filings.toolsItem 1. Financial Statements
80K characters. Original on sec.gov · Markdown
Item 1. Financial Statements
JABIL INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(in millions, except for share data)
| May 31, 2022 (Unaudited) | August 31, 2021 | ||||||||||
| ASSETS | |||||||||||
| Current assets: | |||||||||||
| Cash and cash equivalents | $ | 1,070 | $ | 1,567 | |||||||
| Accounts receivable, net of allowance for doubtful accounts | 3,193 | 3,141 | |||||||||
| Contract assets | 1,276 | 998 | |||||||||
| Inventories, net | 5,981 | 4,414 | |||||||||
| Prepaid expenses and other current assets | 952 | 757 | |||||||||
| Total current assets | 12,472 | 10,877 | |||||||||
| Property, plant and equipment, net of accumulated depreciation of $5,482 as of May 31, 2022 and $5,033 as of August 31, 2021 | 3,894 | 4,075 | |||||||||
| Operating lease right-of-use asset | 481 | 390 | |||||||||
| Goodwill | 711 | 715 | |||||||||
| Intangible assets, net of accumulated amortization of $464 as of May 31, 2022 and $442 as of August 31, 2021 | 167 | 182 | |||||||||
| Deferred income taxes | 174 | 176 | |||||||||
| Other assets | 272 | 239 | |||||||||
| Total assets | $ | 18,171 | $ | 16,654 | |||||||
| LIABILITIES AND EQUITY | |||||||||||
| Current liabilities: | |||||||||||
| Current installments of notes payable and long-term debt | $ | 1 | $ | — | |||||||
| Accounts payable | 7,082 | 6,841 | |||||||||
| Accrued expenses | 4,744 | 3,734 | |||||||||
| Current operating lease liabilities | 115 | 108 | |||||||||
| Total current liabilities | 11,942 | 10,683 | |||||||||
| Notes payable and long-term debt, less current installments | 2,874 | 2,878 | |||||||||
| Other liabilities | 289 | 334 | |||||||||
| Non-current operating lease liabilities | 405 | 333 | |||||||||
| Income tax liabilities | 190 | 178 | |||||||||
| Deferred income taxes | 114 | 111 | |||||||||
| Total liabilities | 15,814 | 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 no shares outstanding | — | — | |||||||||
| Common stock, $0.001 par value, authorized 500,000,000 shares; 270,407,585 and 267,418,092 shares issued and 138,851,189 and 144,496,077 shares outstanding as of May 31, 2022 and August 31, 2021, respectively | — | — | |||||||||
| Additional paid-in capital | 2,622 | 2,533 | |||||||||
| Retained earnings | 3,333 | 2,688 | |||||||||
| Accumulated other comprehensive loss | (20) | (25) | |||||||||
| Treasury stock at cost, 131,556,396 and 122,922,015 shares as of May 31, 2022 and August 31, 2021, respectively | (3,579) | (3,060) | |||||||||
| Total Jabil Inc. stockholders’ equity | 2,356 | 2,136 | |||||||||
| Noncontrolling interests | 1 | 1 | |||||||||
| Total equity | 2,357 | 2,137 | |||||||||
| Total liabilities and equity | $ | 18,171 | $ | 16,654 |
See accompanying notes to Condensed Consolidated Financial Statements.
JABIL INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in millions, except for per share data)
(Unaudited)
| Three months ended | Nine months ended | ||||||||||||||||||||||
| May 31, 2022 | May 31, 2021 | May 31, 2022 | May 31, 2021 | ||||||||||||||||||||
| Net revenue | $ | 8,328 | $ | 7,215 | $ | 24,448 | $ | 21,876 | |||||||||||||||
| Cost of revenue | 7,709 | 6,647 | 22,545 | 20,104 | |||||||||||||||||||
| Gross profit | 619 | 568 | 1,903 | 1,772 | |||||||||||||||||||
| Operating expenses: | |||||||||||||||||||||||
| Selling, general and administrative | 282 | 305 | 870 | 914 | |||||||||||||||||||
| Research and development | 8 | 10 | 25 | 27 | |||||||||||||||||||
| Amortization of intangibles | 8 | 12 | 24 | 35 | |||||||||||||||||||
| Restructuring, severance and related charges | — | 1 | — | 6 | |||||||||||||||||||
| Operating income | 321 | 240 | 984 | 790 | |||||||||||||||||||
| Loss on debt extinguishment | 4 | — | 4 | — | |||||||||||||||||||
| Gain on securities | — | (2) | — | (2) | |||||||||||||||||||
| Other expense (income) | 1 | (4) | (2) | (7) | |||||||||||||||||||
| Interest income | (1) | (1) | (2) | (5) | |||||||||||||||||||
| Interest expense | 39 | 34 | 105 | 97 | |||||||||||||||||||
| Income before income tax | 278 | 213 | 879 | 707 | |||||||||||||||||||
| Income tax expense | 60 | 43 | 198 | 184 | |||||||||||||||||||
| Net income | 218 | 170 | 681 | 523 | |||||||||||||||||||
| Net income attributable to noncontrolling interests, net of tax | — | 1 | — | 2 | |||||||||||||||||||
| Net income attributable to Jabil Inc. | $ | 218 | $ | 169 | $ | 681 | $ | 521 | |||||||||||||||
| Earnings per share attributable to the stockholders of Jabil Inc.: | |||||||||||||||||||||||
| Basic | $ | 1.55 | $ | 1.14 | $ | 4.77 | $ | 3.49 | |||||||||||||||
| Diluted | $ | 1.52 | $ | 1.12 | $ | 4.67 | $ | 3.41 | |||||||||||||||
| Weighted average shares outstanding: | |||||||||||||||||||||||
| Basic | 140.4 | 148.1 | 142.6 | 149.5 | |||||||||||||||||||
| Diluted | 143.3 | 152.0 | 145.8 | 152.8 | |||||||||||||||||||
See accompanying notes to Condensed Consolidated Financial Statements.
JABIL INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(in millions)
(Unaudited)
| Three months ended | Nine months ended | ||||||||||||||||||||||
| May 31, 2022 | May 31, 2021 | May 31, 2022 | May 31, 2021 | ||||||||||||||||||||
| Net income | $ | 218 | $ | 170 | $ | 681 | $ | 523 | |||||||||||||||
| Other comprehensive income: | |||||||||||||||||||||||
| Change in foreign currency translation | (9) | 15 | (20) | 26 | |||||||||||||||||||
| Change in derivative instruments: | |||||||||||||||||||||||
| Change in fair value of derivatives | 6 | 8 | 31 | 64 | |||||||||||||||||||
| Adjustment for net losses (gains) realized and included in net income | 9 | (4) | 6 | (41) | |||||||||||||||||||
| Total change in derivative instruments | 15 | 4 | 37 | 23 | |||||||||||||||||||
| Actuarial loss | (5) | — | (15) | — | |||||||||||||||||||
| Prior service credit | 1 | — | 3 | — | |||||||||||||||||||
| Total other comprehensive income | 2 | 19 | 5 | 49 | |||||||||||||||||||
| Comprehensive income | $ | 220 | $ | 189 | $ | 686 | $ | 572 | |||||||||||||||
| Comprehensive income attributable to noncontrolling interests | — | 1 | — | 2 | |||||||||||||||||||
| Comprehensive income attributable to Jabil Inc. | $ | 220 | $ | 188 | $ | 686 | $ | 570 |
See accompanying notes to Condensed Consolidated Financial Statements.
JABIL INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(in millions)
(Unaudited)
| Three months ended | Nine months ended | ||||||||||||||||||||||
| May 31, 2022 | May 31, 2021 | May 31, 2022 | May 31, 2021 | ||||||||||||||||||||
| Total stockholders' equity, beginning balances | $ | 2,338 | $ | 2,102 | $ | 2,137 | $ | 1,825 | |||||||||||||||
| Common stock: | — | — | — | — | |||||||||||||||||||
| Additional paid-in capital: | |||||||||||||||||||||||
| Beginning balances | 2,608 | 2,488 | 2,533 | 2,414 | |||||||||||||||||||
| Shares issued under employee stock purchase plan | — | — | 26 | 20 | |||||||||||||||||||
| Purchase of noncontrolling interest | — | (14) | — | (14) | |||||||||||||||||||
| Recognition of stock-based compensation | 14 | 17 | 63 | 71 | |||||||||||||||||||
| Ending balances | 2,622 | 2,491 | 2,622 | 2,491 | |||||||||||||||||||
| Retained earnings: | |||||||||||||||||||||||
| Beginning balances | 3,127 | 2,368 | 2,688 | 2,041 | |||||||||||||||||||
| Declared dividends | (12) | (12) | (36) | (37) | |||||||||||||||||||
| Net income attributable to Jabil Inc. | 218 | 169 | 681 | 521 | |||||||||||||||||||
| Ending balances | 3,333 | 2,525 | 3,333 | 2,525 | |||||||||||||||||||
| Accumulated other comprehensive (loss) income: | |||||||||||||||||||||||
| Beginning balances | (22) | (4) | (25) | (34) | |||||||||||||||||||
| Other comprehensive income | 2 | 19 | 5 | 49 | |||||||||||||||||||
| Ending balances | (20) | 15 | (20) | 15 | |||||||||||||||||||
| Treasury stock: | |||||||||||||||||||||||
| Beginning balances | (3,376) | (2,763) | (3,060) | (2,610) | |||||||||||||||||||
| Purchases of treasury stock under employee stock plans | — | — | (44) | (21) | |||||||||||||||||||
| Treasury shares purchased | (203) | (130) | (475) | (262) | |||||||||||||||||||
| Ending balances | (3,579) | (2,893) | (3,579) | (2,893) | |||||||||||||||||||
| Noncontrolling interests: | |||||||||||||||||||||||
| Beginning balances | 1 | 13 | 1 | 14 | |||||||||||||||||||
| Net income attributable to noncontrolling interests | — | 1 | — | 2 | |||||||||||||||||||
| Purchase of noncontrolling interest | — | (13) | — | (13) | |||||||||||||||||||
| Declared dividends to noncontrolling interests | — | — | — | (2) | |||||||||||||||||||
| Ending balances | 1 | 1 | 1 | 1 | |||||||||||||||||||
| Total stockholders' equity, ending balances | $ | 2,357 | $ | 2,139 | $ | 2,357 | $ | 2,139 |
See accompanying notes to Condensed Consolidated Financial Statements.
JABIL INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in millions)
(Unaudited)
| Nine months ended | |||||||||||
| May 31, 2022 | May 31, 2021 | ||||||||||
| Cash flows provided by operating activities: | |||||||||||
| Net income | $ | 681 | $ | 523 | |||||||
| Depreciation, amortization, and other, net | 768 | 730 | |||||||||
| Change in operating assets and liabilities, exclusive of net assets acquired | (704) | (582) | |||||||||
| Net cash provided by operating activities | 745 | 671 | |||||||||
| Cash flows used in investing activities: | |||||||||||
| Acquisition of property, plant and equipment | (1,068) | (878) | |||||||||
| Proceeds and advances from sale of property, plant and equipment | 470 | 287 | |||||||||
| Cash paid for business and intangible asset acquisitions, net of cash | (18) | (50) | |||||||||
| Other, net | — | (3) | |||||||||
| Net cash used in investing activities | (616) | (644) | |||||||||
| Cash flows used in financing activities: | |||||||||||
| Borrowings under debt agreements | 2,621 | 1,081 | |||||||||
| Payments toward debt agreements | (2,707) | (908) | |||||||||
| Payments to acquire treasury stock | (475) | (262) | |||||||||
| Dividends paid to stockholders | (37) | (38) | |||||||||
| Net proceeds from exercise of stock options and issuance of common stock under employee stock purchase plan | 26 | 20 | |||||||||
| Treasury stock minimum tax withholding related to vesting of restricted stock | (44) | (21) | |||||||||
| Other, net | (23) | (49) | |||||||||
| Net cash used in financing activities | (639) | (177) | |||||||||
| Effect of exchange rate changes on cash and cash equivalents | 13 | (3) | |||||||||
| Net decrease in cash and cash equivalents | (497) | (153) | |||||||||
| Cash and cash equivalents at beginning of period | 1,567 | 1,394 | |||||||||
| Cash and cash equivalents at end of period | $ | 1,070 | $ | 1,241 |
See accompanying notes to Condensed Consolidated Financial Statements.
JABIL INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. Basis of Presentation
The accompanying unaudited Condensed Consolidated Financial Statements have been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) necessary to present fairly the information set forth therein have been included. Jabil Inc. (the “Company”) has made certain reclassification adjustments to conform prior periods’ Condensed Consolidated Financial Statements to the current presentation. The accompanying unaudited Condensed Consolidated Financial Statements should be read in conjunction with the Consolidated Financial Statements and footnotes included in the Annual Report on Form 10-K of Jabil Inc. (the “Company”) for the fiscal year ended August 31, 2021. Results for the nine months ended May 31, 2022 are not necessarily an indication of the results that may be expected for the full fiscal year ending August 31, 2022.
2. Trade Accounts Receivable Sale Programs
The Company regularly sells designated pools of high credit quality trade accounts receivable, at a discount, under uncommitted trade accounts receivable sale programs to unaffiliated financial institutions without recourse. As these accounts receivable are sold without recourse, the Company does not retain the associated risks following the transfer of such accounts receivable to the respective financial institutions.
As of May 31, 2022, the Company may elect to sell receivables and the unaffiliated financial institution may elect to purchase specific accounts receivable at any one time up to a: (i) maximum aggregate amount available of $2.0 billion under nine trade accounts receivable sale programs, (ii) maximum amount available of 400 million CNY under one trade accounts receivable sale program and (iii) maximum amount available of 100 million CHF under one trade accounts receivable sale program. The trade accounts receivable sale programs expire on various dates through 2025.
The Company continues servicing the receivables sold and in exchange receives a servicing fee under each of the trade accounts receivable sale programs. Servicing fees related to the trade accounts receivable sale programs recognized during the three months and nine months ended May 31, 2022 and 2021 were not material. The Company does not record a servicing asset or liability on the Condensed Consolidated Balance Sheets as the Company estimates that the fee it receives to service these receivables approximates the fair market compensation to provide the servicing activities.
In connection with the trade accounts receivable sale programs, the Company recognized the following (in millions):
| Three months ended | Nine months ended | ||||||||||||||||||||||
| May 31, 2022 | May 31, 2021 | May 31, 2022 | May 31, 2021 | ||||||||||||||||||||
| Trade accounts receivable sold(1) | $ | 2,575 | $ | 1,016 | $ | 6,509 | $ | 3,567 | |||||||||||||||
| Cash proceeds received | $ | 2,572 | $ | 1,015 | $ | 6,504 | $ | 3,565 | |||||||||||||||
| Pre-tax losses on sale of receivables(2) | $ | 3 | $ | 1 | $ | 5 | $ | 2 |
(1)Receivables sold are excluded from accounts receivable on the Condensed Consolidated Balance Sheets and are reflected as cash provided by operating activities on the Condensed Consolidated Statements of Cash Flows.
(2)Recorded to other expense within the Condensed Consolidated Statement of Operations.
3. Inventories
Inventories consist of the following (in millions):
| May 31, 2022 | August 31, 2021 | ||||||||||
| Raw materials | $ | 4,722 | $ | 3,142 | |||||||
| Work in process | 699 | 677 | |||||||||
| Finished goods | 646 | 680 | |||||||||
| Reserve for excess and obsolete inventory | (86) | (85) | |||||||||
| Inventories, net | $ | 5,981 | $ | 4,414 |
4. Leases
During fiscal year 2022, the Company entered into new operating and finance leases. The future minimum lease payments under these new leases as of May 31, 2022 were as follows (in millions):
| Payments due by period | |||||||||||||||||||||||||||||
| Total | Less than 1 year | 1-3 years | 3-5 years | After 5 years | |||||||||||||||||||||||||
| Operating lease obligations(1) | $ | 180 | $ | 31 | $ | 56 | $ | 44 | $ | 49 | |||||||||||||||||||
| Finance lease obligations(1) | $ | 74 | $ | 37 | $ | 36 | $ | 1 | $ | — |
(1)Excludes $33 million of payments related to leases signed but not yet commenced. Additionally, certain leases signed but not yet commenced contain residual value guarantees and purchase options not deemed probable.
5. Notes Payable and Long-Term Debt
Notes payable and long-term debt outstanding as of May 31, 2022 and August 31, 2021 are summarized below (in millions):
| Maturity Date | May 31, 2022 | August 31, 2021 | ||||||||||||||||||
| 4.700% Senior Notes(1) | Sep 15, 2022 | $ | — | $ | 499 | |||||||||||||||
| 4.900% Senior Notes | Jul 14, 2023 | 300 | 300 | |||||||||||||||||
| 3.950% Senior Notes | Jan 12, 2028 | 497 | 496 | |||||||||||||||||
| 3.600% Senior Notes | Jan 15, 2030 | 496 | 495 | |||||||||||||||||
| 3.000% Senior Notes | Jan 15, 2031 | 592 | 591 | |||||||||||||||||
| 1.700% Senior Notes | Apr 15, 2026 | 496 | 496 | |||||||||||||||||
| 4.250% Senior Notes(1) | May 15, 2027 | 493 | — | |||||||||||||||||
| Borrowings under credit facilities(2) | Jan 22, 2024 and Jan 22, 2026 | — | — | |||||||||||||||||
| Borrowings under loans | Jul 31, 2026 | 1 | 1 | |||||||||||||||||
| Total notes payable and long-term debt | 2,875 | 2,878 | ||||||||||||||||||
| Less current installments of notes payable and long-term debt | 1 | — | ||||||||||||||||||
| Notes payable and long-term debt, less current installments | $ | 2,874 | $ | 2,878 |
(1)On May 4, 2022, the Company 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 the Company’s 4.700% Senior Notes due in 2022 and pay the applicable “make-whole” premium and accrued interest. In addition, the Company intends to allocate an amount equal to the net proceeds from this offering to finance or refinance eligible expenditures under the Company’s new green financing framework.
(2)As of May 31, 2022, the Company has $3.8 billion in available unused borrowing capacity under its revolving credit facilities. The senior unsecured credit agreement dated as of January 22, 2020 and amended on April 28, 2021 (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.
Debt Covenants
Borrowings under the Company’s debt agreements are subject to various covenants that limit the Company’s ability to: incur additional indebtedness, sell assets, effect mergers and certain transactions, and effect certain transactions with subsidiaries and affiliates. In addition, the revolving credit facilities and the 4.900% Senior Notes contain debt leverage and interest coverage covenants. The Company is also subject to certain covenants requiring the Company to offer to repurchase the 4.900%, 3.950%, 3.600%, 3.000%, 1.700% or 4.250% Senior Notes upon a change of control. As of May 31, 2022 and August 31, 2021, the Company was in compliance with its debt covenants.
Fair Value
Refer to Note 15 – “Fair Value Measurements” for the estimated fair values of the Company’s notes payable and long-term debt.
6. Asset-Backed Securitization Program
Certain Jabil entities participating in the global asset-backed securitization program continuously sell designated pools of trade accounts receivable to a special purpose entity, which in turn sells certain of the receivables at a discount to conduits administered by an unaffiliated financial institution on a monthly basis. In addition, a foreign entity participating in the global asset-backed securitization program sells certain receivables at a discount to conduits administered by an unaffiliated financial institution on a daily basis. The Company terminated the foreign asset-backed securitization program on June 28, 2021.
The Company continues servicing the receivables sold and in exchange receives a servicing fee under the global asset-backed securitization program. Servicing fees related to the asset-backed securitization programs recognized during the three months and nine months ended May 31, 2022 and 2021 were not material. The Company does not record a servicing asset or liability on the Condensed Consolidated Balance Sheets as the Company estimates that the fee it receives to service these receivables approximates the fair market compensation to provide the servicing activities.
The special purpose entity in the global asset-backed securitization program is a wholly-owned subsidiary of the Company and is included in the Company’s Condensed 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 the global asset-backed securitization program are pledged as collateral to the unaffiliated financial institution as of May 31, 2022.
The global asset-backed securitization program expires on November 25, 2024 and the maximum amount of net cash proceeds available at any one time is $600 million. As of May 31, 2022, the Company had no available liquidity under its global asset-backed securitization program.
In connection with the asset-backed securitization programs, the Company recognized the following (in millions):
| Three months ended | Nine months ended | ||||||||||||||||||||||
| May 31, 2022 | May 31, 2021**(4)** | May 31, 2022 | May 31, 2021**(4)** | ||||||||||||||||||||
| Trade accounts receivable sold(1) | $ | 947 | $ | 1,074 | $ | 2,979 | $ | 3,388 | |||||||||||||||
| Cash proceeds received(2) | $ | 942 | $ | 1,072 | $ | 2,971 | $ | 3,381 | |||||||||||||||
| Pre-tax losses on sale of receivables(3) | $ | 5 | $ | 2 | $ | 8 | $ | 7 | |||||||||||||||
(1)Receivables sold are excluded from accounts receivable on the Condensed Consolidated Balance Sheets and are reflected as cash provided by operating activities on the Condensed Consolidated Statements of Cash Flows.
(2)The amounts primarily represent proceeds from collections reinvested in revolving-period transfers.
(3)Recorded to other expense within the Condensed Consolidated Statements of Operations.
(4)Activity includes the foreign asset-backed securitization program which terminated on June 28, 2021.
The global asset-backed securitization program requires compliance with several covenants including compliance with the interest ratio and debt to EBITDA ratio of the Credit Facility. As of May 31, 2022 and August 31, 2021, the Company was in compliance with all covenants under the global asset-backed securitization program.
7. Accrued Expenses
Accrued expenses consist of the following (in millions):
| May 31, 2022 | August 31, 2021 | ||||||||||
| Inventory deposits | $ | 1,254 | $ | 711 | |||||||
| Contract liabilities(1) | 733 | 559 | |||||||||
| Accrued compensation and employee benefits | 729 | 827 | |||||||||
| Other accrued expenses | 2,028 | 1,637 | |||||||||
| Accrued expenses | $ | 4,744 | $ | 3,734 | |||||||
(1)Revenue recognized during the nine months ended May 31, 2022 and 2021 that was included in the contract liability balance as of August 31, 2021 and 2020 was $269 million and $306 million, respectively.
8. Postretirement and Other Employee Benefits
Net Periodic Benefit Cost
The following table provides information about the net periodic benefit cost (credit) for all plans for the three months and nine months ended May 31, 2022 and 2021 (in millions):
| Three months ended | Nine months ended | ||||||||||||||||||||||
| May 31, 2022 | May 31, 2021 | May 31, 2022 | May 31, 2021 | ||||||||||||||||||||
| Service cost(1) | $ | 7 | $ | 6 | $ | 19 | $ | 19 | |||||||||||||||
| Interest cost(2) | 1 | 2 | 3 | 4 | |||||||||||||||||||
| Expected long-term return on plan assets(2) | (5) | (4) | (13) | (12) | |||||||||||||||||||
| Recognized actuarial gain(2) | (2) | (1) | (8) | (4) | |||||||||||||||||||
| Amortization of actuarial gain(2)(3) | (2) | (2) | (6) | (5) | |||||||||||||||||||
| Amortization of prior service cost(2) | 1 | — | 3 | — | |||||||||||||||||||
| Net periodic benefit cost (credit) | $ | — | $ | 1 | $ | (2) | $ | 2 |
(1)Service cost is recognized in cost of revenue in the Condensed Consolidated Statement of Operations.
(2)Components are recognized in other expense in the Condensed Consolidated Statement of Operations.
(3)Actuarial gains and losses are amortized using a corridor approach. The gain/loss corridor is equal to 10 percent of the greater of the projected benefit obligation and 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.
9. 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 of certain market risks. The primary market risks managed by the Company through the use of derivative instruments are foreign currency risk and interest rate risk.
Foreign Currency Risk Management
Forward contracts are put in place to manage the foreign currency risk associated with the anticipated foreign currency denominated revenues and expenses. A hedging relationship existed with an aggregate notional amount outstanding of $1.3 billion and $1.5 billion as of May 31, 2022 and August 31, 2021, respectively. The related forward foreign exchange contracts have been designated as hedging instruments and are accounted for as cash flow hedges. The forward foreign exchange contract transactions will effectively lock in the value of anticipated foreign currency denominated revenues and expenses against foreign currency fluctuations. The anticipated foreign currency denominated revenues and expenses being hedged are expected to occur between June 1, 2022 and May 31, 2023.
In addition to derivatives that are designated as hedging instruments and qualify for hedge accounting, the Company also enters into forward contracts to economically hedge transactional exposure associated with commitments arising from trade accounts receivable, trade accounts payable, fixed purchase obligations and intercompany transactions denominated in a currency other than the functional currency of the respective operating entity. The aggregate notional amount of these outstanding contracts as of May 31, 2022 and August 31, 2021, was $3.1 billion and $3.6 billion, respectively.
Refer to Note 15 – “Fair Value Measurements” for the fair values and classification of the Company’s derivative instruments.
The gains and losses recognized in earnings due to amounts 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) gains from forward contracts recorded in the Condensed Consolidated Statements of Operations for the periods indicated (in millions):
| 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 | ||||||||||||||||||||||||||||||
| Three months ended | Nine months ended | |||||||||||||||||||||||||||||||
| May 31, 2022 | May 31, 2021 | May 31, 2022 | May 31, 2021 | |||||||||||||||||||||||||||||
| Forward foreign exchange contracts(1) | Cost of revenue | $ | (66) | $ | 27 | $ | (6) | $ | 148 |
(1)For the three months and nine months ended May 31, 2022, the Company recognized $64 million and $27 million, respectively, of foreign currency gains in cost of revenue, which are offset by the losses from the forward foreign exchange contracts. For the three months and nine months ended May 31, 2021, the Company recognized $22 million and $121 million, respectively, of foreign currency losses in cost of revenue, which are offset by the gains from the forward foreign exchange contracts.
Interest Rate Risk Management
The Company periodically enters into interest rate swaps to manage interest rate risk associated with the Company’s borrowings or anticipated debt issuances.
Cash Flow Hedges
The following table presents the interest rate swaps outstanding as of May 31, 2022, which have been designated as hedging instruments and are accounted for as cash flow hedges:
| Interest Rate Swap Summary | Hedged Interest Rate Payments | Aggregate Notional Amount (in millions) | Effective Date | Expiration Date | ||||||||||||||||||||||
| Forward Interest Rate Swap | ||||||||||||||||||||||||||
| Anticipated Debt Issuance | Fixed | $ | 150 | May 24, 2021 | July 31, 2024 | (1)(2) | ||||||||||||||||||||
(1)The contracts will be settled with the respective counterparties on a net basis at the expiration date for the forward interest rate swap.
(2)If the anticipated debt issuance occurs before July 31, 2024, the contracts will be terminated simultaneously with the debt issuance.
Contemporaneously with the issuance of the 4.250% Senior Notes, in April 2022 the Company settled cash flow hedges with an aggregate notional amount of $250 million and $170 million, with effective dates of November 2020 and March 2022, respectively. The cash received for the cash flow hedges at settlement was $46 million. The settled cash flow hedges are recorded in the Condensed Consolidated Balance Sheets as a component of accumulated other comprehensive income (“AOCI”) and are amortized to interest expense in the Condensed Consolidated Statements of Operations.
Contemporaneously with the issuance of the 3.000% Senior Notes in July 2020, the Company amended interest rate swap agreements with a notional amount of $200 million, with mandatory termination dates from August 15, 2020 to February 15, 2022 (the “2020 Extended Interest Rate Swaps”). In addition, the Company entered into interest rate swaps to offset future exposures of 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 Condensed Consolidated Statements of Operations through the maturity date of February 15, 2022, as an adjustment to interest expense.
10. Accumulated Other Comprehensive Income
The following table sets forth the changes in AOCI, net of tax, by component for the nine months ended May 31, 2022 (in millions):
| 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 | (20) | 31 | (1) | — | 10 | ||||||||||||||||||||||||||||||
| Amounts reclassified from AOCI | — | 6 | (14) | 3 | (5) | ||||||||||||||||||||||||||||||
| Other comprehensive (loss) income(1) | (20) | 37 | (15) | 3 | 5 | ||||||||||||||||||||||||||||||
| Balance as of May 31, 2022 | $ | (40) | $ | 1 | $ | 36 | $ | (17) | $ | (20) |
(1)Amounts are net of tax, which are immaterial.
The following table sets forth the amounts reclassified from AOCI into the Condensed Consolidated Statements of Operations, and the associated financial statement line item, net of tax, for the periods indicated (in millions):
| Three months ended | Nine months ended | |||||||||||||||||||||||||||||||
| Comprehensive Income Components | Financial Statement Line Item | May 31, 2022 | May 31, 2021 | May 31, 2022 | May 31, 2021 | |||||||||||||||||||||||||||
| Realized losses (gains) on derivative instruments:(1) | ||||||||||||||||||||||||||||||||
| Foreign exchange contracts | Cost of revenue | $ | 9 | $ | (4) | $ | 4 | $ | (43) | |||||||||||||||||||||||
| Interest rate contracts | Interest expense | — | — | 2 | 2 | |||||||||||||||||||||||||||
| Actuarial gain | (2) | (4) | — | (14) | — | |||||||||||||||||||||||||||
| Prior service cost | (2) | 1 | — | 3 | — | |||||||||||||||||||||||||||
| Total amounts reclassified from AOCI(3) | $ | 6 | $ | (4) | $ | (5) | $ | (41) |
(1)The Company expects to reclassify $20 million into earnings during the next twelve months, which will primarily be classified as a component of cost of revenue.
(2)Amounts are included in the computation of net periodic benefit cost (credit). Refer to Note 8 – “Postretirement and Other Employee Benefits” for additional information.
(3)Amounts are net of tax, which are immaterial for the three months and nine months ended May 31, 2022 and 2021.
11. Stockholders’ Equity
The Company recognized stock-based compensation expense within selling, general and administrative expense as follows (in millions):
| Three months ended | Nine months ended | ||||||||||||||||||||||
| May 31, 2022 | May 31, 2021 | May 31, 2022 | May 31, 2021 | ||||||||||||||||||||
| Restricted stock units | $ | 13 | $ | 16 | $ | 57 | $ | 68 | |||||||||||||||
| Employee stock purchase plan | 3 | 3 | 10 | 8 | |||||||||||||||||||
| Total | $ | 16 | $ | 19 | $ | 67 | $ | 76 |
As of May 31, 2022, the shares available to be issued under the 2021 Equity Incentive Plan were 9,940,536.
Restricted Stock Units
Certain key employees have been granted time-based, performance-based and market-based restricted stock unit awards (“restricted stock units”). The time-based restricted stock units generally vest on a graded vesting schedule over three years. The performance-based restricted stock units generally vest on a cliff vesting schedule over three years and up to a maximum of 150%, depending on the specified performance condition and the level of achievement obtained. The performance-based restricted stock units have a vesting condition that is based upon the Company’s cumulative adjusted core earnings per share during the performance period. The market-based restricted stock units generally vest on a cliff vesting schedule over three years and up to a maximum of 200%, depending on the specified performance condition and the level of achievement obtained. The market-based restricted stock units have a vesting condition that is tied to the Company’s total shareholder return based on the Company’s stock performance in relation to the companies in the Standard and Poor’s (S&P) Super Composite Technology Hardware and Equipment Index excluding the Company. During the nine months ended May 31, 2022 and 2021, the Company awarded approximately 0.7 million and 1.2 million time-based restricted stock units, respectively, 0.2 million and 0.4 million performance-based restricted stock units, respectively, and 0.2 million and 0.3 million market-based restricted stock units, respectively.
The following represents the stock-based compensation information as of the period indicated (in millions):
| May 31, 2022 | |||||
| Unrecognized stock-based compensation expense—restricted stock units | $ | 44 | |||
| Remaining weighted-average period for restricted stock units expense | 1.5 years |
Common Stock Outstanding
The following represents the common stock outstanding for the periods indicated:
| Three months ended | Nine months ended | ||||||||||||||||||||||
| May 31, 2022 | May 31, 2021 | May 31, 2022 | May 31, 2021 | ||||||||||||||||||||
| Common stock outstanding: | |||||||||||||||||||||||
| Beginning balances | 142,392,135 | 149,366,501 | 144,496,077 | 150,330,358 | |||||||||||||||||||
| Shares issued upon exercise of stock options | — | 9,321 | — | 9,321 | |||||||||||||||||||
| Shares issued under employee stock purchase plan | 1,686 | — | 522,169 | 771,548 | |||||||||||||||||||
| Vesting of restricted stock | 13,609 | 12,787 | 2,467,324 | 2,253,923 | |||||||||||||||||||
| Purchases of treasury stock under employee stock plans | (3,766) | (3,436) | (704,040) | (613,715) | |||||||||||||||||||
| Treasury shares purchased(1) | (3,552,475) | (2,547,707) | (7,930,341) | (5,913,969) | |||||||||||||||||||
| Ending balances | 138,851,189 | 146,837,466 | 138,851,189 | 146,837,466 |
(1)In July 2021, the Board of Directors approved an authorization for the repurchase of up to $1.0 billion of the Company’s common stock (the “2022 Share Repurchase Program”). As of May 31, 2022, 8.6 million shares had been repurchased for $517 million and $483 million remains available under the 2022 Share Repurchase Program.
12. Concentration of Risk and Segment Data
Concentration of Risk
Sales of the Company’s products are concentrated among specific customers. During the nine months ended May 31, 2022, the Company’s five largest customers accounted for approximately 45% of its net revenue and 79 customers accounted for approximately 90% of its net revenue. Sales to these customers were reported in the Electronics Manufacturing Services (“EMS”) and Diversified Manufacturing Services (“DMS”) operating segments.
The Company procures components from a broad group of suppliers. Some of the products manufactured by the Company require one or more components that are available from only a single source.
Segment Data
Net revenue for the operating segments is attributed to the segment in which the service is performed. An operating segment’s performance is evaluated based on its pre-tax operating contribution, or segment income. Segment income is defined as net revenue less cost of revenue, segment selling, general and administrative expenses, segment research and development expenses and an allocation of corporate manufacturing expenses and selling, general and administrative expenses. Certain items are excluded from the calculation of segment income. Transactions between operating segments are generally recorded at amounts that approximate those at which we would transact with third parties.
The following table sets forth operating segment information (in millions):
| Three months ended | Nine months ended | ||||||||||||||||||||||
| May 31, 2022 | May 31, 2021 | May 31, 2022 | May 31, 2021 | ||||||||||||||||||||
| Segment income and reconciliation of income before income tax | |||||||||||||||||||||||
| EMS | $ | 208 | $ | 137 | $ | 507 | $ | 357 | |||||||||||||||
| DMS | 144 | 140 | 589 | 570 | |||||||||||||||||||
| Total segment income | $ | 352 | $ | 277 | $ | 1,096 | $ | 927 | |||||||||||||||
| Reconciling items: | |||||||||||||||||||||||
| Amortization of intangibles | (8) | (12) | (24) | (35) | |||||||||||||||||||
| Stock-based compensation expense and related charges | (16) | (19) | (67) | (76) | |||||||||||||||||||
| Restructuring, severance and related charges | — | (1) | — | (6) | |||||||||||||||||||
| Business interruption and impairment charges, net | — | — | — | 1 | |||||||||||||||||||
| Acquisition and integration charges | — | — | — | (4) | |||||||||||||||||||
| Loss on debt extinguishment | (4) | — | (4) | — | |||||||||||||||||||
| Gain on securities | — | 2 | — | 2 | |||||||||||||||||||
| Other expense (net of periodic benefit cost) | (8) | (1) | (19) | (10) | |||||||||||||||||||
| Interest income | 1 | 1 | 2 | 5 | |||||||||||||||||||
| Interest expense | (39) | (34) | (105) | (97) | |||||||||||||||||||
| Income before income tax | $ | 278 | $ | 213 | $ | 879 | $ | 707 |
The following table presents the Company’s revenues disaggregated by segment (in millions):
| Three months ended | |||||||||||||||||||||||||||||||||||
| May 31, 2022 | May 31, 2021 | ||||||||||||||||||||||||||||||||||
| EMS | DMS | Total | EMS | DMS | Total | ||||||||||||||||||||||||||||||
| Timing of transfer | |||||||||||||||||||||||||||||||||||
| Point in time | $ | 1,755 | $ | 1,395 | $ | 3,150 | $ | 1,346 | $ | 1,441 | $ | 2,787 | |||||||||||||||||||||||
| Over time | 2,736 | 2,442 | 5,178 | 2,297 | 2,131 | 4,428 | |||||||||||||||||||||||||||||
| Total | $ | 4,491 | $ | 3,837 | $ | 8,328 | $ | 3,643 | $ | 3,572 | $ | 7,215 |
| Nine months ended | |||||||||||||||||||||||||||||||||||
| May 31, 2022 | May 31, 2021 | ||||||||||||||||||||||||||||||||||
| EMS | DMS | Total | EMS | DMS | Total | ||||||||||||||||||||||||||||||
| Timing of transfer | |||||||||||||||||||||||||||||||||||
| Point in time | $ | 4,489 | $ | 5,183 | $ | 9,672 | $ | 3,222 | $ | 5,463 | $ | 8,685 | |||||||||||||||||||||||
| Over time | 7,634 | 7,142 | 14,776 | 7,193 | 5,998 | 13,191 | |||||||||||||||||||||||||||||
| Total | $ | 12,123 | $ | 12,325 | $ | 24,448 | $ | 10,415 | $ | 11,461 | $ | 21,876 |
The Company operates in more than 30 countries worldwide. Sales to unaffiliated customers are based on the Company location that maintains the customer relationship and transacts the external sale. The following table sets forth, for the periods indicated, foreign source revenue expressed as a percentage of net revenue:
| Three months ended | Nine months ended | ||||||||||||||||||||||
| May 31, 2022 | May 31, 2021 | May 31, 2022 | May 31, 2021 | ||||||||||||||||||||
| Foreign source revenue | 82.6 | % | 82.7 | % | 83.7 | % | 83.6 | % |
13. Income Taxes
Effective Income Tax Rate
The U.S. federal statutory income tax rate and the Company's effective income tax rate are as follows:
| Three months ended | Nine months ended | ||||||||||||||||||||||
| May 31, 2022 | May 31, 2021 | May 31, 2022 | May 31, 2021 | ||||||||||||||||||||
| U.S. federal statutory income tax rate | 21.0 | % | 21.0 | % | 21.0 | % | 21.0 | % | |||||||||||||||
| Effective income tax rate | 21.8 | % | 20.3 | % | 22.5 | % | 26.0 | % |
The effective income tax rate differed for the three months and nine months ended May 31, 2022, compared to the three months and nine months ended May 31, 2021, primarily due to: (i) decreased losses in tax jurisdictions with existing valuation allowances for the three months and nine months ended May 31, 2022 and (ii) a $17 million income tax expense during the three months ended May 31, 2022 for an unrecognized tax benefit related to the taxation of certain prior year intercompany transactions.
The effective income tax rate differed from the U.S. federal statutory income tax rate of 21.0% during the three months and nine months ended May 31, 2022 and 2021, primarily due to: (i) losses in tax jurisdictions with existing valuation allowances, (ii) tax incentives granted to sites in China, Malaysia, Singapore and Vietnam, and (iii) a $17 million income tax expense during the three months ended May 31, 2022 for an unrecognized tax benefit related to the taxation of certain prior year intercompany transactions.
14. Earnings Per Share and Dividends
Earnings Per Share
The Company calculates its basic earnings per share by dividing net income attributable to the Company by the weighted average number of common shares outstanding during the period. The Company’s diluted earnings per share is calculated in a similar manner, but includes the effect of dilutive securities. The difference between the weighted average number of basic shares outstanding and the weighted average number of diluted shares outstanding is primarily due to dilutive unvested restricted stock units.
Potential shares of common stock are excluded from the computation of diluted earnings per share when their effect would be antidilutive. Performance-based restricted stock units are considered dilutive when the related performance criteria have been met assuming the end of the reporting period represents the end of the performance period. All potential shares of common stock are antidilutive in periods of net loss. Potential shares of common stock not included in the computation of earnings per share because their effect would have been antidilutive or because the performance criterion was not met were as follows (in thousands):
| Three months ended | Nine months ended | ||||||||||||||||||||||
| May 31, 2022 | May 31, 2021 | May 31, 2022 | May 31, 2021 | ||||||||||||||||||||
| Restricted stock units | 430.9 | 665.0 | 431.7 | 665.0 | |||||||||||||||||||
Dividends
The following table sets forth cash dividends declared by the Company to common stockholders during the nine months ended May 31, 2022 and 2021 (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 | |||||||||||||||||||||||
| 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 | |||||||||||||||||||||||
15. Fair Value Measurements
Fair Value Measurements on a Recurring Basis
The following table presents the fair value of the Company's financial assets and liabilities measured at fair value by hierarchy level on a recurring basis as of the periods indicated (in millions):
| Fair Value Hierarchy | May 31, 2022 | August 31, 2021 | |||||||||||||||
| Assets: | |||||||||||||||||
| Cash and cash equivalents: | |||||||||||||||||
| Cash equivalents | Level 1 | (1) | $ | 10 | $ | 36 | |||||||||||
| Prepaid expenses and other current assets: | |||||||||||||||||
| Short-term investments | Level 1 | 17 | 18 | ||||||||||||||
| Forward foreign exchange contracts: | |||||||||||||||||
| Derivatives designated as hedging instruments (Note 9) | Level 2 | (2) | 8 | 9 | |||||||||||||
| Derivatives not designated as hedging instruments (Note 9) | Level 2 | (2) | 18 | 20 | |||||||||||||
| Other assets: | |||||||||||||||||
| Forward interest rate swap: | |||||||||||||||||
| Derivatives designated as hedging instruments (Note 9) | Level 2 | (3) | 9 | 9 | |||||||||||||
| Liabilities: | |||||||||||||||||
| Accrued expenses: | |||||||||||||||||
| Forward foreign exchange contracts: | |||||||||||||||||
| Derivatives designated as hedging instruments (Note 9) | Level 2 | (2) | $ | 25 | $ | 6 | |||||||||||
| Derivatives not designated as hedging instruments (Note 9) | Level 2 | (2) | 56 | 9 | |||||||||||||
| Interest rate swaps: | |||||||||||||||||
| Derivatives not designated as hedging instruments (Note 9) | Level 2 | (3) | — | 3 | |||||||||||||
| Extended interest rate swap not designated as a hedging instrument (Note 9) | Level 2 | (4) | — | 10 | |||||||||||||
| Other liabilities: | |||||||||||||||||
| Forward interest rate swap: | |||||||||||||||||
| Derivatives designated as hedging instruments (Note 9) | Level 2 | (3) | — | 7 |
(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 a recurring basis at fair value, based on foreign currency spot rates and forward rates quoted by banks or foreign currency dealers.
(3)Fair value measurements are based on the contractual terms of the derivatives and use observable market-based inputs. The interest rate swaps are valued using a discounted cash flow analysis on the expected cash flows of each derivative using observable inputs including interest rate curves and credit spreads.
(4)The 2020 Extended Interest Rate Swaps were considered a hybrid instrument and the Company elected the fair value option for reporting. Fair value measurements were based on the contractual terms of the contract and used observable market-based inputs. The interest rate swaps were valued using a discounted cash flow analysis of the expected cash flows using observable inputs including interest rate curves and credit spreads.
Assets Held for Sale
The following table presents the assets held for sale (in millions):
| May 31, 2022 | August 31, 2021 | |||||||||||||||||||
| Carrying Amount | Carrying Amount | |||||||||||||||||||
| Assets held for sale(1) | $ | — | $ | 61 |
(1)During the nine months ended May 31, 2022, the Company sold assets held for sale with a carrying value of $61 million.
Fair Value of Financial Instruments
The carrying amounts of cash and cash equivalents, trade accounts receivable, prepaid expenses and other current assets, accounts payable and accrued expenses approximate fair value because of the short-term nature of these financial instruments. The carrying amounts of borrowings under credit facilities and under loans approximates fair value as interest rates on these instruments approximates current market rates.
Notes payable and long-term debt is carried at amortized cost; however, the Company estimates the fair values of notes payable and long-term debt for disclosure purposes. The following table presents the carrying amounts and fair values of the Company's notes payable and long-term debt, by hierarchy level as of the periods indicated (in millions):
| May 31, 2022 | August 31, 2021 | |||||||||||||||||||||||||||||||
| Fair Value Hierarchy | Carrying Amount | Fair Value | Carrying Amount | Fair Value | ||||||||||||||||||||||||||||
| Notes payable and long-term debt: (Note 5) | ||||||||||||||||||||||||||||||||
| 4.700% Senior Notes | Level 2 | (1) | $ | — | $ | — | $ | 499 | $ | 521 | ||||||||||||||||||||||
| 4.900% Senior Notes | Level 3 | (2) | $ | 300 | $ | 305 | $ | 300 | $ | 322 | ||||||||||||||||||||||
| 3.950% Senior Notes | Level 2 | (1) | $ | 497 | $ | 492 | $ | 496 | $ | 555 | ||||||||||||||||||||||
| 3.600% Senior Notes | Level 2 | (1) | $ | 496 | $ | 459 | $ | 495 | $ | 541 | ||||||||||||||||||||||
| 3.000% Senior Notes | Level 2 | (1) | $ | 592 | $ | 522 | $ | 591 | $ | 618 | ||||||||||||||||||||||
| 1.700% Senior Notes | Level 2 | (1) | $ | 496 | $ | 455 | $ | 496 | $ | 504 | ||||||||||||||||||||||
| 4.250% Senior Notes | Level 2 | (1) | $ | 493 | $ | 497 | $ | — | $ | — |
(1)The fair value estimates are based upon observable market data.
(2)This fair value estimate is based on the Company’s indicative borrowing cost derived from discounted cash flows.
16. Commitments and Contingencies
Legal Proceedings
The Company is party to certain lawsuits in the ordinary course of business. The Company does not believe that these proceedings, individually or in the aggregate, will have a material adverse effect on the Company’s financial position, results of operations or cash flows.
17. New Accounting Guidance
New accounting guidance adopted during the period did not have a material impact to the Company.
Recently issued accounting guidance is not applicable or did not have, or is not expected to have, a material impact to the Company.
JABIL INC. AND SUBSIDIARIES
This Quarterly Report on Form 10-Q contains forward-looking statements, within the meaning of the Private Securities Litigation Reform Act of 1995, that involve risks and uncertainties. Many of the forward-looking statements are located in Item 2 of this Form 10-Q under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” Forward-looking statements provide current expectations of future events based on certain assumptions and include any statement that does not directly relate to any historical or current fact. Forward-looking statements can also be identified by words such as “future,” “anticipates,” “believes,” “estimates,” “expects,” “intends,” “plans,” “predicts,” “will,” “would,” “should,” “could,” “can,” “may,” and similar terms. Forward-looking statements are not guarantees of future performance and the Company’s actual results may differ significantly from the results discussed in the forward-looking statements. Achievement of anticipated results is subject to substantial risks, uncertainties and inaccurate assumptions. Should known or unknown risks or uncertainties materialize, or should underlying assumptions prove inaccurate, actual results could vary materially from past results and those anticipated, estimated or projected. You should bear this in mind as you consider forward-looking statements, and you are cautioned not to put undue reliance on forward-looking statements. We undertake no obligation to publicly update forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law or by the rules and regulations of the SEC. You are advised, however, to consult any further disclosures we make on related subjects. Factors that might cause such differences include, but are not limited to, those discussed in Part II, Item 1A to this Quarterly Report on Form 10-Q and in Part 1, Item 1A of the Company’s Annual Report on Form 10-K for the year ended August 31, 2021 such as, the scope and duration of the COVID-19 outbreak and its impact on our operations, sites, customers and supply chain; managing growth effectively; our dependence on a limited number of customers; competitive challenges affecting our customers; managing rapid declines or increases in customer demand and other related customer challenges that may occur; risks arising from relationships with emerging companies; changes in technology; our ability to introduce new business models or programs requiring implementation of new competencies; competition; transportation issues; our ability to maintain our engineering, technological and manufacturing expertise; retaining key personnel; our ability to purchase components efficiently and reliance on a limited number of suppliers for critical components; risks associated with international sales and operations; our ability to achieve expected profitability from acquisitions; risk arising from our restructuring activities; issues involving our information systems, including security issues; regulatory risks (including the expense of complying, or failing to comply, with applicable regulations; risk arising from design or manufacturing defects; and intellectual property risk); financial risks (including customers or suppliers who become financially troubled; turmoil in financial markets; tax risks; credit rating risks; risks of exposure to debt; currency fluctuations; energy prices; and asset impairment); changes in financial accounting standards or policies; and risk of natural disaster, climate change or other global events. References in this report to “the Company,” “Jabil,” “we,” “our,” or “us” mean Jabil Inc. together with its subsidiaries, except where the context otherwise requires.
Previous: Cover and table of contents · Next: Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations