2 | — | ||||||||
Indefinite reinvestment assertion impact(4) | 0.9 | 5.8 | — | |||||||||
Valuation allowance(5) | 1.3 | (16.4 | ) | 14.8 | ||||||||
Non-deductible equity compensation | 1.4 | 5.5 | 4.5 | |||||||||
Impact of intercompany charges and dividends(6) | 10.4 | 7.3 | 38.3 | |||||||||
Reclassification of stranded tax effects in AOCI | — | (4.0 | ) | — | ||||||||
Global IntangibleLow-Taxed Income(7) | 10.4 | — | — | |||||||||
Other, net | 3.6 | 4.2 | 6.9 | |||||||||
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Effective income tax rate | 35.8 | % | 76.6 | % | 50.4 | % | ||||||
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Tax Act
On December 22, 2017, the U.S. government enacted comprehensive tax legislation commonly referred to as the Tax Cuts and Jobs Act of 2017 (“Tax Act”). The Tax Act reduced the corporate tax rate, limited or eliminated certain tax deductions, introduced Global IntangibleLow-Taxed Income (“GILTI”) as a newly defined category of foreign subsidiary income which is taxable to U.S. shareholders each year, and changed the taxation of foreign earnings of U.S. multinational companies. The enacted changes included a mandatory income inclusion of the historically untaxed foreign earnings of a U.S. company’s foreign subsidiaries and effectively taxed such income at reduced tax rates (“transition tax”). As a result of theone-time transition tax, the Company has a substantial amount of previously taxed earnings that can be distributed to the U.S. without additional U.S. taxation. Additionally, the Tax Act provides for a 100% dividends received deduction for dividends received by U.S. corporations from10-percent or more owned foreign corporations. During the fiscal year ended August 31, 2018, the Company made reasonable estimates related to certain impacts of the Tax Act and, in accordance with Staff Accounting Bulletin No. 118,Income Tax Accounting Implications of the Tax Cut and Jobs Act (“SAB 118”), recorded a net provisional income tax expense (benefit). During the fiscal year ended August 31, 2019, the Company completed its accounting for the effects of the Tax Act under SAB 118 based on the analysis, interpretations and guidance available at that time. During the first quarter of fiscal year 2019, the Company elected to record the GILTI effects as a period cost.
The following table summarizes the tax expense (benefit) related to the Tax Act recognized during the SAB 118 measurement period (in millions):
One-time transition tax, inclusive of unrecognized tax benefits(1) | Re-measurement of the Company’s U.S. deferred tax attributes | Change in indefinite reinvestment assertion(2) | Other | Income tax expense (benefit) | ||||||||||||||||
Provisional income tax expense (benefit) – recognized in fiscal year 2018 | $ | 65.9 | $ | (10.5 | ) | $ | 85.0 | $ | 1.9 | $ | 142.3 | |||||||||
Income tax (benefit) expense adjustment – recognized in fiscal year 2019 | $ | (19.7 | ) | $ | 1.6 | $ | — | $ | (0.3 | ) | $ | (18.4 | ) | |||||||
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Income tax expense (benefit) related to the Tax Act | $ | 46.2 | $ | (8.9 | ) | $ | 85.0 | $ | 1.6 | $ | 123.9 | |||||||||
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Deferred Tax Assets and Liabilities
Significant components of the deferred tax assets and liabilities are summarized below (in thousands):
Fiscal Year Ended August 31, | ||||||||
2019 | 2018 | |||||||
Deferred tax assets: | ||||||||
Net operating loss carry forward | $ | 183,297 | $ | 119,259 | ||||
Receivables | 6,165 | 7,111 | ||||||
Inventories | 9,590 | 7,634 | ||||||
Compensated absences | 10,401 | 8,266 | ||||||
Accrued expenses | 81,731 | 81,912 | ||||||
Property, plant and equipment, principally due to differences in depreciation and amortization | 66,268 | 97,420 | ||||||
Domestic federal and state tax credits | 42,464 | 70,153 | ||||||
Foreign jurisdiction tax credits | 15,345 | 25,887 | ||||||
Equity compensation – Domestic | 7,617 | 7,566 | ||||||
Equity compensation – Foreign | 2,179 | 2,401 | ||||||
Domestic federal interest carry forward | 5,853 | — | ||||||
Cash flow hedges | 9,878 | — | ||||||
Unrecognized capital loss carry forward | 7,799 | — | ||||||
Revenue recognition | 19,195 | — | ||||||
Other | 21,907 | 18,176 | ||||||
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Total deferred tax assets before valuation allowances | 489,689 | 445,785 | ||||||
Less valuation allowances | (287,604 | ) | (223,487 | ) | ||||
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Net deferred tax assets | $ | 202,085 | $ | 222,298 | ||||
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Deferred tax liabilities: | ||||||||
Unremitted earnings of foreign subsidiaries | 75,387 | 74,654 | ||||||
Intangible assets | 39,242 | 39,122 | ||||||
Other | 4,447 | 4,655 | ||||||
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Total deferred tax liabilities | $ | 119,076 | $ | 118,431 | ||||
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Net deferred tax assets | $ | 83,009 | $ | 103,867 | ||||
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Based on the Company’s historical operating income, projection of future taxable income, scheduled reversal of taxable temporary differences, and tax planning strategies, management believes that it is more likely than not that the Company will realize the benefit of its deferred tax assets, net of valuation allowances recorded. The net increase in the total valuation allowance for the fiscal year ended August 31, 2019 is primarily related to the increase of a net operating loss carry forward due to a release of anon-U.S. unrecognized tax benefit and the increase of deferred tax assets in sites with existing valuation allowances. The decrease in domestic federal and state tax credits is primarily related to the utilization of tax credits against theone-time transition tax.
As of August 31, 2019, the Company intends to indefinitely reinvest the remaining earnings from its foreign subsidiaries for which a deferred tax liability has not already been recorded. The accumulated earnings are the most significant component of the basis difference which is indefinitely reinvested. As of August 31, 2019, the indefinitely reinvested earnings in foreign subsidiaries upon which taxes had not been provided were approximately $1.9 billion. The estimated amount of the unrecognized deferred tax liability on these reinvested earnings was approximately $0.2 billion.
Tax Carryforwards
The amount and expiration dates of income tax net operating loss carryforwards and tax credit carryforwards, which are available to reduce future taxes, if any, as of August 31, 2019 are as follows:
(dollars in thousands) | Last Fiscal Year of Expiration | Amount | ||||||
Income tax net operating loss carryforwards:(1) | ||||||||
Domestic – state | 2039 | $ | 57,299 | |||||
Foreign | 2039 or indefinite | $ | 565,609 | |||||
Tax credit carryforwards:(1) | ||||||||
Domestic – federal | 2029 | $ | 39,784 | |||||
Domestic – state | 2027 | $ | 3,313 | |||||
Foreign(2) | 2027 or indefinite | $ | 15,345 |
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Unrecognized Tax Benefits
Reconciliation of the unrecognized tax benefits is summarized below (in thousands):
Fiscal Year Ended August 31, | ||||||||||||
2019 | 2018 | 2017 | ||||||||||
Beginning balance | $ | 256,705 | $ | 201,355 | $ | 149,898 | ||||||
Additions for tax positions of prior years | 20,158 | 14,465 | 2,155 | |||||||||
Reductions for tax positions of prior years(1) | (106,252 | ) | (21,045 | ) | (12,233 | ) | ||||||
Additions for tax positions related to current year(2) | 35,769 | 81,866 | 77,807 | |||||||||
Cash settlements | — | (1,659 | ) | (2,298 | ) | |||||||
Reductions from lapses in statutes of limitations | (2,570 | ) | (7,496 | ) | (10,446 | ) | ||||||
Reductions from settlements with taxing authorities(3) | (35,582 | ) | (5,928 | ) | (6,061 | ) | ||||||
Foreign exchange rate adjustment | (3,845 | ) | (4,853 | ) | 2,533 | |||||||
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Ending balance | $ | 164,383 | $ | 256,705 | $ | 201,355 | ||||||
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Unrecognized tax benefits that would affect the effective tax rate (if recognized) | $ | 93,237 | $ | 117,455 | $ | 75,223 | ||||||
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August 31, 2022 | August 31, 2021 | ||||||||||
Raw materials | $ | 4,918 | $ | 3,142 | |||||||
Work in process | 687 | 677 | |||||||||
Finished goods | 605 | 680 | |||||||||
Reserve for excess and obsolete inventory | (82) | (85) | |||||||||
Inventories, net | $ | 6,128 | $ | 4,414 |
The Company recognizes interest and penalties related to unrecognized tax benefits in income tax expense. The Company’s accrued interest and penalties were approximately $18.9 million and $20.4 million as of August 31, 2019 and 2018, respectively. The Company recognized interest and penalties of approximately $(1.5) million, $(6.7) million and $5.2 million during the fiscal years ended August 31, 2019, 2018 and 2017, respectively.
It is reasonably possible that the August 31, 2019 unrecognized tax benefits could decrease during the next 12 months by $5.8 million, primarily related to a state settlement.
The Company is no longer subject to U.S. federal tax examinations for fiscal years before August 31, 2015. In majornon-U.S. and state jurisdictions, the Company is no longer subject to income tax examinations for fiscal years before August 31, 2009.
The Internal Revenue Service (“IRS”) completed its field examination of the Company’s tax returns for fiscal years 2009 through 2011 and issued a Revenue Agent’s Report (“RAR”) on May 27, 2015, which was updated on June 22, 2016. The IRS completed its field examination of the Company’s tax returns for fiscal years 2012 through 2014 and issued an RAR on April 19, 2017. The proposed adjustments in the RAR from both examination periods relate primarily to U.S. taxation of certain intercompany transactions. On May 8, 2019, the tax return audits for fiscal years 2009 through 2014 were effectively settled when the Company agreed to the IRS Office of Appeals’ Form870-AD (Offer to Waive Restrictions on Assessment and Collection of Tax Deficiency and to Accept Overassessment) adjustments, which were substantially lower than the initial RAR proposed adjustments. The settlement did not have a material effect on the Company’s financial position, results of operations, or cash flows and no additional tax liabilities were recorded.
5.
August 31, | ||||||||
2019 | 2018 | |||||||
Land and improvements | $ | 146,719 | $ | 144,136 | ||||
Buildings | 962,559 | 849,975 | ||||||
Leasehold improvements | 1,092,787 | 1,013,428 | ||||||
Machinery and equipment | 4,262,015 | 3,983,025 | ||||||
Furniture, fixtures and office equipment | 209,257 | 192,243 | ||||||
Computer hardware and software | 671,252 | 601,955 | ||||||
Transportation equipment | 16,423 | 17,215 | ||||||
Construction in progress | 83,234 | 42,984 | ||||||
|
|
|
| |||||
7,444,246 | 6,844,961 | |||||||
Less accumulated depreciation and amortization | 4,110,496 | 3,646,945 | ||||||
|
|
|
| |||||
$ | 3,333,750 | $ | 3,198,016 | |||||
|
|
|
|
August 31, 2022 | August 31, 2021 | ||||||||||
Land and improvements | $ | 108 | $ | 143 | |||||||
Buildings | 1,191 | 1,216 | |||||||||
Leasehold improvements | 1,362 | 1,249 | |||||||||
Machinery and equipment | 5,627 | 5,216 | |||||||||
Furniture, fixtures and office equipment | 241 | 234 | |||||||||
Computer hardware and software | 860 | 819 | |||||||||
Transportation equipment | 10 | 9 | |||||||||
Construction in progress | 179 | 222 | |||||||||
Property, plant and equipment | 9,578 | 9,108 | |||||||||
Less accumulated depreciation and amortization | 5,624 | 5,033 | |||||||||
Property, plant and equipment, net | $ | 3,954 | $ | 4,075 |
Fiscal Year Ended August 31, | ||||||||||||
2019 | 2018 | 2017 | ||||||||||
Depreciation expense | $ | 739,910 | $ | 735,213 | $ | 724,856 | ||||||
Maintenance and repair expense | $ | 288,309 | $ | 266,691 | $ | 234,332 |
Fiscal Year Ended August 31, | |||||||||||||||||
2022 | 2021 | 2020 | |||||||||||||||
Depreciation expense | $ | 891 | $ | 828 | $ | 739 | |||||||||||
Maintenance and repair expense | $ | 395 | $ | 381 | $ | 334 |
Financial Statement Line Item | August 31, 2022 | August 31, 2021 | ||||||||||||||||||
Assets | ||||||||||||||||||||
Operating lease assets(1) | Operating lease right-of-use assets | $ | 500 | $ | 390 | |||||||||||||||
Finance lease assets(2) | Property, plant and equipment, net | 368 | 318 | |||||||||||||||||
Total lease assets | $ | 868 | $ | 708 | ||||||||||||||||
Liabilities | ||||||||||||||||||||
Current | ||||||||||||||||||||
Operating lease liabilities | Current operating lease liabilities | $ | 119 | $ | 108 | |||||||||||||||
Finance lease liabilities | Accrued expenses | 120 | 96 | |||||||||||||||||
Non-current | ||||||||||||||||||||
Operating lease liabilities | Non-current operating lease liabilities | 417 | 333 | |||||||||||||||||
Finance lease liabilities | Other liabilities | 198 | 223 | |||||||||||||||||
Total lease liabilities | $ | 854 | $ | 760 |
Fiscal Year Ended August 31, | |||||||||||
2022 | 2021 | ||||||||||
Operating lease cost | $ | 143 | $ | 119 | |||||||
Finance lease cost | |||||||||||
Amortization of leased assets | 70 | 27 | |||||||||
Interest on lease liabilities | 6 | 5 | |||||||||
Other | 22 | 27 | |||||||||
Net lease cost(1) | $ | 241 | $ | 178 |
August 31, 2022 | August 31, 2021 | ||||||||||||||||||||||
Weighted-average remaining lease term | Weighted-average discount rate | Weighted-average remaining lease term | Weighted-average discount rate | ||||||||||||||||||||
Operating leases | 5.3 years | 3.19 | % | 5.6 years | 3.09 | % | |||||||||||||||||
Finance leases | 2.6 years | 2.84 | % | 3.4 years | 2.51 | % | |||||||||||||||||
Fiscal Year Ended August 31, | |||||||||||
2022 | 2021 | ||||||||||
Cash paid for amounts included in the measurement of lease liabilities: | |||||||||||
Operating cash flows for operating leases(1) | $ | 123 | $ | 121 | |||||||
Operating cash flows for finance leases(1) | $ | 6 | $ | 5 | |||||||
Financing activities for finance leases(2) | $ | 120 | $ | 39 | |||||||
Non-cash right-of-use assets obtained in exchange for new lease liabilities: | |||||||||||
Operating leases | $ | 229 | $ | 141 | |||||||
Finance leases | $ | 127 | $ | 190 |
Fiscal Year Ended August 31, | Operating Leases(1) | Finance Leases(1)(2) | Total | ||||||||||||||
2023 | $ | 130 | $ | 126 | $ | 256 | |||||||||||
2024 | 102 | 46 | 148 | ||||||||||||||
2025 | 78 | 63 | 141 | ||||||||||||||
2026 | 60 | 83 | 143 | ||||||||||||||
2027 | 43 | 6 | 49 | ||||||||||||||
Thereafter | 174 | 14 | 188 | ||||||||||||||
Total minimum lease payments | $ | 587 | $ | 338 | $ | 925 | |||||||||||
Less: Interest | (51) | (20) | (71) | ||||||||||||||
Present value of lease liabilities | $ | 536 | $ | 318 | $ | 854 |
analysis.
EMS | DMS | Total | ||||||||||
Balance as of August 31, 2017 | $ | 52,574 | $ | 555,610 | $ | 608,184 | ||||||
Acquisitions and adjustments(1) | 30,763 | (8,186 | ) | 22,577 | ||||||||
Change in foreign currency exchange rates | (667 | ) | (2,349 | ) | (3,016 | ) | ||||||
|
|
|
|
|
| |||||||
Balance as of August 31, 2018 | 82,670 | 545,075 | 627,745 | |||||||||
Change in foreign currency exchange rates | (702 | ) | (4,788 | ) | (5,490 | ) | ||||||
|
|
|
|
|
| |||||||
Balance as of August 31, 2019 | $ | 81,968 | $ | 540,287 | $ | 622,255 | ||||||
|
|
|
|
|
|
EMS | DMS | Total | |||||||||||||||
Balance as of August 31, 2020 | $ | 74 | $ | 623 | $ | 697 | |||||||||||
Acquisitions and adjustments | — | 17 | 17 | ||||||||||||||
Change in foreign currency exchange rates | — | 1 | 1 | ||||||||||||||
Balance as of August 31, 2021 | 74 | 641 | 715 | ||||||||||||||
Acquisitions and adjustments | 6 | 1 | 7 | ||||||||||||||
Change in foreign currency exchange rates | (1) | (17) | (18) | ||||||||||||||
Balance as of August 31, 2022 | $ | 79 | $ | 625 | $ | 704 |
| ||
August 31, 2019 | August 31, 2018 | |||||||||||||||
Gross Carrying Amount | Accumulated Impairment | Gross Carrying Amount | Accumulated Impairment | |||||||||||||
Goodwill | $ | 1,642,077 | $ | 1,019,822 | $ | 1,647,567 | $ | 1,019,822 |
August 31, 2022 | August 31, 2021 | ||||||||||||||||||||||
Gross Carrying Amount | Accumulated Impairment | Gross Carrying Amount | Accumulated Impairment | ||||||||||||||||||||
Goodwill | $ | 1,724 | $ | 1,020 | $ | 1,735 | $ | 1,020 |
Weighted Average Amortization Period (in years) | August 31, 2019 | August 31, 2018 | ||||||||||||||||||||||||||
Gross Carrying Amount | Accumulated Amortization | Net Carrying Amount | Gross Carrying Amount | Accumulated Amortization | Net Carrying Amount | |||||||||||||||||||||||
Contractual agreements and customer relationships | 12 | $ | 292,797 | $ | (175,199 | ) | $ | 117,598 | $ | 289,947 | $ | (153,415 | ) | $ | 136,532 | |||||||||||||
Intellectual property | 6 | 173,771 | (157,606 | ) | 16,165 | 168,181 | (148,672 | ) | 19,509 | |||||||||||||||||||
Finite-lived trade names | Not applicable | 77,536 | (5,036 | ) | 72,500 | 5,091 | (5,091 | ) | — | |||||||||||||||||||
Trade names | Indefinite | 50,590 | — | 50,590 | 123,090 | — | 123,090 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||
Total intangible assets | 11 | $ | 594,694 | $ | (337,841 | ) | $ | 256,853 | $ | 586,309 | $ | (307,178 | ) | $ | 279,131 | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
In the fourth quarter of fiscal year 2019, the Company made a strategic decision that the indefinite-lived trade name of $72.5 million acquired during the acquisition of Nypro would be phased out over the next four years. In connection with a strategic shift to further diversify our portfolio, focus on innovation and technology within the Company’s healthcare business and as a result of the strategic collaboration with a certain medical device company, management decided to implement a rebranding initiative to Jabil Healthcare. Management believes the name change better leverages the Jabil brand and the full range of services available to its customers.
As a result of the decision to rebrand, the Company determined the indefinite-lived trade name should no longer be classified as an indefinite-lived intangible asset. Accordingly, prior to reclassifying the trade name to a finite-lived intangible asset, the Company tested it for impairment and determined the fair value of the asset exceeded the carrying value. As such, this trade name was assigned a four-year estimated useful life and will be amortized on an accelerated basis.
Weighted
Average
Amortization
Period
(in years)August 31, 2022 August 31, 2021 Gross
Carrying
AmountAccumulated
AmortizationNet
Carrying
AmountGross
Carrying
AmountAccumulated
AmortizationNet
Carrying
AmountContractual agreements and customer relationships 12 $ 302 $ (231) $ 71 $ 304 $ (217) $ 87 Intellectual property 9 198 (173) 25 191 (169) 22 Finite-lived trade names Not applicable 78 (67) 11 78 (56) 22 Trade names Indefinite 51 — 51 51 — 51 Total intangible assets 12 $ 629 $ (471) $ 158 $ 624 $ (442) $ 182
Fiscal Year Ended August 31, | ||||
2020 | $ | 54,165 | ||
2021 | 43,780 | |||
2022 | 28,291 | |||
2023 | 25,877 | |||
2024 | 10,976 | |||
Thereafter | 43,174 | |||
|
| |||
Total | $ | 206,263 | ||
|
|
Fiscal Year Ended August 31, | |||||
2023 | $ | 31 | |||
2024 | 17 | ||||
2025 | 15 | ||||
2026 | 12 | ||||
2027 | 12 | ||||
Thereafter | 20 | ||||
Total | $ | 107 |
Accrued expenses consist of the following (in thousands):
August 31, 2019 | August 31, 2018 | |||||||
Contract liabilities | $ | 511,329 | $ | — | ||||
Deferred income | — | 691,365 | ||||||
Accrued compensation and employee benefits | 600,907 | 570,400 | ||||||
Obligation associated with securitization programs | 475,251 | — | ||||||
Other accrued expenses | 1,402,657 | 1,000,979 | ||||||
|
|
|
| |||||
Accrued expenses | $ | 2,990,144 | $ | 2,262,744 | ||||
|
|
|
|
8. Notes Payable and Long-Term Debt
Maturity Date | August 31, 2019 | August 31, 2018 | ||||||||||
5.625% Senior Notes(1)(2) | Dec 15, 2020 | 398,886 | 397,995 | |||||||||
4.700% Senior Notes(1)(2) | Sep 15, 2022 | 498,004 | 497,350 | |||||||||
4.900% Senior Notes(1) | Jul 14, 2023 | 299,057 | 298,814 | |||||||||
3.950% Senior Notes(1)(2)(3) | Jan 12, 2028 | 494,825 | 494,208 | |||||||||
Borrowings under credit facilities(4)(5)(6) | | Nov 8, 2022 and Aug 24, 2020 | | — | — | |||||||
Borrowings under loans(4)(5) | | Nov 8, 2022 and Aug 24, 2020 | | 805,693 | 830,332 | |||||||
|
|
|
| |||||||||
Total notes payable and long-term debt | 2,496,465 | 2,518,699 | ||||||||||
Less current installments of notes payable and long-term debt | 375,181 | 25,197 | ||||||||||
|
|
|
| |||||||||
Notes payable and long-term debt, less current installments | $ | 2,121,284 | $ | 2,493,502 | ||||||||
|
|
|
|
Maturity Date | August 31, 2022 | August 31, 2021 | |||||||||||||||
4.700% Senior Notes(1)(2)(3) | Sep 15, 2022 | $ | — | $ | 499 | ||||||||||||
4.900% Senior Notes(1) | Jul 14, 2023 | 300 | 300 | ||||||||||||||
3.950% Senior Notes(1)(2) | Jan 12, 2028 | 497 | 496 | ||||||||||||||
3.600% Senior Notes(1)(2) | Jan 15, 2030 | 496 | 495 | ||||||||||||||
3.000% Senior Notes(1)(2) | Jan 15, 2031 | 592 | 591 | ||||||||||||||
1.700% Senior Notes(1)(2)(4) | Apr 15, 2026 | 497 | 496 | ||||||||||||||
4.250% Senior Notes(1)(2)(3) | May 15, 2027 | 493 | — | ||||||||||||||
Borrowings under credit facilities(5)(6) | Jan 22, 2024 and Jan 22, 2026 | — | — | ||||||||||||||
Borrowings under loans(4) | Jul 31, 2026 | — | 1 | ||||||||||||||
Total notes payable and long-term debt | 2,875 | 2,878 | |||||||||||||||
Less current installments of notes payable and long-term debt | 300 | — | |||||||||||||||
Notes payable and long-term debt, less current installments | $ | 2,575 | $ | 2,878 |
|
|
|
|
During(1)The notes are carried at the fiscal year ended Augustprincipal amount of each note, less any unamortized discount and unamortized debt issuance costs.
|
During the fiscal year ended August 31, 2019, the interest rates on the 2018 Revolving Credit Facility ranged from 3.1% to 3.4% and the 2018 Term Loan Facility ranged from 3.3% to 3.8%. Interest is charged at a rate equal to (a) for the 2018 Revolving Credit Facility, either the base rate or 0.9750% above the Eurocurrency rate and (b) for the 2018 Term Loan Facility, either 0.125% above the base rate or 1.125% above the Eurocurrency rate. The base rate represents the greatest of: (i) Mizuho Bank, Ltd.’s prime rate, (ii) 0.50% above the federal funds rate, and (iii) 1.0% aboveone-month LIBOR, but not less than zero. The Eurocurrency rate represents adjusted LIBOR for the applicable interest period, but not less than zero. Fees include a facility fee based on the revolving credit commitments of the lenders.
Additionally, the Company’s foreign subsidiaries had various additional credit facilities that finance their future growth and any corresponding working capital needs.
January 22, 2026.
|
The Credit Facility acts as the back-up facility for commercial paper outstanding, if any. The Company has a borrowing capacity of up to $3.2 billion under its commercial paper program, which was increased from $1.8 billion on February 18, 2022.
Fiscal Year Ended August 31, | ||||
2020 | $ | 375,181 | ||
2021 | 441,858 | |||
2022 | 49,797 | |||
2023 | 1,134,613 | |||
2024 | 120 | |||
Thereafter | 494,896 | |||
|
| |||
Total | $ | 2,496,465 | ||
|
|
Fiscal Year Ended August 31, | |||||
2023 | $ | 300 | |||
2024 | — | ||||
2025 | — | ||||
2026 | 497 | ||||
2027 | 493 | ||||
Thereafter | 1,585 | ||||
Total | $ | 2,875 |
Fiscal Year Ended August 31, | |||||||||||||||||
2022 | 2021(3) | 2020 | |||||||||||||||
Trade accounts receivable sold | $ | 3,932 | $ | 4,222 | $ | 4,333 | |||||||||||
Cash proceeds received(1) | $ | 3,919 | $ | 4,202 | $ | 4,314 | |||||||||||
Proceeds due from bank | $ | — | $ | 10 | $ | — | |||||||||||
Pre-tax losses on sale of receivables(2) | $ | 13 | $ | 10 | $ | 19 |
August 31, 2022 | August 31, 2021 | ||||||||||
Inventory deposits | $ | 1,586 | $ | 711 | |||||||
Accrued compensation and employee benefits | 806 | 827 | |||||||||
Contract liabilities(1) | 796 | 559 | |||||||||
Other accrued expenses | 2,084 | 1,637 | |||||||||
Accrued expenses | $ | 5,272 | $ | 3,734 |
Pension | ||||||||
2019 | 2018 | |||||||
Change in projected benefit obligation | ||||||||
Beginning projected benefit obligation | $ | 161,104 | $ | 167,714 | ||||
Service cost | 1,437 | 1,063 | ||||||
Interest cost | 3,715 | 3,807 | ||||||
Actuarial loss (gain) | 19,060 | (6,019 | ) | |||||
Curtailments gain | — | (998 | ) | |||||
Total benefits paid | (6,568 | ) | (6,211 | ) | ||||
Plan participants’ contributions | 35 | 31 | ||||||
Amendments | — | 1,864 | ||||||
Acquisitions | 6,040 | — | ||||||
Effect of conversion to U.S. dollars | (10,133 | ) | (147 | ) | ||||
|
|
|
| |||||
Ending projected benefit obligation | $ | 174,690 | $ | 161,104 | ||||
|
|
|
| |||||
Change in plan assets | ||||||||
Beginning fair value of plan assets | 151,715 | 146,698 | ||||||
Actual return on plan assets | 19,784 | 8,146 | ||||||
Employer contributions | 1,717 | 1,811 | ||||||
Benefits paid from plan assets | (5,435 | ) | (4,758 | ) | ||||
Plan participants’ contributions | 35 | 31 | ||||||
Effect of conversion to U.S. dollars | (9,715 | ) | (213 | ) | ||||
|
|
|
| |||||
Ending fair value of plan assets | $ | 158,101 | $ | 151,715 | ||||
|
|
|
| |||||
Unfunded status | $ | (16,589 | ) | $ | (9,389 | ) | ||
|
|
|
| |||||
Amounts recognized in the Consolidated Balance Sheets | ||||||||
Accrued benefit liability, current | $ | 368 | $ | 428 | ||||
Accrued benefit liability, noncurrent | $ | 16,221 | $ | 8,961 | ||||
Accumulated other comprehensive loss(1) | ||||||||
Actuarial loss, before tax | $ | 24,343 | $ | 22,387 | ||||
Prior service cost, before tax | $ | 690 | $ | 719 |
Fiscal Year Ended August 31, | |||||||||||
2022 | 2021 | ||||||||||
Change in PBO | |||||||||||
Beginning PBO | $ | 587 | $ | 559 | |||||||
Service cost | 25 | 25 | |||||||||
Interest cost | 4 | 5 | |||||||||
Actuarial (gain) loss | (119) | 2 | |||||||||
Settlements paid from plan assets(1) | (28) | (44) | |||||||||
Total benefits paid | (13) | (17) | |||||||||
Plan participants’ contributions | 21 | 25 | |||||||||
Plan amendments | — | 24 | |||||||||
Acquisitions | — | 8 | |||||||||
Effect of conversion to U.S. dollars | (45) | — | |||||||||
Ending PBO | $ | 432 | $ | 587 | |||||||
Change in plan assets | |||||||||||
Beginning fair value of plan assets | 576 | 538 | |||||||||
Actual return on plan assets | (68) | 55 | |||||||||
Acquisitions | — | — | |||||||||
Settlements paid from plan assets(1) | (28) | (44) | |||||||||
Employer contributions | 16 | 17 | |||||||||
Benefits paid from plan assets | (12) | (15) | |||||||||
Plan participants’ contributions | 21 | 25 | |||||||||
Effect of conversion to U.S. dollars | (46) | — | |||||||||
Ending fair value of plan assets | $ | 459 | $ | 576 | |||||||
Funded (unfunded) status | $ | 27 | $ | (11) | |||||||
Amounts recognized in the Consolidated Balance Sheets | |||||||||||
Accrued benefit liability, current | $ | 1 | $ | 1 | |||||||
Accrued benefit asset, noncurrent | $ | 28 | $ | — | |||||||
Accrued benefit liability, noncurrent | $ | — | $ | 10 | |||||||
Accumulated other comprehensive loss(2) | |||||||||||
Actuarial gain, before tax | $ | (85) | $ | (69) | |||||||
Prior service cost, before tax | $ | 18 | $ | 23 |
| ||
(1)The settlements recognized during fiscal years 2022 and 2021 relate primarily to the Switzerland plan.
August 31, 2022 | August 31, 2021 | ||||||||||
ABO | $ | 417 | $ | 563 | |||||||
Plans with ABO in excess of plan assets | |||||||||||
ABO | $ | 41 | $ | 59 | |||||||
Fair value of plan assets | $ | 19 | $ | 26 | |||||||
Plans with PBO in excess of plan assets | |||||||||||
PBO | $ | 51 | $ | 74 | |||||||
Fair value of plan assets | $ | 19 | $ | 26 |
Pension | ||||||||||||
2019 | 2018 | 2017 | ||||||||||
Service cost | $ | 1,437 | $ | 1,063 | $ | 1,068 | ||||||
Interest cost | 3,715 | 3,807 | 2,942 | |||||||||
Expected long-term return on plan assets | (5,291 | ) | (5,954 | ) | (4,206 | ) | ||||||
Recognized actuarial loss | 741 | 1,127 | 1,929 | |||||||||
Amortization of prior service credit | (44 | ) | (88 | ) | (138 | ) | ||||||
Net settlement loss | 634 | 116 | 1,472 | |||||||||
|
|
|
|
|
| |||||||
Net periodic benefit cost | $ | 1,192 | $ | 71 | $ | 3,067 | ||||||
|
|
|
|
|
|
On September 1, 2018, the Company adopted a new accounting standard, which changes the presentation
Fiscal Year Ended August 31, | |||||||||||||||||
2022 | 2021 | 2020 | |||||||||||||||
Service cost(1) | $ | 25 | $ | 25 | $ | 25 | |||||||||||
Interest cost(2) | 4 | 5 | 3 | ||||||||||||||
Expected long-term return on plan assets(2) | (17) | (16) | (15) | ||||||||||||||
Recognized actuarial gain(2) | (6) | (10) | (3) | ||||||||||||||
Amortization of actuarial gains(2)(3) | (8) | (6) | — | ||||||||||||||
Net settlement loss(2) | 1 | 1 | — | ||||||||||||||
Amortization of prior service costs(2) | 4 | 1 | — | ||||||||||||||
Net periodic benefit cost | $ | 3 | $ | — | $ | 10 |
the fair value of plan assets. Gains and losses in excess of the corridor are generally amortized over the average future working lifetime of the plan participants.
Pension | ||||||||||||
2019 | 2018 | 2017 | ||||||||||
Net periodic benefit cost: | ||||||||||||
Expected long-term return on plan assets(1) | 3.6 | % | 3.8 | % | 3.3 | % | ||||||
Rate of compensation increase | 4.4 | % | 3.3 | % | 2.7 | % | ||||||
Discount rate | 2.2 | % | 2.1 | % | 1.9 | % | ||||||
Projected benefit obligation: | ||||||||||||
Expected long-term return on plan assets | 2.0 | % | 3.6 | % | 4.0 | % | ||||||
Rate of compensation increase | 4.3 | % | 4.4 | % | 4.4 | % | ||||||
Discount rate(2) | 1.7 | % | 2.2 | % | 2.3 | % |
Fiscal Year Ended August 31, | |||||||||||||||||
2022 | 2021 | 2020 | |||||||||||||||
Net periodic benefit cost: | |||||||||||||||||
Expected long-term return on plan assets(1) | 3.0 | % | 2.9 | % | 3.0 | % | |||||||||||
Rate of compensation increase | 2.2 | % | 2.1 | % | 2.0 | % | |||||||||||
Discount rate | 0.7 | % | 0.8 | % | 0.5 | % | |||||||||||
PBO: | |||||||||||||||||
Expected long-term return on plan assets | 3.6 | % | 3.0 | % | 2.9 | % | |||||||||||
Rate of compensation increase | 2.1 | % | 2.2 | % | 2.1 | % | |||||||||||
Discount rate(2) | 2.6 | % | 0.7 | % | 0.8 | % |
| ||
|
Investment policies and strategies governing the assets of the plans are designed to achieve investment objectives with prudent risk parameters. Risk management practices include the use of external investment managers; the maintenance of a portfolio diversified by asset class, investment approach and security holdings; and the maintenance of sufficient liquidity to meet benefit obligations as they come due. Within the equity securities class, the investment policy provides for investments in a broad range of publicly traded securities including both domestic and international stocks. Within the debt securities class, the investment policy provides for investments in corporate bonds as well as fixed and variable interest debt instruments. The Company currently expects to achieve a target mix of 35%40% equity and 65%60% debt securities in fiscal year 2020.
2023.
August 31, 2019 | August 31, 2018 | |||||||||||||||||||
Fair Value Hierarchy | Fair Value | Asset Allocation | Fair Value | Asset Allocation | ||||||||||||||||
Asset Category | ||||||||||||||||||||
Cash and cash equivalents(1) | Level 1 | $ | 7,705 | 5 | % | $ | 6,682 | 4 | % | |||||||||||
Equity Securities: | ||||||||||||||||||||
Global equity securities(2)(3) | Level 2 | 20,215 | 13 | % | 35,932 | 24 | % | |||||||||||||
Debt Securities: | ||||||||||||||||||||
Corporate bonds(3) | Level 2 | 42,522 | 27 | % | 41,088 | 27 | % | |||||||||||||
Government bonds(3) | Level 2 | 69,880 | 44 | % | 51,597 | 34 | % | |||||||||||||
Other Investments: | ||||||||||||||||||||
Insurance contracts(4) | Level 3 | 17,779 | 11 | % | 16,416 | 11 | % | |||||||||||||
|
|
|
|
|
|
|
| |||||||||||||
Fair value of plan assets | $ | 158,101 | 100 | % | $ | 151,715 | 100 | % | ||||||||||||
|
|
|
|
|
|
|
|
August 31, 2022 | August 31, 2021 | ||||||||||||||||||||||||||||
Fair Value Hierarchy | Fair Value | Asset Allocation | Fair Value | Asset Allocation | |||||||||||||||||||||||||
Asset Category | |||||||||||||||||||||||||||||
Cash and cash equivalents(1) | Level 1 | $ | 13 | 3 | % | $ | 15 | 3 | % | ||||||||||||||||||||
Equity Securities: | |||||||||||||||||||||||||||||
Global equity securities(2)(3) | Level 2 | 197 | 43 | % | 222 | 39 | % | ||||||||||||||||||||||
Debt Securities: | |||||||||||||||||||||||||||||
Corporate bonds(3) | Level 2 | 203 | 44 | % | 262 | 45 | % | ||||||||||||||||||||||
Government bonds(3) | Level 2 | 34 | 7 | % | 58 | 10 | % | ||||||||||||||||||||||
Other Investments: | |||||||||||||||||||||||||||||
Insurance contracts(4) | Level 3 | 12 | 3 | % | 19 | 3 | % | ||||||||||||||||||||||
Fair value of plan assets | $ | 459 | 100 | % | $ | 576 | 100 | % |
| ||
| |||||||||||
|
|
Accumulated Benefit Obligation
The following table provides information for the plans with an accumulated benefit obligation for fiscal years 2019 and 2018 (in thousands):
August 31, | ||||||||
2019 | 2018 | |||||||
Projected benefit obligation | $ | 174,690 | $ | 161,104 | ||||
Accumulated benefit obligation | $ | 161,729 | $ | 152,380 | ||||
Fair value of plan assets | $ | 158,101 | $ | 151,715 |
Cash Flows
Fiscal Year Ended August 31, | Amount | |||
2020 | $ | 5,017 | ||
2021 | 4,788 | |||
2022 | 5,365 | |||
2023 | 5,877 | |||
2024 | 6,274 | |||
2025 through 2029 | 40,828 |
Fiscal Year Ended August 31, | Amount | ||||
2023 | $ | 34 | |||
2024 | $ | 28 | |||
2025 | $ | 30 | |||
2026 | $ | 29 | |||
2027 | $ | 29 | |||
2028 through 2032 | $ | 141 |
10. Commitments
Lease Agreements
Hedging Activities
Derivatives Not Designated as Hedging Instruments Under ASC 815 | Location of (Loss) Gain on Derivatives Recognized in Net Income | Amount of (Loss) Gain Recognized in Net Income on Derivatives | ||||||||||||||||||||||||
Fiscal Year Ended August 31, | ||||||||||||||||||||||||||
2022 | 2021 | 2020 | ||||||||||||||||||||||||
Forward foreign exchange contracts(1) | Cost of revenue | $ | (71) | $ | 140 | $ | 42 |
Fiscal Year Ending August 31, | Amount | |||
2020 | $ | 118,312 | ||
2021 | 102,915 | |||
2022 | 84,729 | |||
2023 | 63,206 | |||
2024 | 51,091 | |||
Thereafter | 182,932 | |||
|
| |||
Total minimum lease payments | $ | 603,185 | ||
|
|
Total operating lease expense was approximately $125.4 million, $130.2
Interest Rate Swap Summary | Hedged Interest Rate Payments | Aggregate Notional Amount | Effective Date | Expiration Date | ||||||||||||||||||||||
Forward Interest Rate Swap | ||||||||||||||||||||||||||
Anticipated Debt Issuance | Fixed | $ | 150 | May 24, 2021 | July 31, 2024 | (1)(2) | ||||||||||||||||||||
Anticipated Debt Issuance | Fixed | $ | 100 | August 8, 2022 | July 31, 2024 | (1)(2) |
Legal Proceedings
the cash flow hedges at settlement was $46 million. The Company is party to certain lawsuitssettled cash flow hedges are recorded in the ordinary courseCondensed Consolidated Balance Sheets as a component of business. The Company does not believe that these proceedings, individually orAOCI and are amortized to interest expense in the aggregate, will haveCondensed Consolidated Statements of Operations.
11.fluctuations in the fair value of the 2020 Extended Interest Rate Swaps (the “Offsetting Interest Rate Swaps”). The change in fair value of the 2020 Extended Interest Rate Swaps and Offsetting Interest Rate Swaps was recorded in the Consolidated Statements of Operations through the maturity date of February 15, 2022, as an adjustment to interest expense.
Fiscal Year Ended August 31, | ||||||||||||
2019 | 2018 | 2017 | ||||||||||
Restricted stock units | $ | 53,766 | $ | 84,082 | $ | 42,122 | ||||||
Employee stock purchase plan | 7,580 | 6,891 | 6,334 | |||||||||
Other(1) | — | 7,538 | 88 | |||||||||
|
|
|
|
|
| |||||||
Total | $ | 61,346 | $ | 98,511 | $ | 48,544 | ||||||
|
|
|
|
|
|
|
Fiscal Year Ended August 31, 2022 2021 2020 Restricted stock units $ 67 $ 91 $ 74 Employee stock purchase plan 14 11 9 Total $ 81 $ 102 $ 83
11,000,000.
Shares Available for Grant | ||||||||
Balance as of August 31, | 10,981,300 | |||||||
Restricted stock units granted, net of forfeitures(1) | (1,007,006) | |||||||
Balance as of August 31, | 9,974,294 |
|
Stock Appreciation Rights (“SARS”)
The following table summarizes SARS activity from August 31, 2018 through August 31, 2019:
SARS Outstanding | Average Intrinsic Value (in thousands) | Weighted- Average Exercise Price | Weighted- Average Remaining Contractual Life (years) | |||||||||||||
Outstanding as of August 31, 2018 | 156,801 | $ | 1,748 | $ | 18.41 | 3.10 | ||||||||||
SARS exercised | (33,300 | ) | $ | 18.24 | ||||||||||||
|
| |||||||||||||||
Outstanding and exercisable as of August 31, 2019 | 123,501 | $ | 1,278 | $ | 18.46 | 2.11 | ||||||||||
|
|
On October 6, 2017, the Company’s Compensation Committee approved the modification of vesting criteria for certain performance-based restricted stock units granted in fiscal year 2015. As a result of the modification, 0.8 million awards vested during the first quarter of fiscal year 2018, which resulted in approximately $24.9 million of stock-based compensation expense recognized.
The following table summarizes restricted stock units activity from August 31, 20182021 through August 31, 2019:
Shares | Weighted- Average Grant-Date Fair Value | |||||||
Outstanding as of August 31, 2018 | 8,352,307 | $ | 24.34 | |||||
Changes during the period | ||||||||
Shares granted(1) | 3,144,205 | $ | 25.25 | |||||
Shares vested | (1,983,411 | ) | $ | 25.07 | ||||
Shares forfeited | (2,347,628 | ) | $ | 24.78 | ||||
|
| |||||||
Outstanding as of August 31, 2019 | 7,165,473 | $ | 26.27 | |||||
|
|
Shares | Weighted- Average Grant-Date Fair Value | ||||||||||
Outstanding as of August 31, 2021 | 5,909,131 | $ | 36.51 | ||||||||
Changes during the period | |||||||||||
Shares granted(1) | 1,306,995 | $ | 68.11 | ||||||||
Shares vested | (2,503,143) | $ | 28.66 | ||||||||
Shares forfeited | (299,989) | $ | 42.90 | ||||||||
Outstanding as of August 31, 2022 | 4,412,994 | $ | 49.87 |
| ||
Fiscal Year Ended August 31, | ||||||||||||
2019 | 2018 | 2017 | ||||||||||
Intrinsic value of SARS exercised | $ | 335 | $ | 909 | $ | 5,053 | ||||||
Fair value of restricted stock units vested | $ | 49,725 | $ | 62,592 | $ | 44,010 | ||||||
Tax benefit for stock compensation expense(1) | $ | 611 | $ | 1,122 | $ | 560 | ||||||
Unrecognized stock-based compensation expense — restricted stock units | $ | 41,778 | ||||||||||
Remaining weighted-average period for restricted stock units expense | 1.3 years |
Fiscal Year Ended August 31, | |||||||||||||||||
2022 | 2021 | 2020 | |||||||||||||||
Intrinsic value of SARS exercised | $ | — | $ | — | $ | 2 | |||||||||||
Fair value of restricted stock units vested | $ | 72 | $ | 69 | $ | 56 | |||||||||||
Tax benefit for stock compensation expense(1) | $ | 2 | $ | 1 | $ | 1 | |||||||||||
Unrecognized stock-based compensation expense — restricted stock units | $ | 34 | |||||||||||||||
Remaining weighted-average period for restricted stock units expense | 1.4 years |
| ||
23,000,000.
Fiscal Year Ended August 31, | ||||||||||||
2019 | 2018 | 2017 | ||||||||||
Expected dividend yield | 0.6 | % | 0.6 | % | 0.8 | % | ||||||
Risk-free interest rate | 2.3 | % | 1.4 | % | 0.5 | % | ||||||
Expected volatility(1) | 28.6 | % | 23.0 | % | 33.0 | % | ||||||
Expected life | 0.5 years | 0.5 years | 0.5 years |
Fiscal Year Ended August 31, | |||||||||||||||||
2022 | 2021 | 2020 | |||||||||||||||
Expected dividend yield | 0.3 | % | 0.5 | % | 0.4 | % | |||||||||||
Risk-free interest rate | 0.1 | % | 0.1 | % | 1.9 | % | |||||||||||
Expected volatility(1) | 29.6 | % | 32.9 | % | 30.7 | % | |||||||||||
Expected life | 0.5 years | 0.5 years | 0.5 years |
| ||
(1)The expected volatility was estimated using the historical volatility derived from the Company’s common stock.
Dividend Declaration Date | Dividend per Share | Total of Cash Dividends Declared | Date of Record for Dividend Payment | Dividend Cash Payment Date | ||||||||||||||||
(in thousands, except for per share data) | ||||||||||||||||||||
Fiscal Year 2019: | October 18, 2018 | $ | 0.08 | $ | 13,226 | November 15, 2018 | December 3, 2018 | |||||||||||||
January 24, 2019 | $ | 0.08 | $ | 12,706 | February 15, 2019 | March 1, 2019 | ||||||||||||||
April 18, 2019 | $ | 0.08 | $ | 12,681 | May 15, 2019 | June 3, 2019 | ||||||||||||||
July 18, 2019 | $ | 0.08 | $ | 12,724 | August 15, 2019 | September 3, 2019 | ||||||||||||||
Fiscal Year 2018: | October 19, 2017 | $ | 0.08 | $ | 14,588 | November 15, 2017 | December 1, 2017 | |||||||||||||
January 25, 2018 | $ | 0.08 | $ | 14,272 | February 15, 2018 | March 1, 2018 | ||||||||||||||
April 19, 2018 | $ | 0.08 | $ | 13,991 | May 15, 2018 | June 1, 2018 | ||||||||||||||
July 18, 2018 | $ | 0.08 | $ | 13,677 | August 15, 2018 | September 4, 2018 |
Share Repurchases
In September 2019, the Company’s Board2021:
(in millions, except for per share data) | Dividend Declaration Date | Dividend per Share | Total of Cash Dividends Declared | Date of Record for Dividend Payment | Dividend Cash Payment Date | ||||||||||||||||||||||||
Fiscal Year 2022: | October 21, 2021 | $ | 0.08 | $ | 12 | November 15, 2021 | December 1, 2021 | ||||||||||||||||||||||
January 20, 2022 | $ | 0.08 | $ | 12 | February 15, 2022 | March 2, 2022 | |||||||||||||||||||||||
April 21, 2022 | $ | 0.08 | $ | 12 | May 16, 2022 | June 2, 2022 | |||||||||||||||||||||||
July 21, 2022 | $ | 0.08 | $ | 11 | August 15, 2022 | September 2, 2022 | |||||||||||||||||||||||
Fiscal Year 2021: | October 15, 2020 | $ | 0.08 | $ | 12 | November 16, 2020 | December 2, 2020 | ||||||||||||||||||||||
January 21, 2021 | $ | 0.08 | $ | 12 | February 15, 2021 | March 2, 2021 | |||||||||||||||||||||||
April 22, 2021 | $ | 0.08 | $ | 12 | May 14, 2021 | June 2, 2021 | |||||||||||||||||||||||
July 22, 2021 | $ | 0.08 | $ | 12 | August 13, 2021 | September 2, 2021 |
Fiscal Year Ended August 31, | ||||||||||||
2019 | 2018 | 2017 | ||||||||||
Common stock outstanding: | ||||||||||||
Beginning balances | 164,588,172 | 177,727,653 | 186,998,472 | |||||||||
Shares issued upon exercise of stock options | 11,348 | 30,832 | 172,620 | |||||||||
Shares issued under employee stock purchase plan | 1,282,042 | 1,105,400 | 1,228,316 | |||||||||
Vesting of restricted stock | 1,983,261 | 2,727,229 | 2,102,049 | |||||||||
Purchases of treasury stock under employee stock plans | (489,836 | ) | (793,052 | ) | (550,096 | ) | ||||||
Treasury shares purchased(1) | (13,854,607 | ) | (16,209,890 | ) | (12,223,708 | ) | ||||||
|
|
|
|
|
| |||||||
Ending balances | 153,520,380 | 164,588,172 | 177,727,653 | |||||||||
|
|
|
|
|
|
Fiscal Year Ended August 31, | |||||||||||||||||
2022 | 2021 | 2020 | |||||||||||||||
Common stock outstanding: | |||||||||||||||||
Beginning balances | 144,496,077 | 150,330,358 | 153,520,380 | ||||||||||||||
Shares issued upon exercise of stock options | — | 9,321 | 56,999 | ||||||||||||||
Shares issued under employee stock purchase plan | 970,480 | 1,288,397 | 1,106,852 | ||||||||||||||
Vesting of restricted stock | 2,503,143 | 2,290,104 | 2,259,623 | ||||||||||||||
Purchases of treasury stock under employee stock plans | (713,667) | (622,703) | (621,250) | ||||||||||||||
Treasury shares purchased(1)(2) | (11,762,053) | (8,799,400) | (5,992,246) | ||||||||||||||
Ending balances | 135,493,980 | 144,496,077 | 150,330,358 |
| ||
12.
Sales of the Company’s products are concentrated among specific customers. For fiscal year 2019,2022, the Company’s five largest customers accounted for approximately 42%44% of its net revenue and 8579 customers accounted for approximately 90% of its net revenue. As the Company is a provider of manufacturing services and solutions and products are built based on customer specifications, it is impracticable to provide revenues from external customers for each product and service. Sales to the following customercustomers that accounted for 10% or more of the Company’s net revenues, expressed as a percentage of consolidated net revenue, and the percentage of accounts receivable for the customer,customers, were as follows:
Percentage of Net Revenue Fiscal Year Ended August 31, | Percentage of Accounts Receivable as of August 31, | |||||||||||||||||||
2019 | 2018 | 2017 | 2019 | 2018 | ||||||||||||||||
Apple, Inc.(1) | 22 | % | 28 | % | 24 | % | * | * |
Percentage of Net Revenue Fiscal Year Ended August 31, | Percentage of Accounts Receivable as of August 31, | |||||||||||||||||||||||||||||||
2022 | 2021 | 2020 | 2022 | 2021 | ||||||||||||||||||||||||||||
Apple, Inc.(1) | 19 | % | 22 | % | 20 | % | * | * | ||||||||||||||||||||||||
Amazon.com(2) | 11 | % | * | 11 | % | * | * |
| ||
|
The following table presents the Company’s revenues disaggregated by segment (in millions):
Fiscal Year Ended August 31, | |||||||||||||||||||||||||||||||||||||||||||||||||||||
2022 | 2021 | 2020 | |||||||||||||||||||||||||||||||||||||||||||||||||||
EMS | DMS | Total | EMS | DMS | Total | EMS | DMS | Total | |||||||||||||||||||||||||||||||||||||||||||||
Timing of transfer | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Point in time | $ | 6,112 | $ | 6,818 | $ | 12,930 | $ | 4,464 | $ | 7,183 | $ | 11,647 | $ | 4,363 | $ | 6,068 | $ | 10,431 | |||||||||||||||||||||||||||||||||||
Over time | 10,625 | 9,923 | 20,548 | 9,440 | 8,198 | 17,638 | 9,730 | 7,105 | 16,835 | ||||||||||||||||||||||||||||||||||||||||||||
Total | $ | 16,737 | $ | 16,741 | $ | 33,478 | $ | 13,904 | $ | 15,381 | $ | 29,285 | $ | 14,093 | $ | 13,173 | $ | 27,266 |
Fiscal Year Ended August 31, | ||||||||||||
2019 | 2018 | 2017 | ||||||||||
Net revenue | ||||||||||||
EMS | $ | 15,430,529 | $ | 12,268,600 | $ | 11,077,622 | ||||||
DMS | 9,851,791 | 9,826,816 | 7,985,499 | |||||||||
|
|
|
|
|
| |||||||
$ | 25,282,320 | $ | 22,095,416 | $ | 19,063,121 | |||||||
|
|
|
|
|
|
Fiscal Year Ended August 31, | ||||||||||||
2019 | 2018 | 2017 | ||||||||||
Segment income and reconciliation of income before tax | ||||||||||||
EMS | $ | 480,047 | $ | 451,149 | $ | 436,110 | ||||||
DMS | 396,564 | 316,998 | 230,893 | |||||||||
|
|
|
|
|
| |||||||
Total segment income | $ | 876,611 | $ | 768,147 | $ | 667,003 | ||||||
Reconciling items: | ||||||||||||
Amortization of intangibles | (31,923 | ) | (38,490 | ) | (35,524 | ) | ||||||
Stock-based compensation expense and related charges | (61,346 | ) | (98,511 | ) | (48,544 | ) | ||||||
Restructuring and related charges | (25,914 | ) | (36,902 | ) | (160,395 | ) | ||||||
Distressed customer charges | (6,235 | ) | (32,710 | ) | (10,198 | ) | ||||||
Business interruption and impairment charges, net (1) | 2,860 | (11,299 | ) | — | ||||||||
Acquisition and integration charges | (52,697 | ) | (8,082 | ) | — | |||||||
Loss on disposal of subsidiaries | — | — | (2,112 | ) | ||||||||
Restructuring of securities loss | (29,632 | ) | — | — | ||||||||
Other expense | (53,750 | ) | (37,563 | ) | (28,448 | ) | ||||||
Interest income | 21,460 | 17,813 | 12,525 | |||||||||
Interest expense | (188,730 | ) | (149,002 | ) | (138,074 | ) | ||||||
|
|
|
|
|
| |||||||
Income before income tax | $ | 450,704 | $ | 373,401 | $ | 256,233 | ||||||
|
|
|
|
|
|
| ||||||||||||||||||||
August 31, 2019 | August 31, 2018 | |||||||
Total assets | ||||||||
EMS | $ | 4,353,465 | $ | 3,456,866 | ||||
DMS | 4,988,198 | 5,378,436 | ||||||
Othernon-allocated assets | 3,628,812 | 3,210,339 | ||||||
|
|
|
| |||||
$ | 12,970,475 | $ | 12,045,641 | |||||
|
|
|
|
Fiscal Year Ended August 31, | ||||||||||||||||||||
2022 | 2021 | 2020 | ||||||||||||||||||
Segment income and reconciliation of income before income tax | ||||||||||||||||||||
EMS | $ | 727 | $ | 509 | $ | 374 | ||||||||||||||
DMS | 816 | 732 | 490 | |||||||||||||||||
Total segment income | $ | 1,543 | $ | 1,241 | $ | 864 | ||||||||||||||
Reconciling items: | ||||||||||||||||||||
Amortization of intangibles | (34) | (47) | (56) | |||||||||||||||||
Stock-based compensation expense and related charges | (81) | (102) | (83) | |||||||||||||||||
Restructuring, severance and related charges | (18) | (10) | (157) | |||||||||||||||||
Distressed customer charges | — | — | (15) | |||||||||||||||||
Business interruption and impairment charges, net | — | 1 | (6) | |||||||||||||||||
Acquisition and integration charges | — | (4) | (31) | |||||||||||||||||
Loss on debt extinguishment | (4) | — | — | |||||||||||||||||
Gain (loss) on securities | — | 2 | (49) | |||||||||||||||||
Other expense (net of periodic benefit cost) | (29) | (13) | (47) | |||||||||||||||||
Interest income | 5 | 6 | 15 | |||||||||||||||||
Interest expense | (151) | (130) | (174) | |||||||||||||||||
Income before income tax | $ | 1,231 | $ | 944 | $ | 261 |
August 31, 2022 | August 31, 2021 | |||||||||||||
Total assets: | ||||||||||||||
EMS | $ | 5,402 | $ | 4,340 | ||||||||||
DMS | 8,881 | 8,228 | ||||||||||||
Other non-allocated assets | 5,434 | 4,086 | ||||||||||||
Total | $ | 19,717 | $ | 16,654 |
Fiscal Year Ended August 31, | ||||||||||||
2019 | 2018 | 2017 | ||||||||||
External net revenue: | ||||||||||||
Singapore | $ | 6,718,495 | $ | 7,193,414 | $ | 5,585,837 | ||||||
China | 4,958,462 | 4,585,355 | 4,012,950 | |||||||||
Mexico | 4,526,456 | 3,533,437 | 3,207,059 | |||||||||
Malaysia | 1,681,911 | 1,389,851 | 1,119,384 | |||||||||
Hungary | 809,031 | 897,033 | 944,448 | |||||||||
Other | 3,489,398 | 2,651,632 | 2,547,750 | |||||||||
|
|
|
|
|
| |||||||
Foreign source revenue | 22,183,753 | 20,250,722 | 17,417,428 | |||||||||
|
|
|
|
|
| |||||||
U.S. | 3,098,567 | 1,844,694 | 1,645,693 | |||||||||
|
|
|
|
|
| |||||||
Total | $ | 25,282,320 | $ | 22,095,416 | $ | 19,063,121 | ||||||
|
|
|
|
|
|
August 31, | ||||||||
2019 | 2018 | |||||||
Long-lived assets: | ||||||||
China | $ | 1,579,904 | $ | 1,770,732 | ||||
Mexico | 418,641 | 256,086 | ||||||
Singapore | 156,028 | 191,506 | ||||||
Malaysia | 154,386 | 113,011 | ||||||
Taiwan | 123,608 | 130,062 | ||||||
Hungary | 85,809 | 91,063 | ||||||
Spain | 77,855 | 79,991 | ||||||
Poland | 57,794 | 60,847 | ||||||
Other | 412,498 | 334,466 | ||||||
|
|
|
| |||||
Long-lived assets related to foreign operations | 3,066,523 | 3,027,764 | ||||||
|
|
|
| |||||
U.S. | 1,146,335 | 1,077,128 | ||||||
|
|
|
| |||||
Total | $ | 4,212,858 | $ | 4,104,892 | ||||
|
|
|
|
13. Derivative Financial Instruments and Hedging Activities
The Company is directly and indirectly affected by changes in certain market conditions. These changes in market conditions may adversely impact the Company’s financial performance and are referred to as market risks. The Company, where deemed appropriate, uses derivatives as risk management tools to mitigate the potential impact
Fiscal Year Ended August 31, | ||||||||||||||||||||
2022 | 2021 | 2020 | ||||||||||||||||||
External net revenue: | ||||||||||||||||||||
Singapore | $ | 7,916 | $ | 7,943 | $ | 6,512 | ||||||||||||||
Mexico | 5,630 | 4,323 | 4,686 | |||||||||||||||||
China | 5,272 | 4,666 | 4,583 | |||||||||||||||||
Malaysia | 2,709 | 2,121 | 1,903 | |||||||||||||||||
Ireland | 1,135 | 748 | 746 | |||||||||||||||||
Other | 5,427 | 4,669 | 4,088 | |||||||||||||||||
Foreign source revenue | 28,089 | 24,470 | 22,518 | |||||||||||||||||
U.S. | 5,389 | 4,815 | 4,748 | |||||||||||||||||
Total | $ | 33,478 | $ | 29,285 | $ | 27,266 |
Refer to Note 16 – “Fair Value Measurements” for the fair values and classification of the Company’s derivative instruments.
The gains and losses recognized in earnings due to hedge ineffectiveness and the amount excluded from effectiveness testing were not material for all periods presented and are included as components of net revenue, cost of revenue and selling, general and administrative expense, which are the same line items in which the hedged items are recorded.
The following table presents the net losses from forward contracts recorded in the Consolidated Statements of Operations for the periods indicated (in thousands):
Location of Loss on | Fiscal Year Ended August 31 | |||||||||||||
Derivatives Recognized | 2019 | 2018 | 2017 | |||||||||||
Derivatives Not Designated as Hedging Instruments Under ASC 815 | in Net Income | Amount of Loss Recognized in Net Income on Derivatives | ||||||||||||
Forward foreign exchange contracts(1) | Cost of revenue | $ | (29,557 | ) | $ | (27,774 | ) | $ | (95,665 | ) |
|
Interest Rate Risk Management
The Company periodically enters into interest rate swaps to manage interest rate risk associated with the Company’s borrowings.
Cash Flow Hedges
The following table presents the interest rate swaps outstanding as of August 31, 2019, which have been designated as hedging instruments and accounted for as cash flow hedges:
Interest Rate Swap Summary | Hedged Interest Rate Payments | Aggregate Notional Amount (in millions) | Effective Date | Expiration Date (1) | ||||||||||||
Forward Interest Rate Swap | ||||||||||||||||
Anticipated Debt Issuance | Fixed | $ | 200.0 | October 22, 2018 | December 15, 2020 | (2) | ||||||||||
Interest Rate Swaps(3) | ||||||||||||||||
2017 Term Loan Facility | Variable | $ | 200.0 | October 11, 2018 | August 31, 2020 | |||||||||||
2018 Term Loan Facility | Variable | $ | 350.0 | August 24, 2018 | August 24, 2020 |
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August 31, 2022 | August 31, 2021 | |||||||||||||
Long-lived assets: | ||||||||||||||
China | $ | 1,758 | $ | 2,046 | ||||||||||
Mexico | 492 | 361 | ||||||||||||
Malaysia | 328 | 281 | ||||||||||||
Switzerland | 208 | 217 | ||||||||||||
Singapore | 138 | 128 | ||||||||||||
Hungary | 114 | 125 | ||||||||||||
Vietnam | 104 | 103 | ||||||||||||
Taiwan | 101 | 106 | ||||||||||||
Other | 553 | 526 | ||||||||||||
Long-lived assets related to foreign operations | 3,796 | 3,893 | ||||||||||||
U.S. | 1,020 | 1,079 | ||||||||||||
Total | $ | 4,816 | $ | 4,972 |
Fiscal Year Ended August 31, | ||||||||||||
2019 | 2018 | 2017(2) | ||||||||||
Employee severance and benefit costs | $ | 16,029 | $ | 16,269 | $ | 56,834 | ||||||
Lease costs | (41 | ) | 1,596 | 3,966 | ||||||||
Assetwrite-off costs | (3,566 | ) | 16,264 | 94,346 | ||||||||
Other costs | 13,492 | 2,773 | 5,249 | |||||||||
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Total restructuring and related charges(1) | $ | 25,914 | $ | 36,902 | $ | 160,395 | ||||||
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Fiscal Year Ended August 31, | ||||||||||||||||||||
2022(1) | 2021 | 2020 | ||||||||||||||||||
Employee severance and benefit costs | $ | 18 | $ | 5 | $ | 94 | ||||||||||||||
Lease costs | — | (1) | 8 | |||||||||||||||||
Asset write-off costs | — | 5 | 33 | |||||||||||||||||
Other costs | — | 1 | 22 | |||||||||||||||||
Total restructuring, severance and related charges(2)(3) | $ | 18 | $ | 10 | $ | 157 |
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2017 Restructuring Plan
On September 15, 2016,
The 20172020 Restructuring Plan, totaling $195.0 million in restructuring and other related costs, iswhich was complete as of August 31, 2019.
The table below sets forth2021.
2017 Restructuring Plan(1) | ||||
Employee severance and benefit costs | $ | 74,656 | ||
Lease costs | 5,521 | |||
Assetwrite-off costs | 106,974 | |||
Other related costs | 7,395 | |||
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Total restructuring and related charges | $ | 194,546 | ||
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The tables below summarize the Company’s liability activity, primarily associated with the 2017 Restructuring Plan (in thousands):
Employee Severance and Benefit Costs | Lease Costs | Asset Write-off Costs | Other Related Costs | Total | ||||||||||||||||
Balance as of August 31, 2017 | $ | 33,580 | $ | 1,665 | $ | — | $ | 3,143 | $ | 38,388 | ||||||||||
Restructuring related charges | 16,269 | 1,596 | 16,264 | 2,773 | 36,902 | |||||||||||||||
Assetwrite-off charge and othernon-cash activity | (127 | ) | 525 | (16,264 | ) | 25 | (15,841 | ) | ||||||||||||
Cash payments | (31,591 | ) | (1,102 | ) | — | (5,419 | ) | (38,112 | ) | |||||||||||
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Balance as of August 31, 2018 | 18,131 | 2,684 | — | 522 | 21,337 | |||||||||||||||
Restructuring related charges | 16,029 | (41 | ) | (3,566 | ) | 2,071 | 14,493 | |||||||||||||
Assetwrite-off charge and othernon-cash activity | (494 | ) | — | 3,566 | (18 | ) | 3,054 | |||||||||||||
Cash payments | (30,504 | ) | (663 | ) | — | (1,786 | ) | (32,953 | ) | |||||||||||
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Balance as of August 31, 2019 | $ | 3,162 | $ | 1,980 | $ | — | $ | 789 | $ | 5,931 | ||||||||||
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2020 Restructuring Plan
The Company currently expects to recognize approximately $85.0totaling $86 million inpre-tax restructuring and other related costs, primarily overwas complete as of August 31, 2021.
Fiscal Year Ended August 31, | |||||||||||||||||
2022 | 2021 | 2020 | |||||||||||||||
Domestic(1) | $ | (116) | $ | (271) | $ | (452) | |||||||||||
Foreign(1) | 1,347 | 1,215 | 713 | ||||||||||||||
Total | $ | 1,231 | $ | 944 | $ | 261 |
Fiscal Year Ended August 31, | |||||||||||||||||
2022 | 2021 | 2020 | |||||||||||||||
Current: | |||||||||||||||||
Domestic - federal | $ | 7 | $ | 7 | $ | (3) | |||||||||||
Domestic - state | 2 | 3 | 1 | ||||||||||||||
Foreign | 239 | 252 | 180 | ||||||||||||||
Total current | 248 | 262 | 178 | ||||||||||||||
Deferred: | |||||||||||||||||
Domestic - federal | (25) | 2 | (10) | ||||||||||||||
Foreign | 12 | (18) | 36 | ||||||||||||||
Total deferred | (13) | (16) | 26 | ||||||||||||||
Total income tax expense | $ | 235 | $ | 246 | $ | 204 |
Fiscal Year Ended August 31, | |||||||||||||||||
2022 | 2021 | 2020 | |||||||||||||||
U.S. federal statutory income tax rate | 21.0 | % | 21.0 | % | 21.0 | % | |||||||||||
State income taxes, net of federal tax benefit | 0.7 | 0.2 | (2.6) | ||||||||||||||
Impact of foreign tax rates(1)(2) | (4.0) | (4.6) | (0.9) | ||||||||||||||
Permanent differences | 1.2 | (0.4) | 3.2 | ||||||||||||||
Income tax credits(1) | (0.5) | (0.4) | (2.5) | ||||||||||||||
Changes in tax rates on deferred tax assets and liabilities(3) | — | — | 10.3 | ||||||||||||||
Valuation allowance(4) | (3.3) | 1.3 | 16.8 | ||||||||||||||
Equity compensation | (0.5) | 0.6 | 2.2 | ||||||||||||||
Impact of intercompany charges and dividends | 3.6 | 4.4 | 15.0 | ||||||||||||||
Global Intangible Low-Taxed Income | 1.1 | 3.0 | 13.7 | ||||||||||||||
Other, net | (0.2) | 0.9 | 2.0 | ||||||||||||||
Effective income tax rate | 19.1 | % | 26.0 | % | 78.2 | % |
August 31, 2022 | August 31, 2021 | ||||||||||
Deferred tax assets: | |||||||||||
Net operating loss carryforwards | $ | 176 | $ | 200 | |||||||
Receivables | 4 | 8 | |||||||||
Inventories | 16 | 14 | |||||||||
Compensated absences | 13 | 13 | |||||||||
Accrued expenses | 106 | 115 | |||||||||
Property, plant and equipment | 66 | 71 | |||||||||
Domestic tax credits | 11 | 11 | |||||||||
Foreign jurisdiction tax credits | 4 | 10 | |||||||||
Equity compensation | 10 | 10 | |||||||||
Domestic interest carryforwards | 4 | 4 | |||||||||
Cash flow hedges | — | 10 | |||||||||
Capital loss carryforwards | 20 | 20 | |||||||||
Revenue recognition | 32 | 36 | |||||||||
Operating and finance lease liabilities | 72 | 60 | |||||||||
Other | 27 | 19 | |||||||||
Total deferred tax assets before valuation allowances | 561 | 601 | |||||||||
Less valuation allowances | (281) | (353) | |||||||||
Net deferred tax assets | $ | 280 | $ | 248 | |||||||
Deferred tax liabilities: | |||||||||||
Unremitted earnings of foreign subsidiaries | $ | 57 | $ | 60 | |||||||
Intangible assets | 25 | 27 | |||||||||
Operating lease assets | 111 | 92 | |||||||||
Other | 10 | 4 | |||||||||
Total deferred tax liabilities | $ | 203 | $ | 183 | |||||||
Net deferred tax assets | $ | 77 | $ | 65 |
Last Fiscal Year of Expiration | Amount | ||||||||||
Income tax net operating loss carryforwards:(1) | |||||||||||
Domestic - federal | 2038 or indefinite | $ | 13 | ||||||||
Domestic - state | 2042 or indefinite | $ | 54 | ||||||||
Foreign | 2037 or indefinite | $ | 567 | ||||||||
Tax credit carryforwards:(1) | |||||||||||
Domestic - federal | 2032 | $ | 7 | ||||||||
Domestic - state | 2027 or indefinite | $ | 4 | ||||||||
Foreign(2) | Indefinite | $ | 4 | ||||||||
Tax capital loss carryforwards:(3) | |||||||||||
Domestic - federal | 2026 | $ | 76 |
Fiscal Year Ended August 31, | |||||||||||||||||
2022 | 2021 | 2020 | |||||||||||||||
Beginning balance | $ | 241 | $ | 190 | $ | 164 | |||||||||||
Additions for tax positions of prior years | 22 | 15 | 10 | ||||||||||||||
Reductions for tax positions of prior years | (21) | (3) | (9) | ||||||||||||||
Additions for tax positions related to current year(1) | 36 | 36 | 27 | ||||||||||||||
Cash settlements | (3) | — | (1) | ||||||||||||||
Reductions from lapses in statutes of limitations | (3) | (2) | (1) | ||||||||||||||
Reductions from non-cash settlements with taxing authorities | (9) | — | (2) | ||||||||||||||
Foreign exchange rate adjustment | (10) | 5 | 2 | ||||||||||||||
Ending balance | $ | 253 | $ | 241 | $ | 190 | |||||||||||
Unrecognized tax benefits that would affect the effective tax rate (if recognized) | $ | 150 | $ | 139 | $ | 109 |
15.examinations for fiscal years before August 31, 2012 and August 31, 2009, respectively.
Fiscal year 2019
Acquisitions
On February 25, 2019 and April 29, During the fiscal year ended August
The Company is currently evaluating the fair values of the assets and liabilities related to this business combination. The preliminary estimates and measurements are, therefore, subject to change during the measurement period for assets acquired, liabilities assumed and tax adjustments. The results of operations were included in the Company’s consolidated financial results beginning on February 25, 2019 for the initial closing and April 29, 2019 for the second closing. The Company believes it is impracticable to provide pro forma information for the acquisition of the JJMD assets.
Fiscal year 2018
Acquisitions
On September 1, 2017,October 26, 2020, under the terms of the framework agreement, the Company completed the fourth closing of its acquisition of True-Tech Corporation (“True-Tech”)certain assets of JJMD. The aggregate purchase price paid for the fourth closing was approximately $95.9$19 million in cash. True-Tech is a manufacturer specializing in aerospace, semiconductor and medical machined components.
The acquisition of True-TechTotal assets was accounted for as a business combination using the acquisition method of accounting. Assets acquired of $114.7$30 million including $25.9 million in intangible assets and $22.6 million in goodwill, andtotal liabilities assumed of $18.8$11 million were recorded at their estimated fair values as of the acquisition date.
Fiscal year 2017
Acquisitions
On March 1, 2017, the Company completed the acquisition of Lewis Engineering, which was not deemed to be significant. The acquired business expanded the Company’s capabilities in precision machining, manufacturing and design engineering. The aggregate purchase priceacquisitions of the acquisition totaled approximately $31.4 million in cash.
The acquisition was accounted for as a business combination using the acquisition method of accounting. Assets acquired of $32.3 million, including $8.2 million in goodwill and $14.6 million in intangible assets, and liabilities assumed of $0.9 million were recorded at their estimated fair values as of the acquisition date. The excess of the purchase price over the fair value of the acquired assets and assumed liabilities of $8.2 million was recorded to goodwill and was fully allocated to the DMS segment. The majority of the goodwill is currently expected to be deductible for income tax purposes. The Company expensed transaction costs in connection with the acquisition of approximately $0.8 million during the fiscal year ended August 31, 2017. The results of operations of the acquired business were included in the Company’s consolidated financial results beginning on the date of the acquisition. Pro forma information has not been provided as the acquisition is not deemed to be significant.
16.
(in thousands) | Fair Value Hierarchy | August 31, 2019 | August 31, 2018 | |||||||||
Assets: | ||||||||||||
Cash and cash equivalents: | ||||||||||||
Cash equivalents | Level 1 | (1) | $ | 27,804 | $ | 21,412 | ||||||
Prepaid expenses and other current assets: | ||||||||||||
Short-term investments | Level 1 | 14,088 | — | |||||||||
Deferred purchase price receivables(Note 2) | Level 3 | (2) | — | 533,113 | ||||||||
Forward foreign exchange contracts: | ||||||||||||
Derivatives designated as hedging instruments (Note 13) | Level 2 | (3) | 904 | 225 | ||||||||
Derivatives not designated as hedging instruments (Note 13) | Level 2 | (3) | 6,878 | 10,125 | ||||||||
Other assets: | ||||||||||||
SeniorNon-Convertible Preferred Stock | Level 3 | (4) | 33,102 | 47,300 | ||||||||
Liabilities: | ||||||||||||
Accrued expenses: | ||||||||||||
Forward foreign exchange contracts: | ||||||||||||
Derivatives designated as hedging instruments (Note 13) | Level 2 | (3) | $ | 15,999 | $ | 13,364 | ||||||
Derivatives not designated as hedging instruments (Note 13) | Level 2 | (3) | 55,391 | 46,171 | ||||||||
Interest rate swaps: | ||||||||||||
Derivatives designated as hedging instruments (Note 13) | Level 2 | (5) | 5,918 | 117 | ||||||||
Other liabilities: | ||||||||||||
Forward interest rate swaps: | ||||||||||||
Derivatives designated as hedging instruments (Note 13) | Level 2 | (5) | 35,045 | — |
Fair Value Hierarchy | August 31, 2022 | August 31, 2021 | ||||||||||||||||||
Assets: | ||||||||||||||||||||
Cash and cash equivalents: | ||||||||||||||||||||
Cash equivalents | Level 1 | (1) | $ | 14 | $ | 36 | ||||||||||||||
Prepaid expenses and other current assets: | ||||||||||||||||||||
Short-term investments | Level 1 | 16 | 18 | |||||||||||||||||
Forward foreign exchange contracts: | ||||||||||||||||||||
Derivatives designated as hedging instruments (Note 11) | Level 2 | (2) | 3 | 9 | ||||||||||||||||
Derivatives not designated as hedging instruments (Note 11) | Level 2 | (2) | 13 | 20 | ||||||||||||||||
Other assets: | ||||||||||||||||||||
Forward interest rate swap: | ||||||||||||||||||||
Derivatives designated as hedging instruments (Note 11) | Level 2 | (3) | 13 | 9 | ||||||||||||||||
Liabilities: | ||||||||||||||||||||
Accrued expenses: | ||||||||||||||||||||
Forward foreign exchange contracts: | ||||||||||||||||||||
Derivatives designated as hedging instruments (Note 11) | Level 2 | (2) | $ | 32 | $ | 6 | ||||||||||||||
Derivatives not designated as hedging instruments (Note 11) | Level 2 | (2) | 76 | 9 | ||||||||||||||||
Interest rate swaps: | ||||||||||||||||||||
Derivatives not designated as hedging instruments (Note 11) | Level 2 | (3) | — | 3 | ||||||||||||||||
Extended interest rate swap not designated as a hedging instrument (Note 11) | Level 2 | (4) | — | 10 | ||||||||||||||||
Other liabilities: | ||||||||||||||||||||
Forward interest rate swap: | ||||||||||||||||||||
Derivatives designated as hedging instruments (Note 11) | Level 2 | (3) | — | 7 |
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(1)Consist of investments that are readily convertible to cash with original maturities of 90 days or less. (2)The Company’s forward foreign exchange contracts are measured on |
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As a resultrecurring basis at fair value, based on foreign currency spot rates and forward rates quoted by banks or foreign currency dealers.
August 31, 2022 | August 31, 2021 | |||||||||||||||||||
Carrying Amount | Carrying Amount | |||||||||||||||||||
Assets held for sale (1) | $ | — | $ | 61 |
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Company sold assets held for sale with a carrying value of $61 million.
Notes payable and long-term debt is carried at amortized cost; however, the Company estimates the fair value of notes payable and long-term debt for disclosure purposes. The following table presents the carrying amounts and fair values of the Company’sCompany's notes payable and long-term debt, by hierarchy level as of the periods indicated:
August 31, 2019 | August 31, 2018 | |||||||||||||||||||
(in thousands) | Fair Value Hierarchy | Carrying Amount | Fair Value | Carrying Amount | Fair Value | |||||||||||||||
Notes payable and long-term debt: (Note 8) | ||||||||||||||||||||
5.625% Senior Notes | Level 2 | (1) | $ | 398,886 | $ | 416,000 | $ | 397,995 | $ | 415,704 | ||||||||||
4.700% Senior Notes | Level 2 | (1) | 498,004 | 525,890 | 497,350 | 503,545 | ||||||||||||||
4.900% Senior Notes | Level 3 | (2) | 299,057 | 318,704 | 298,814 | 306,535 | ||||||||||||||
3.950% Senior Notes | Level 2 | (1) | 494,825 | 509,845 | 494,208 | 476,010 |
August 31, 2022 | August 31, 2021 | |||||||||||||||||||||||||||||||
Fair Value Hierarchy | Carrying Amount | Fair Value | Carrying Amount | Fair Value | ||||||||||||||||||||||||||||
Notes payable and long-term debt: (Note 7) | ||||||||||||||||||||||||||||||||
4.700% Senior Notes | Level 2 | (1) | $ | — | $ | — | $ | 499 | $ | 521 | ||||||||||||||||||||||
4.900% Senior Notes | Level 3 | (2) | $ | 300 | $ | 300 | $ | 300 | $ | 322 | ||||||||||||||||||||||
3.950% Senior Notes | Level 2 | (1) | $ | 497 | $ | 471 | $ | 496 | $ | 555 | ||||||||||||||||||||||
3.600% Senior Notes | Level 2 | (1) | $ | 496 | $ | 440 | $ | 495 | $ | 541 | ||||||||||||||||||||||
3.000% Senior Notes | Level 2 | (1) | $ | 592 | $ | 500 | $ | 591 | $ | 618 | ||||||||||||||||||||||
1.700% Senior Notes | Level 2 | (1) | $ | 497 | $ | 446 | $ | 496 | $ | 504 | ||||||||||||||||||||||
4.250% Senior Notes | Level 2 | (1) | $ | 493 | $ | 483 | $ | — | $ | — |
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17.
Recently Adopted Accounting Guidance
During fiscal year 2014,
During fiscal year 2016, the FASB issued a new accounting standard to address certain aspects of recognition, measurement, presentation and disclosure of financial instruments. This guidance became effective for the Company in the first quarter of fiscal year 2019, and was applied prospectively by means of a cumulative-effect adjustment to the Consolidated Balance Sheet as of September 1, 2018 to equity investments that existed as of the date of adoption of the standard. The adoption of this standardperiod did not have a material impact on the Company’s Consolidated Financial Statements; however, the impact on future periods will depend on the facts and circumstances of future transactions.
During fiscal year 2016, the FASB issued a new accounting standard to address the presentation of certain transactions within the statement of cash flows with the objective of reducing the existing diversity in practice. This standard was adopted on September 1, 2018 on a retrospective basis and resulted in a reclassification of cash flows from operating activities to investing activities in the Company’s Consolidated Statement of Cash Flows for cash receipts related to collections on the deferred purchase price receivable (i.e. beneficial interest) on asset-backed securitization transactions. The increase in cash flow from investing activities and the corresponding decrease to cash flow from operating activities upon adoption of the standard was $96.8 million, $2.0 billion, and $2.7 billion for the fiscal years ended August 31, 2019, 2018 and 2017, respectively.
During fiscal year 2017, the FASB issued a new accounting standard to improve the accounting for the income tax consequences of intra-entity transfers of assets other than inventory. The new standard eliminates the exception for an intra-entity transfer of an asset other than inventory and requires an entity to recognize the income tax consequences when the transfer occurs. This guidance became effective for the Company beginning in the first quarter of fiscal year 2019. This guidance was adopted on a modified retrospective basis and an immaterial cumulative-effect adjustment was recorded, which reduced retained earnings as of September 1, 2018.
During fiscal year 2017, the FASB issued a new accounting standard which clarifies the scope of accounting for asset derecognition and adds further guidance for recognizing gains and losses from the transferof non-financial assets in contracts withnon-customers. This guidance became effective for the Company beginning in the first quarter of fiscal year 2019 coincident with the new revenue recognition guidance. The adoption of this standard did not have a material impact on the Company’s Consolidated Financial Statements; however, the impact on future periods will depend on the facts and circumstances of future transactions.
During the second quarter of fiscal year 2018, the Securities and Exchange Commission (“SEC”) staff issued SAB 118, which provides guidance on accounting for the tax effects of the Tax Act. SAB 118 provides a measurement period that should not extend beyond one year from the Tax Act enactment date for companies to complete the accounting under ASC 740. In accordance with SAB 118, a company must reflect the income tax effects of those aspects of the Tax Act for which the accounting under ASC 740 is complete. To the extent that a company’s accounting for certain income tax effects of the Tax Act is incomplete, but it is able to determine a reasonable estimate, it must record a provisional estimate in its financial statements. If a company cannot determine a provisional estimate to be included in the financial statements, it should continue to apply ASC 740 on the basis of the provisions of the tax laws that were in effect immediately before the enactment of the Tax Act. The Company applied SAB 118 and provided required disclosures in Note 4 – “Income Taxes.”
Recently Issued Accounting Guidance
During fiscal year 2016, the FASB issued a new accounting standard revising lease accounting. The new guidance requires organizations to recognize lease assets and lease liabilities on the Consolidated Balance Sheet and disclose key information regarding leasing arrangements. This guidance is effective for the Company beginning in the first quarter of fiscal year 2020. The standard must be adopted using a modified retrospective approach. The Company intends to elect the package of practical expedients offered, which allows entities to not reassess: i) whether any contracts prior to the adoption date are or contain leases, ii) lease classification, and iii) whether capitalized initial direct costs continue to meet the definitionCompany.
18. Revenue
Effective September 1, 2018, the Company adopted ASU2014-09, Revenue Recognition (Topic 606). The new standard is a comprehensive new revenue recognition model that requires the Company to recognize revenue in a manner which depicts the transfer of goods or services to its customers at an amount that reflects the consideration the Company expects to receive in exchange for those goods or services.
Prior to the adoption of the new standard, the Company recognized substantially all of its revenue from contracts with customers at a point in time, which was generally when the goods were shipped to or received by the customer, title and risk of ownership had passed, the price to the buyer was fixed or determinable and collectability was reasonably assured (net of
estimated returns). Under the new standard, the Company recognizes revenue over time for the majority of its contracts with customers which results in revenue for those customers being recognized earlier than under the previous guidance. Revenue for all other contracts with customers continues to be recognized at a point in time, similar to recognition prior to the adoption of the standard.
Additionally, the new standard impacts the Company’s accounting for certain fulfillment costs, which include upfront costs to prepare for manufacturing activities that are expected to be recovered. Under the new standard, such upfront costs are recognized as an asset and amortized on a systematic basis consistent with the pattern of the transfer of control of the products or services to which to the asset relates.
The Company adopted ASU2014-09 using the modified retrospective method by applying the guidance to all open contracts upon adoption and recorded a cumulative effect adjustment as of September 1, 2018, net of tax, of $42.6 million. No adjustments have been made to prior periods. Following is a summary of the cumulative effect adjustment (in thousands):
Balance as of August 31, 2018 | Adjustments due to adoption of ASU 2014-09 | Balance as of September 1, 2018 | ||||||||||
Assets | ||||||||||||
Contract assets(1) | $ | — | $ | 591,616 | $ | 591,616 | ||||||
Inventories, net(1) | $ | 3,457,706 | $ | (461,271 | ) | $ | 2,996,435 | |||||
Prepaid expenses and other current assets(1)(2) | $ | 1,141,000 | $ | (37,271 | ) | $ | 1,103,729 | |||||
Deferred income taxes(1)(2) | $ | 218,252 | $ | (8,325 | ) | $ | 209,927 | |||||
Liabilities | ||||||||||||
Contract liabilities(2)(3) | $ | — | $ | 690,142 | $ | 690,142 | ||||||
Deferred income(2)(3)(4) | $ | 691,365 | $ | (691,365 | ) | $ | — | |||||
Other accrued expenses(3)(4) | $ | 1,000,979 | $ | 40,392 | $ | 1,041,371 | ||||||
Deferred income taxes(1) | $ | 114,385 | $ | 2,977 | $ | 117,362 | ||||||
Equity | ||||||||||||
Retained earnings(1)(2) | $ | 1,760,097 | $ | 42,602 | $ | 1,802,699 |
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The following table presents the effect of the adoption of the new revenue guidance on the Consolidated Balance Sheets as of August 31, 2019 (in thousands):
August 31, 2019 | ||||||||
As reported | Balance without the adoption of ASU2014-09 | |||||||
Assets | ||||||||
Contract assets(1) | $ | 911,940 | $ | — | ||||
Inventories, net(1) | $ | 3,023,003 | $ | 3,761,591 | ||||
Prepaid expenses and other current assets(1)(2) | $ | 501,573 | $ | 514,769 | ||||
Deferred income taxes(1) | $ | 198,827 | $ | 202,791 | ||||
Liabilities | ||||||||
Contract liabilities(2)(3) | $ | 511,329 | $ | — | ||||
Deferred income(2)(3)(4) | $ | — | $ | 521,035 | ||||
Other accrued expenses(3)(4) | $ | 1,877,908 | $ | 1,868,201 | ||||
Deferred income taxes(1) | $ | 115,818 | $ | 111,304 | ||||
Equity | ||||||||
Retained earnings(1)(2) | $ | 2,037,037 | $ | 1,885,360 |
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The following table presents the effect of the adoption of the new revenue guidance on the Consolidated Statement of Operations for the fiscal year ended August 31, 2019 (in thousands):
Fiscal Year Ended | ||||||||
August 31, 2019 | ||||||||
As reported | Balance without the adoption of ASU2014-09 | |||||||
Net revenue(1) | $ | 25,282,320 | $ | 24,864,754 | ||||
Cost of revenue(2) | $ | 23,368,919 | $ | 23,057,603 | ||||
Operating income | $ | 701,356 | $ | 595,105 | ||||
Income tax expense | $ | 161,230 | $ | 164,054 | ||||
Net income | $ | 289,474 | $ | 180,399 |
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The following table presents the Company’s revenues disaggregated by segment (in thousands):
Fiscal Year Ended | ||||||||||||
August 31, 2019 | ||||||||||||
EMS | DMS | Total | ||||||||||
Timing of transfer | ||||||||||||
Point in time | $ | 2,877,082 | $ | 6,055,716 | $ | 8,932,798 | ||||||
Over time | $ | 12,553,447 | $ | 3,796,075 | $ | 16,349,522 | ||||||
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Total | $ | 15,430,529 | $ | 9,851,791 | $ | 25,282,320 | ||||||
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Contract Balances
No impairment costs related to contract assets were recognized during the fiscal year ended August 31, 2019. Revenue recognized during the fiscal year ended August 31, 2019 that was included in the contract liability balance as of September 1, 2018 was $404.0 million.
Fulfillment Costs
As of August 31, 2019, capitalized costs to fulfill are $67.1 million. Amortization of fulfillment cost was $48.6 million during the fiscal year ended August 31, 2019. No impairments related to fulfillments costs were recognized during the fiscal year ended August 31, 2019.
Remaining Performance Obligations
The Company applied the practical expedient and did not disclose the value of unsatisfied performance obligations for contracts with an original expected length of one year or less.
JABIL INC. Registrant | ||||||||
| ||||||||
Date: October 25, 2022 | ||||||||
By: | /s/ MARK T. MONDELLO | |||||||
Mark T. Mondello | ||||||||
Chief Executive Officer |
Date: October 22, 2019
Signature |
| Title |
| Date | ||||||||||||
By: | /s/
| Chairman of the Board of Directors and Chief Executive Officer (Principal Executive Officer) | October 25, 2022 | |||||||||||||
By: | /s/ STEVEN A. RAYMUND | Lead Independent Director | October 25, 2022 | |||||||||||||
Steven A. Raymund | ||||||||||||||||
By: | /s/ THOMAS A. SANSONE
| Vice Chairman of the Board of Directors | October 25, 2022 | |||||||||||||
By: | /s/ M
| Chief
| October 25, 2022 | |||||||||||||
By: | /s/
|
| October 25, 2022 | |||||||||||||
By: | /s/
| Director | October 25, 2022 | |||||||||||||
By: | /s/
| Director | October 25, 2022 | |||||||||||||
By: | /s/
| Director | October 25, 2022 | |||||||||||||
By: | /s/
| Director | October 25, 2022 | |||||||||||||
By: | /s/
| Director | October 25, 2022 | |||||||||||||
Kathleen A. |
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SCHEDULE II
JABIL INC. AND SUBSIDIARIES
SCHEDULE OF VALUATION AND QUALIFYING ACCOUNTS
(in thousands)
Balance at Beginning of Period | Additions and Adjustments Charged to Costs and Expenses | Additions/ (Reductions) Charged to Other Accounts | Write-offs | Balance at End of Period | ||||||||||||||||
Allowance for uncollectible accounts receivable: | ||||||||||||||||||||
Fiscal year ended August 31, 2019 | $ | 15,181 | $ | 15,867 | $ | — | $ | (13,827 | ) | $ | 17,221 | |||||||||
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Fiscal year ended August 31, 2018 | $ | 14,134 | $ | 12,545 | $ | — | $ | (11,498 | ) | $ | 15,181 | |||||||||
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Fiscal year ended August 31, 2017 | $ | 11,094 | $ | 6,255 | $ | — | $ | (3,215 | ) | $ | 14,134 | |||||||||
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Balance at Beginning of Period | Additions and Adjustments Charged to Costs and Expenses | Additions/ (Reductions) Charged to Other Accounts | Write-offs | Balance at End of Period | ||||||||||||||||
Reserve for excess and obsolete inventory: | ||||||||||||||||||||
Fiscal year ended August 31, 2019 | $ | 60,940 | $ | 34,091 | $ | — | $ | (25,478 | ) | $ | 69,553 | |||||||||
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Fiscal year ended August 31, 2018 | $ | 46,013 | $ | 35,538 | $ | — | $ | (20,611 | ) | $ | 60,940 | |||||||||
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Fiscal year ended August 31, 2017 | $ | 32,221 | $ | 46,030 | $ | — | $ | (32,238 | ) | $ | 46,013 | |||||||||
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Balance at Beginning of Period | Additions Charged to Costs and Expenses(1) | Additions/ (Reductions) Charged to Other Accounts(2) | Reductions Charged to Costs and Expenses(3) | Balance at End of Period | ||||||||||||||||
Valuation allowance for deferred taxes: | ||||||||||||||||||||
Fiscal year ended August 31, 2019 | $ | 223,487 | $ | 22,750 | $ | 58,117 | $ | (16,750 | ) | $ | 287,604 | |||||||||
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Fiscal year ended August 31, 2018 | $ | 285,559 | $ | 18,418 | $ | (886 | ) | $ | (79,604 | ) | $ | 223,487 | ||||||||
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Fiscal year ended August 31, 2017 | $ | 344,828 | $ | 65,300 | $ | (97,203 | ) | $ | (27,366 | ) | $ | 285,559 | ||||||||
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Balance at
Beginning
of PeriodAdditions and
Adjustments
Charged to Costs
and ExpensesAdditions/
(Reductions)
Charged
to Other AccountsWrite-offs Balance at
End of PeriodReserve for excess and obsolete inventory: Fiscal year ended August 31, 2022 $ 85 $ 23 $ — $ (26) $ 82 Fiscal year ended August 31, 2021 $ 85 $ 33 $ — $ (33) $ 85 Fiscal year ended August 31, 2020 $ 70 $ 60 $ — $ (45) $ 85 Balance at
Beginning
of PeriodAdditions
Charged to
Costs and
ExpensesAdditions/
(Reductions)
Charged
to Other AccountsReductions
Charged to
Costs and
ExpensesBalance at
End of PeriodValuation allowance for deferred taxes: Fiscal year ended August 31, 2022 $ 353 $ 19 $ (31) $ (60) $ 281 Fiscal year ended August 31, 2021 $ 341 $ 18 $ — $ (6) $ 353 Fiscal year ended August 31, 2020 $ 288 $ 54 $ 9 $ (10) $ 341
102