UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended May 31, 2017
or
☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission File Number: 001-14063
JABIL INC.
(Exact name of registrant as specified in its charter)
Delaware | 38-1886260 | |
(State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) |
10560 Dr. Martin Luther King, Jr. Street North, St. Petersburg, Florida 33716
(Address of principal executive offices) (Zip Code)
(727) 577-9749
(Registrants telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of large accelerated filer, accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act.
Large accelerated filer | ☒ | Accelerated filer | ☐ | |||
Non-accelerated filer | ☐ (Do not check if a smaller reporting company) | Smaller reporting company | ☐ | |||
Emerging growth company |
☐ |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
As of June 21, 2017, there were 179,242,687 shares of the registrants Common Stock outstanding.
JABIL INC. AND SUBSIDIARIES INDEX
Part I Financial Information | ||||||
Item 1. |
Financial Statements | |||||
Condensed Consolidated Balance Sheets at May 31, 2017 and August 31, 2016 |
1 | |||||
2 | ||||||
3 | ||||||
Condensed Consolidated Statements of Stockholders Equity at May 31, 2017 and August 31, 2016 |
4 | |||||
Condensed Consolidated Statements of Cash Flows for the nine months ended May 31, 2017 and 2016 |
5 | |||||
6 | ||||||
Item 2. |
Managements Discussion and Analysis of Financial Condition and Results of Operations |
23 | ||||
Item 3. |
35 | |||||
Item 4. |
36 | |||||
Part II Other Information | ||||||
Item 1. |
37 | |||||
Item 1A. |
37 | |||||
Item 2. |
37 | |||||
Item 3. |
37 | |||||
Item 4. |
37 | |||||
Item 5. |
37 | |||||
Item 6. |
38 | |||||
40 |
Item 1. | Financial Statements |
See accompanying notes to Condensed Consolidated Financial Statements.
1
JABIL INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except for per share data)
(Unaudited)
Three months ended | Nine months ended | |||||||||||||||
May 31, | May 31, | May 31, | May 31, | |||||||||||||
2017 | 2016 | 2017 | 2016 | |||||||||||||
Net revenue |
$ | 4,489,557 | $ | 4,310,752 | $ | 14,040,092 | $ | 13,922,323 | ||||||||
Cost of revenue |
4,163,142 | 3,989,665 | 12,920,267 | 12,718,268 | ||||||||||||
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Gross profit |
326,415 | 321,087 | 1,119,825 | 1,204,055 | ||||||||||||
Operating expenses: |
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Selling, general and administrative |
233,884 | 239,646 | 665,879 | 716,097 | ||||||||||||
Research and development |
7,274 | 7,675 | 21,982 | 24,431 | ||||||||||||
Amortization of intangibles |
9,174 | 9,711 | 26,262 | 26,150 | ||||||||||||
Restructuring and related charges |
32,700 | 4,460 | 113,529 | 8,349 | ||||||||||||
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Operating income |
43,383 | 59,595 | 292,173 | 429,028 | ||||||||||||
Other expense |
15,821 | 2,412 | 23,872 | 6,346 | ||||||||||||
Interest income |
(3,663 | ) | (2,302 | ) | (8,407 | ) | (6,653 | ) | ||||||||
Interest expense |
35,443 | 35,212 | 102,087 | 102,509 | ||||||||||||
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(Loss) income before income tax |
(4,218 | ) | 24,273 | 174,621 | 326,826 | |||||||||||
Income tax expense |
21,481 | 18,434 | 93,495 | 110,639 | ||||||||||||
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Net (loss) income |
(25,699 | ) | 5,839 | 81,126 | 216,187 | |||||||||||
Net (loss) income attributable to noncontrolling interests, net of tax |
(418 | ) | 626 | (2,285 | ) | 159 | ||||||||||
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Net (loss) income attributable to Jabil Inc. |
$ | (25,281 | ) | $ | 5,213 | $ | 83,411 | $ | 216,028 | |||||||
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(Loss) earnings per share attributable to the stockholders of Jabil Inc. |
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Basic |
$ | (0.14 | ) | $ | 0.03 | $ | 0.46 | $ | 1.13 | |||||||
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Diluted |
$ | (0.14 | ) | $ | 0.03 | $ | 0.45 | $ | 1.12 | |||||||
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Weighted average shares outstanding: |
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Basic |
181,038 | 191,206 | 182,982 | 190,841 | ||||||||||||
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Diluted |
181,038 | 193,069 | 186,621 | 193,058 | ||||||||||||
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Cash dividends declared per common share |
$ | 0.08 | $ | 0.08 | $ | 0.24 | $ | 0.24 | ||||||||
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See accompanying notes to Condensed Consolidated Financial Statements.
2
JABIL INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(in thousands)
(Unaudited)
Three months ended | Nine months ended | |||||||||||||||
May 31, | May 31, | May 31, | May 31, | |||||||||||||
2017 | 2016 | 2017 | 2016 | |||||||||||||
Net (loss) income |
$ | (25,699 | ) | $ | 5,839 | $ | 81,126 | $ | 216,187 | |||||||
Other comprehensive income: |
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Foreign currency translation adjustment |
11,727 | 18,734 | 15,231 | (5,433 | ) | |||||||||||
Changes in fair value of derivative instruments, net of tax |
(2,009 | ) | (2,021 | ) | 8,647 | (15,834 | ) | |||||||||
Reclassification of net losses realized and included in net income related to derivative instruments, net of tax |
201 | 6,812 | 11,595 | 29,762 | ||||||||||||
Unrealized gain (loss) on available for sale securities |
4,548 | (621 | ) | 10,192 | (3,748 | ) | ||||||||||
Reclassification of losses on available for sale securities into net income |
10,139 | | 10,139 | | ||||||||||||
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Total other comprehensive income |
24,606 | 22,904 | 55,804 | 4,747 | ||||||||||||
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Comprehensive (loss) income |
$ | (1,093 | ) | $ | 28,743 | $ | 136,930 | $ | 220,934 | |||||||
Comprehensive (loss) income attributable to noncontrolling interests |
(418 | ) | 626 | (2,285 | ) | 159 | ||||||||||
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Comprehensive (loss) income attributable to Jabil Inc. |
$ | (675 | ) | $ | 28,117 | $ | 139,215 | $ | 220,775 | |||||||
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See accompanying notes to Condensed Consolidated Financial Statements.
3
JABIL INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY
(in thousands, except for share data)
(Unaudited)
Jabil Inc. Stockholders Equity |
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Common Stock | Accumulated | |||||||||||||||||||||||||||||||
Additional | Other | |||||||||||||||||||||||||||||||
Shares | Par | Paid-in | Retained | Comprehensive | Treasury | Noncontrolling | Total | |||||||||||||||||||||||||
Outstanding | Value | Capital | Earnings | (Loss) Income | Stock | Interests | Equity | |||||||||||||||||||||||||
Balance at August 31, 2016 |
186,998,472 | $ | 250 | $ | 2,034,525 | $ | 1,660,820 | $ | (39,877 | ) | $ | (1,217,547 | ) | $ | 19,326 | $ | 2,457,497 | |||||||||||||||
Shares issued upon exercise of stock options |
108,941 | | | | | | | | ||||||||||||||||||||||||
Shares issued under employee stock purchase plan |
710,832 | 1 | 11,246 | | | | | 11,247 | ||||||||||||||||||||||||
Vesting of restricted stock awards |
2,073,007 | 2 | (2 | ) | | | | | | |||||||||||||||||||||||
Purchases of treasury stock under employee stock plans |
(526,540 | ) | | | | | (11,558 | ) | | (11,558 | ) | |||||||||||||||||||||
Treasury shares purchased |
(9,901,336 | ) | | | | | (237,135 | ) | | (237,135 | ) | |||||||||||||||||||||
Recognition of stock-based compensation |
| | 33,064 | | | | | 33,064 | ||||||||||||||||||||||||
Declared dividends |
| | | (45,527 | ) | | | | (45,527 | ) | ||||||||||||||||||||||
Comprehensive income |
| | | 83,411 | 55,804 | | (2,285 | ) | 136,930 | |||||||||||||||||||||||
Declared dividends to noncontrolling interests |
| | | | | | (1,500 | ) | (1,500 | ) | ||||||||||||||||||||||
Foreign currency adjustments attributable to noncontrolling interests |
| | | | | | (175 | ) | (175 | ) | ||||||||||||||||||||||
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Balance at |
179,463,376 | 253 | $ | 2,078,833 | $ | 1,698,704 | $ | 15,927 | $ | (1,466,240 | ) | $ | 15,366 | $ | 2,342,843 | |||||||||||||||||
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See accompanying notes to Condensed Consolidated Financial Statements.
4
JABIL INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(Unaudited)
Nine months ended | ||||||||
May 31, | May 31, | |||||||
2017 | 2016 | |||||||
Cash flows from operating activities: |
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Net income |
$ | 81,126 | $ | 216,187 | ||||
Adjustments to reconcile net income to net cash provided by operating activities: |
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Depreciation and amortization |
570,557 | 512,972 | ||||||
Restructuring and related charges |
58,613 | | ||||||
Recognition of stock-based compensation expense and related charges |
33,377 | 58,505 | ||||||
Deferred income taxes |
(44,916 | ) | (24,403 | ) | ||||
Loss on sale of property, plant and equipment |
1,362 | 13,229 | ||||||
Other, net |
24,928 | 6,408 | ||||||
Change in operating assets and liabilities, exclusive of net assets acquired: |
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Accounts receivable |
(85,761 | ) | 180,830 | |||||
Inventories |
(216,149 | ) | 229,187 | |||||
Prepaid expenses and other current assets |
100,397 | (131,682 | ) | |||||
Other assets |
(28,852 | ) | (7,466 | ) | ||||
Accounts payable, accrued expenses and other liabilities |
38,341 | (565,558 | ) | |||||
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Net cash provided by operating activities |
533,023 | 488,209 | ||||||
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Cash flows from investing activities: |
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Acquisition of property, plant and equipment |
(482,739 | ) | (668,505 | ) | ||||
Proceeds from sale of property, plant and equipment |
43,437 | 18,710 | ||||||
Cash paid for business and intangible asset acquisitions, net of cash |
(36,620 | ) | (206,039 | ) | ||||
Issuance of notes receivable |
| (29,300 | ) | |||||
Other, net |
(1,360 | ) | (5,250 | ) | ||||
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Net cash used in investing activities |
(477,282 | ) | (890,384 | ) | ||||
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Cash flows from financing activities: |
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Borrowings under debt agreements |
5,432,503 | 4,748,060 | ||||||
Payments toward debt agreements |
(5,370,936 | ) | (4,268,839 | ) | ||||
Payments to acquire treasury stock |
(237,135 | ) | (54,567 | ) | ||||
Dividends paid to stockholders |
(45,550 | ) | (47,122 | ) | ||||
Net proceeds from exercise of stock options and issuance of common stock under employee stock purchase plan |
11,246 | 10,660 | ||||||
Treasury stock minimum tax withholding related to vesting of restricted stock |
(11,558 | ) | (10,490 | ) | ||||
Other, net |
(1,496 | ) | (1,958 | ) | ||||
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Net cash (used in) provided by financing activities |
(222,926 | ) | 375,744 | |||||
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Effect of exchange rate changes on cash and cash equivalents |
(943 | ) | (541 | ) | ||||
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Net decrease in cash and cash equivalents |
(168,128 | ) | (26,972 | ) | ||||
Cash and cash equivalents at beginning of period |
912,059 | 913,963 | ||||||
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Cash and cash equivalents at end of period |
$ | 743,931 | $ | 886,991 | ||||
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See accompanying notes to Condensed Consolidated Financial Statements.
5
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. 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, 2016. Results for the nine months ended May 31, 2017 are not necessarily an indication of the results that may be expected for the full fiscal year ending August 31, 2017.
2. Earnings Per Share and Dividends
a. Earnings Per Share
The Company calculates its basic earnings per share by dividing net income attributable to Jabil Inc. by the weighted average number of common shares outstanding during the period. The Companys diluted earnings per share is calculated in a similar manner, but includes the effect of dilutive securities. To the extent these securities are anti-dilutive, they are excluded from the calculation of diluted earnings per share.
No potential common shares relating to outstanding stock awards have been included in the computation of diluted earnings per share as a result of the Companys net loss for the three months ended May 31, 2017. The Company accordingly excluded from the computation of diluted earnings per share 4,230,665 restricted stock awards and 513,693 stock appreciation rights for the three months ended May 31, 2017. For the nine months ended May 31, 2017, 334,152 stock appreciation rights were excluded from the computation of diluted earnings per share as their effect would have been anti-dilutive. For the three months and nine months ended May 31, 2016, 2,124,084 and 2,454,562 stock appreciation rights, respectively, were excluded from the computation of diluted earnings per share as their effect would have been anti-dilutive.
b. Dividends
The following table sets forth cash dividends declared by the Company to common stockholders during the nine months ended May 31, 2017 and 2016 (in thousands, 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 |
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Fiscal Year 2017: |
October 20, 2016 | $ | 0.08 | $ | 15,248 | November 15, 2016 | December 1, 2016 | |||||||||||||
January 26, 2017 | $ | 0.08 | $ | 15,051 | February 15, 2017 | March 1, 2017 | ||||||||||||||
April 20, 2017 | $ | 0.08 | $ | 14,840 | May 15, 2017 | June 1, 2017 | ||||||||||||||
Fiscal Year 2016: |
October 14, 2015 | $ | 0.08 | $ | 15,906 | November 16, 2015 | December 1, 2015 | |||||||||||||
January 21, 2016 | $ | 0.08 | $ | 15,947 | February 16, 2016 | March 1, 2016 | ||||||||||||||
April 21, 2016 | $ | 0.08 | $ | 15,940 | May 16, 2016 | June 1, 2016 |
6
3. Inventories
Inventories consist of the following (in thousands):
May 31, 2017 | August 31, 2016 | |||||||
Raw materials |
$ | 1,468,471 | $ | 1,302,481 | ||||
Work in process |
722,833 | 675,867 | ||||||
Finished goods |
567,556 | 510,485 | ||||||
Reserve for inventory obsolescence |
(52,330 | ) | (32,221 | ) | ||||
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Total inventories, net |
$ | 2,706,530 | $ | 2,456,612 | ||||
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4. Stock-Based Compensation
The Company recognizes stock-based compensation expense, reduced for estimated forfeitures, on a straight-line basis over the requisite service period of the award, which is generally the vesting period for outstanding stock awards. The Company recorded $18.4 million and $33.4 million of stock-based compensation expense gross of tax effects, which is included in selling, general and administrative expenses within the Condensed Consolidated Statements of Operations for the three months and nine months ended May 31, 2017, respectively. During the first quarter of fiscal year 2017, the Company recorded a $21.0 million reversal to stock-based compensation expense due to decreased expectations for the vesting of certain performance-based restricted stock awards. The Company recorded tax benefits related to the stock-based compensation expense of $0.3 million and $0.7 million, which is included in income tax expense within the Condensed Consolidated Statements of Operations for the three months and nine months ended May 31, 2017, respectively. The Company recorded $13.4 million and $58.5 million of stock-based compensation expense gross of tax effects, which is included in selling, general and administrative expenses within the Condensed Consolidated Statements of Operations for the three months and nine months ended May 31, 2016, respectively. The Company recorded tax benefits related to the stock-based compensation expense of $0.1 million and $0.8 million, which is included in income tax expense within the Condensed Consolidated Statements of Operations for the three months and nine months ended May 31, 2016, respectively.
Certain key employees have been granted time-based, performance-based and market-based restricted stock awards. The time-based restricted awards granted generally vest on a graded vesting schedule over three years. The performance-based restricted awards generally vest on a cliff vesting schedule over three to five years and provide a range of vesting possibilities of up to a maximum of 100% or 150%, depending on the specified performance condition and the level of achievement obtained. The market-based restricted awards generally vest on a cliff vesting schedule over three years and provide a range of vesting possibilities of up to a maximum of 200%. The market-based awards have a vesting condition that is tied to the Companys stock performance in relation to the Standard and Poors (S&P) Super Composite Technology Hardware and Equipment Index. The market conditions are considered in the grant date fair value using a Monte Carlo valuation model, which utilizes multiple input variables to determine the probability of the Company achieving the specified market conditions. During the nine months ended May 31, 2017 and 2016, the Company awarded approximately 1.8 million and 2.6 million time-based restricted stock units, respectively, 0.6 million and 1.3 million performance-based restricted stock units, respectively and 0.4 million and 0.4 million market-based stock units, respectively.
At May 31, 2017, there was $58.5 million of total unrecognized stock-based compensation expense related to restricted stock awards. This expense is expected to be recognized over a weighted-average period of 1.5 years.
5. Concentration of Risk and Segment Data
a. Concentration of Risk
Sales of the Companys products are concentrated among specific customers. During the nine months ended May 31, 2017, the Companys five largest customers accounted for approximately 46% 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. Almost all of the products manufactured by the Company require one or more components that are available from only a single source.
Production levels for a portion of the DMS segment are subject to seasonal influences. The Company may realize greater net revenue during its first fiscal quarter due to higher demand for consumer related products manufactured in the DMS segment during the holiday selling season. Therefore, quarterly results should not be relied upon as necessarily being indicative of results for the entire fiscal year.
7
b. Segment Data
Operating segments are defined as components of an enterprise that engage in business activities from which they may earn revenues and incur expenses; for which separate financial information is available; and whose operating results are regularly reviewed by the chief operating decision maker to assess the performance of the individual segment and make decisions about resources to be allocated to the segment.
The Company derives its revenue from providing comprehensive electronics design, production and product management services. The chief operating decision maker evaluates performance and allocates resources on a segment basis. The Companys operating segments consist of two segments EMS and DMS, which are also the Companys reportable segments. The EMS segment is focused around leveraging IT, supply chain design and engineering, technologies largely centered on core electronics, sharing of the Companys large scale manufacturing infrastructure and the ability to serve a broad range of end markets. The EMS segment includes customers primarily in the automotive and transportation, capital equipment, computing and storage, digital home, industrial and energy, networking and telecommunications, point of sale and printing industries. The DMS segment is focused on providing engineering solutions and a focus on material sciences and technologies. The DMS segment includes customers primarily in the consumer lifestyles and wearable technologies, defense and aerospace, healthcare, mobility and packaging industries.
Net revenue for the operating segments is attributed to the segment in which the service is performed. An operating segments 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. Segment income does not include amortization of intangibles, stock-based compensation expense and related charges, restructuring and related charges, distressed customer charges, acquisition costs and certain purchase accounting adjustments, loss on disposal of subsidiaries, settlement of receivables and related charges, impairment of notes receivable and related charges, goodwill impairment charges, income (loss) from discontinued operations, gain (loss) on sale of discontinued operations, other expense, interest income, interest expense, income tax expense or adjustment for net income (loss) attributable to noncontrolling interests. Total segment assets are defined as accounts receivable, inventories, net customer-related property, plant and equipment, intangible assets net of accumulated amortization and goodwill. All other non-segment assets are reviewed on a global basis by management. Transactions between operating segments are generally recorded at amounts that approximate those at which we would transact with third parties.
8
The following tables set forth operating segment information (in thousands):
Three months ended | Nine months ended | |||||||||||||||
May 31, 2017 | May 31, 2016 | May 31, 2017 | May 31, 2016 | |||||||||||||
Net revenue |
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EMS |
$ | 2,819,711 | $ | 2,846,919 | $ | 8,205,812 | $ | 8,228,595 | ||||||||
DMS |
1,669,846 | 1,463,833 | 5,834,280 | 5,693,728 | ||||||||||||
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$ | 4,489,557 | $ | 4,310,752 | $ | 14,040,092 | $ | 13,922,323 | |||||||||
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Segment income and reconciliation of income before income tax |
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EMS |
$ | 109,783 | $ | 99,758 | $ | 297,418 | $ | 267,717 | ||||||||
DMS |
4,022 | (12,547 | ) | 178,121 | 254,315 | |||||||||||
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Total segment income |
$ | 113,805 | $ | 87,211 | $ | 475,539 | $ | 522,032 | ||||||||
Reconciling items: |
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Amortization of intangibles |
9,174 | 9,711 | 26,262 | 26,150 | ||||||||||||
Stock-based compensation expense and related charges |
18,350 | 13,445 | 33,377 | 58,505 | ||||||||||||
Restructuring and related charges |
32,700 | 4,460 | 113,529 | 8,349 | ||||||||||||
Distressed customer charges |
10,198 | | 10,198 | | ||||||||||||
Other expense |
15,821 | 2,412 | 23,872 | 6,346 | ||||||||||||
Interest income |
(3,663 | ) | (2,302 | ) | (8,407 | ) | (6,653 | ) | ||||||||
Interest expense |
35,443 | 35,212 | 102,087 | 102,509 | ||||||||||||
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|||||||||
(Loss) income before income tax |
$ | (4,218 | ) | $ | 24,273 | $ | 174,621 | $ | 326,826 | |||||||
|
|
|
|
|
|
|
|
May 31, 2017 | August 31, 2016 | |||||||
Total assets |
||||||||
EMS |
$ | 2,802,613 | $ | 2,615,237 | ||||
DMS |
5,030,763 | 5,012,798 | ||||||
Other non-allocated assets |
2,496,273 | 2,694,642 | ||||||
|
|
|
|
|||||
$ | 10,329,649 | $ | 10,322,677 | |||||
|
|
|
|
As of May 31, 2017, the Company operated in 28 countries worldwide. Sales to unaffiliated customers are based on the Companys location that maintains the customer relationship and transacts the external sale. Total foreign net revenue represented 90.6% and 91.3% of net revenue during the three months and nine months ended May 31, 2017, respectively, compared to 90.4% and 91.0% of net revenue during the three months and nine months ended May 31, 2016, respectively.
6. Notes Payable, Long-Term Debt and Capital Lease Obligations
Notes payable, long-term debt and capital lease obligations outstanding at May 31, 2017 and August 31, 2016 are summarized below (in thousands):
May 31, 2017 |
August 31, 2016 |
|||||||
8.250% Senior Notes due 2018 |
$ | 399,268 | $ | 398,552 | ||||
5.625% Senior Notes due 2020 |
396,881 | 396,212 | ||||||
4.700% Senior Notes due 2022 |
496,532 | 496,041 | ||||||
4.900% Senior Notes due 2023 |
298,511 | 298,329 | ||||||
Borrowings under credit facilities |
100,000 | | ||||||
Borrowings under loans |
464,674 | 502,210 | ||||||
Capital lease obligations |
27,709 | 28,478 | ||||||
|
|
|
|
|||||
Total notes payable, long-term debt and capital lease obligations |
2,183,575 | 2,119,822 | ||||||
Less current installments of notes payable, long-term debt and capital lease obligations |
538,985 | 45,810 | ||||||
|
|
|
|
|||||
Notes payable, long-term debt and capital lease obligations, less current installments |
$ | 1,644,590 | $ | 2,074,012 | ||||
|
|
|
|
9
The $400.0 million of 8.250% senior unsecured notes, $400.0 million of 5.625% senior unsecured notes, $500.0 million of 4.700% senior unsecured notes and $300.0 million of 4.900% senior unsecured notes outstanding are carried at the principal amount of each note, less any unamortized discount and unamortized debt issuance costs. The estimated fair values of the Companys publicly traded debt, including the 8.250%, 5.625% and 4.700% senior notes, were approximately $419.1 million, $433.9 million and $531.9 million respectively, at May 31, 2017. The fair value estimates are based upon observable market data (Level 2 criteria). The estimated fair value of the Companys private debt, the 4.900% senior notes, was approximately $313.1 million, at May 31, 2017. This fair value estimate is based on the Companys indicative borrowing cost derived from discounted cash flows (Level 3 criteria). The carrying amounts of borrowings under credit facilities and under loans approximates fair value as interest rates on these instruments approximates current market rates.
7. Trade Accounts Receivable Securitization and Sale Programs
The Company regularly sells designated pools of trade accounts receivable under two asset-backed securitization programs and four uncommitted trade accounts receivable sale programs (collectively referred to herein as the programs). The Company continues servicing the receivables sold and in exchange receives a servicing fee under each of the programs. Servicing fees related to each of the programs recognized during the three months and nine months ended May 31, 2017 and 2016 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.
Transfers of the receivables under the programs are accounted for as sales and, accordingly, net receivables sold under the programs 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.
a. Asset-Backed Securitization Programs
The Company continuously sells designated pools of trade accounts receivable, at a discount, under its North American asset-backed securitization program, currently scheduled to expire on October 20, 2017, and its foreign asset-backed securitization program, currently scheduled to expire on May 1, 2018, (collectively referred to herein as the asset-backed securitization programs) to special purpose entities, which in turn sell 100% of the receivables to conduits administered by unaffiliated financial institutions (for the North American asset-backed securitization program) and to an unaffiliated financial institution and a conduit administered by an unaffiliated financial institution (for the foreign asset-backed securitization program). The special purpose entity in the North American asset-backed securitization program is a wholly-owned subsidiary of the Company. 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 entitys 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 entities associated with these asset-backed securitization programs are included in the Companys Condensed Consolidated Financial Statements. Any portion of the purchase price for the receivables which is not paid in cash upon the sale taking place is recorded as a deferred purchase price receivable, which is paid from available cash as payments on the receivables are collected. Net cash proceeds of up to a maximum of $200.0 million and $400.0 million for the North American and foreign asset-backed securitization programs, respectively, are available at any one time. The foreign asset-backed securitization program was amended to increase the facility limit from $275.0 million to $400.0 million, effective February 13, 2017.
In connection with the asset-backed securitization programs, the Company sold $2.1 billion and $6.6 billion of eligible trade accounts receivable during the three months and nine months ended May 31, 2017, respectively. In exchange, the Company received cash proceeds of $1.6 billion and $6.1 billion during the three months and nine months ended May 31, 2017, respectively, (which represented proceeds from collections reinvested in revolving-period transfers as there were no new transfers during these periods) and a deferred purchase price receivable. The Company sold $2.0 billion and $5.8 billion of eligible trade accounts receivable during the three months and nine months ended May 31, 2016, respectively. In exchange, the Company received cash proceeds of $1.5 billion and $5.3 billion during the three months and nine months ended May 31, 2016, respectively, (of which approximately $0.0 million and $3.0 million, respectively, represented new transfers and the remainder represented proceeds from collections reinvested in revolving-period transfers) and a deferred purchase price receivable. At May 31, 2017 and 2016, the deferred purchase price receivables recorded in connection with the asset-backed securitization programs totaled approximately $501.3 million and $517.3 million, respectively.
10
The Company recognized pretax losses on the sales of receivables under the asset-backed securitization programs of approximately $2.5 million and $6.6 million during the three months and nine months ended May 31, 2017, respectively, and approximately $1.3 million and $3.5 million during the three months and nine months ended May 31, 2016, respectively, which are recorded to other expense within the Condensed Consolidated Statements of Operations.
The deferred purchase price receivables recorded under the asset-backed securitization programs are recorded initially at fair value as prepaid expenses and other current assets on the Condensed Consolidated Balance Sheets and are valued using unobservable inputs (Level 3 inputs), primarily discounted cash flows, and due to their credit quality and short-term maturity the fair values approximated book values. The unobservable inputs consist of estimated credit losses and estimated discount rates, which both have an immaterial impact on the fair value calculations of the deferred purchase price receivables.
b. Trade Accounts Receivable Sale Programs
In connection with four separate trade accounts receivable sale programs with unaffiliated financial institutions, the Company may elect to sell, at a discount, on an ongoing basis, up to a maximum of $650.0 million, $150.0 million, 800.0 million Chinese yuan renminbi (CNY) and $100.0 million, respectively, of specific trade accounts receivable at any one time. The $650.0 million trade accounts receivable sale program is an uncommitted facility that will expire on August 31, 2017 (as the agreement was automatically extended on October 31, 2016), although any party may elect to terminate the agreement upon 15 days prior notice. The $150.0 million trade accounts receivable sale program is an uncommitted facility that will expire on August 31, 2017 unless renewed. The 800.0 million CNY trade accounts receivable sale program is an uncommitted facility that was entered into on February 15, 2017 and is scheduled to expire on February 15, 2018 unless renewed. The $100.0 million trade accounts receivable sale program is an uncommitted facility that is scheduled to expire on October 31, 2017 (as the agreement was automatically extended on October 31, 2016), although any party may elect to terminate the agreement upon 15 days prior notice. The $100.0 million trade accounts receivable sale program will be automatically extended until November 1, 2018, unless any party gives no less than 30 days prior notice that the agreement should not be extended.
During the three months and nine months ended May 31, 2017, the Company sold $0.5 billion and $2.2 billion of trade accounts receivable under these programs, respectively, compared to $0.7 billion and $3.0 billion during the three months and nine months ended May 31, 2016, respectively. In exchange, the Company received cash proceeds of $0.5 billion and $2.2 billion during the three months and nine months ended May 31, 2017, respectively, compared to $0.7 billion and $2.9 billion during the three months and nine months ended May 31, 2016, respectively. The resulting losses on the sales of trade accounts receivable were approximately $1.5 million and $4.1 million during the three months and nine months ended May 31, 2017, respectively, compared to approximately $1.1 million and $3.1 million during the three months and nine months ended May 31, 2016, respectively, and were recorded to other expense within the Condensed Consolidated Statements of Operations.
8. Accumulated Other Comprehensive Income
The following table sets forth the changes in accumulated other comprehensive income (AOCI), net of tax, by component from August 31, 2016 to May 31, 2017 (in thousands):
Foreign Currency Translation Adjustment |
Derivative Instruments |
Actuarial Loss |
Prior Service Cost |
Available for Sale Securities |
Total | |||||||||||||||||||
Balance at August 31, 2016 |
$ | 16,338 | $ | 7,784 | $ | (43,587 | ) | $ | 941 | $ | (21,353 | ) | $ | (39,877 | ) | |||||||||
Other comprehensive income (loss) before reclassifications |
9,512 | 8,647 | | | 10,192 | 28,351 | ||||||||||||||||||
Amounts reclassified from AOCI |
5,719 | 11,595 | | | 10,139 | 27,453 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Other comprehensive income |
15,231 | 20,242 | | | 20,331 | 55,804 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Balance at May 31, 2017 |
$ | 31,569 | $ | 28,026 | $ | (43,587 | ) | $ | 941 | $ | (1,022 | ) | $ | 15,927 | ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
The portion of AOCI reclassified into earnings during the nine months ended May 31, 2017 for foreign currency translation adjustments was not material. The portion of AOCI reclassified into earnings during the nine months ended May 31, 2017 for derivative instruments was primarily classified as a component of cost of revenue. The portion of AOCI reclassified into earnings during the nine months ended May 31, 2017 for available for sale securities was due to an other than temporary impairment on securities and was classified as a component of other expense. The tax benefit (expense) on the derivative instruments component of AOCI, including reclassification adjustments, is not material for the three months and nine months ended May 31, 2017. There was no tax benefit (expense) on the foreign currency translation adjustment and the available for sale securities components of AOCI, including reclassification adjustments, for the three months and nine months ended May 31, 2017.
11
9. Postretirement and Other Employee Benefits
The Company sponsors defined benefit pension plans in several countries in which it operates. The pension obligations relate primarily to the following: (a) a funded retirement plan in the United Kingdom and (b) both funded and unfunded retirement plans, mainly in Austria, France, Germany, The Netherlands, Poland, and Taiwan, which provide benefits based upon years of service and compensation at retirement.
The following table provides information about net periodic benefit cost for the pension plans during the three months and nine months ended May 31, 2017 and 2016 (in thousands):
Three months ended | Nine months ended | |||||||||||||||
May 31, 2017 |
May 31, 2016 |
May 31, 2017 |
May 31, 2016 |
|||||||||||||
Service cost |
$ | 259 | $ | 222 | $ | 771 | $ | 662 | ||||||||
Interest cost |
744 | 1,208 | 2,222 | 3,693 | ||||||||||||
Expected long-term return on plan assets |
(1,127 | ) | (1,383 | ) | (3,365 | ) | (4,243 | ) | ||||||||
Recognized actuarial loss |
479 | 264 | 1,422 | 790 | ||||||||||||
Amortization of prior service credit |
(34 | ) | (35 | ) | (101 | ) | (104 | ) | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Net periodic benefit cost |
$ | 321 | $ | 276 | $ | 949 | $ | 798 | ||||||||
|
|
|
|
|
|
|
|
During the nine months ended May 31, 2017, the Company made contributions of approximately $6.4 million to its defined benefit pension plans. The Company expects to make total cash contributions of between $6.8 million and $7.6 million to its funded pension plans during the fiscal year ended August 31, 2017.
10. Commitments and Contingencies
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 Companys financial position, results of operations or cash flows.
The Internal Revenue Service (IRS) completed its field examination of the Companys tax returns for fiscal years 2009 through 2011 and issued a Revenue Agents Report on May 27, 2015, which was updated on June 22, 2016. The IRS completed its field examination of the Companys tax returns for fiscal years 2012 through 2014 and issued a Revenue Agents Report on April 19, 2017. The proposed adjustments from both examination periods relate primarily to U.S. taxation of certain intercompany transactions. If the IRS ultimately prevails in its positions, the Companys income tax payment due for the fiscal years 2009 through 2011 and fiscal years 2012 through 2014 would be approximately $28.6 million and $5.3 million, respectively, after utilization of tax loss carry forwards available through fiscal year 2014. Also, the IRS has proposed interest and penalties with respect to fiscal years 2009 through 2011. The IRS may make similar claims in future audits with respect to these types of transactions. At this time, anticipating the amount of any future IRS proposed adjustments, interest, and penalties is not practicable.
The Company disagrees with the proposed adjustments and intends to vigorously contest these matters through the applicable IRS administrative and judicial procedures, as appropriate. As the final resolution of the proposed adjustments remains uncertain, the Company continues to provide for the uncertain tax positions based on the more likely than not standard. While the resolution of the issues may result in tax liabilities, interest and penalties, which are significantly higher than the amounts accrued for these matters, management currently believes that the resolution will not have a material adverse effect on the Companys financial position, results of operations or cash flows. Despite this belief, an unfavorable resolution could have a material adverse effect on the Companys results of operations and financial condition.
11. 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 Companys 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 fluctuation risk and interest rate risk.
All derivative instruments are recorded gross on the Condensed Consolidated Balance Sheets at their respective fair values. The accounting for changes in the fair value of a derivative instrument depends on the intended use and designation of the derivative instrument. For derivative instruments that are designated and qualify as a fair value hedge, the gain or loss on the derivative and the offsetting gain or loss on the hedged item attributable to the hedged risk are recognized in current earnings. For derivative instruments that are designated and qualify as a cash flow hedge, the effective portion of the gain or loss on the derivative instrument is initially reported as a component of AOCI, net of tax, and is subsequently reclassified into the line item within the Condensed Consolidated
12
Statements of Operations in which the hedged items are recorded in the same period in which the hedged item affects earnings. The ineffective portion of the gain or loss is recognized immediately in current earnings. For derivative instruments that are not designated as hedging instruments, gains and losses from changes in fair values are recognized in earnings. Cash receipts and cash payments related to derivative instruments are recorded in the same category as the cash flows from the items being hedged on the Condensed Consolidated Statements of Cash Flows.
a. 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 $178.7 million and $323.3 million at May 31, 2017 and August 31, 2016, 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, 2017 and February 28, 2018.
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 at May 31, 2017 and August 31, 2016, was $1.7 billion and $1.7 billion, respectively.
The following table presents the Companys assets and liabilities related to forward foreign exchange contracts measured at fair value on a recurring basis as of May 31, 2017, aggregated by the level in the fair-value hierarchy in which those measurements are classified (in thousands):
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Assets: |
||||||||||||||||
Forward foreign exchange contracts |
$ | | 19,466 | | $ | 19,466 | ||||||||||
Liabilities: |
||||||||||||||||
Forward foreign exchange contracts |
| (12,972 | ) | | (12,972 | ) | ||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total |
$ | | 6,494 | | $ | 6,494 | ||||||||||
|
|
|
|
|
|
|
|
The Companys 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.
13
The following table presents the fair values of the Companys derivative instruments located on the Condensed Consolidated Balance Sheets utilized for foreign currency risk management purposes at May 31, 2017 and August 31, 2016 (in thousands):
Fair Values of Derivative Instruments | ||||||||||||||||||||||||
Asset Derivatives | Liability Derivatives | |||||||||||||||||||||||
Balance Sheet Location |
Fair Value at May 31, 2017 |
Fair Value at August 31, 2016 |
Balance Sheet Location |
Fair Value at May 31, 2017 |
Fair Value at August 31, 2016 |
|||||||||||||||||||
Derivatives designated as hedging instruments: |
||||||||||||||||||||||||
Forward foreign exchange contracts |
|
Prepaid expenses and other current assets |
|
$ |
4,200 |
|
$ |
420 |
|
|
Accrued expenses |
|
$ |
1,400 |
|
$ |
1,986 |
| ||||||
Derivatives not designated as hedging instruments: |
||||||||||||||||||||||||
Forward foreign exchange contracts |
|
Prepaid expenses and other current assets |
|
$ |
15,266 |
|
$ |
3,850 |
|
|
Accrued expenses |
|
$ |
11,572 |
|
$ |
10,801 |
|
As of May 31, 2017 and August 31, 2016, the Company also included gains and losses in AOCI related to changes in fair value of its derivatives utilized for foreign currency risk management purposes and designated as hedging instruments. These gains and losses were not material and the portion that is expected to be reclassified into earnings during the next 12 months will be classified as components of net revenue, cost of revenue and selling, general and administrative expense.
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.
The Company recognized gains and losses in earnings related to changes in fair value of derivatives utilized for foreign currency risk management purposes and not designated as hedging instruments during the three months and nine months ended May 31, 2017 and 2016. These amounts were not material and were recognized as components of cost of revenue.
b. Interest Rate Risk Management
The Company periodically enters into interest rate swaps to manage interest rate risk associated with the Companys borrowings.
Cash Flow Hedges
During the fourth quarter of fiscal year 2007, the Company entered into forward interest rate swap transactions to hedge the fixed interest rate payments for an anticipated debt issuance, which was the issuance of the 8.250% Senior Notes. The swaps were accounted for as a cash flow hedge and had a notional amount of $400.0 million. Concurrently with the pricing of the 8.250% Senior Notes, the Company settled the swaps by its payment of $43.1 million. The ineffective portion of the swaps was immediately recorded to interest expense within the Condensed Consolidated Statements of Operations. The effective portion of the swaps is recorded on the Companys Condensed Consolidated Balance Sheets as a component of AOCI and is being amortized to interest expense within the Companys Condensed Consolidated Statements of Operations over the life of the 8.250% Senior Notes, which is through March 15, 2018. The effective portions of the swaps amortized to interest expense during the three months and nine months ended May 31, 2017 and 2016 were not material. Existing losses related to interest rate risk management hedging arrangements that are expected to be reclassified into earnings during the next 12 months are not material.
During the fourth quarter of fiscal year 2016, the Company entered into forward starting swap transactions to hedge the fixed interest rate payments for an anticipated debt issuance. The forward starting swaps have an aggregate notional amount of $200.0 million and have been designated as hedging instruments and accounted for as cash flow hedges. The forward starting swaps are scheduled to expire on March 15, 2018. If the anticipated debt issuance occurs before March 15, 2018, the contracts will be terminated simultaneously with the debt issuance. The contracts will be settled with the respective counterparties on a net basis at the time of termination or expiration. Changes in the fair value of the forward starting swap transactions are recorded on the Companys Condensed Consolidated Balance Sheets as a component of AOCI.
During the fourth quarter of fiscal year 2016, the Company entered into interest rate swap transactions to hedge the variable interest rate payments for the Term Loan Facility. In connection with this transaction, the Company will pay interest based upon a fixed rate as agreed upon with the respective counterparties and receive variable rate interest payments based on the one-month LIBOR. The interest rate swaps have an aggregate notional amount of $200.0 million and have been designated as hedging
14
instruments and accounted for as cash flow hedges. The interest rate swaps were effective on September 30, 2016 and are scheduled to expire on June 30, 2019. The contracts will be settled with the respective counterparties on a net basis at each settlement date. Changes in the fair value of the interest rate swap transactions are recorded on the Companys Condensed Consolidated Balance Sheets as a component of AOCI.
12. Restructuring and Related Charges
a. 2017 Restructuring Plan
In conjunction with the restructuring plan that was approved by the Companys Board of Directors on September 15, 2016 (the 2017 Restructuring Plan), the Company charged $31.4 million and $108.9 million of restructuring and related charges to the Condensed Consolidated Statement of Operations during the three months and nine months ended May 31, 2017, respectively. The 2017 Restructuring Plan is intended to better align the Companys global capacity and administrative support infrastructure in order to further optimize organizational effectiveness. This action includes headcount reductions across the Companys Selling, General and Administrative cost base and capacity realignment in higher cost locations. The restructuring and related charges during the three months and nine months ended May 31, 2017 include cash costs of $17.3 million and $43.3 million related to employee severance and benefit costs, respectively, $1.2 million and $5.6 million related to lease costs, respectively, $1.1 million and $1.4 million of other related costs, respectively, as well as non-cash costs related to asset write-off costs of $11.8 million and $58.6 million, respectively.
The Company currently expects to recognize approximately $195.0 million in pre-tax restructuring and other related costs over the course of the Companys fiscal years 2017 and 2018 under the 2017 Restructuring Plan. The restructuring and related charges are expected to include $55.0 million to $75.0 million of employee severance and benefit costs; $110.0 million to $130.0 million of asset write-off costs; and $10.0 million of contract termination costs and other related costs. Since the inception of the 2017 Restructuring Plan, a total of $108.9 million of restructuring and related costs have been recognized. Of the $108.9 million recognized to date, $19.1 million was allocated to the EMS segment, $65.9 million was allocated to the DMS segment and $23.9 million was not allocated to a segment. The remaining $86.1 million of the restructuring and related costs expected to be recognized reflects the Companys intention only and restructuring decisions, and the timing of such decisions, at certain plants are still subject to the finalization of timetables for the transition of functions and consultation with the Companys employees and their representatives.
The tables below set forth the significant components and activity in the 2017 Restructuring Plan during the three months and nine months ended May 31, 2017 (in thousands):
2017 Restructuring Plan Three Months Ended May 31, 2017
Liability Balance at February 28, 2017 |
Restructuring Related Charges |
Asset Write-off Charge and Other Non-Cash Activity |
Cash Payments |
Liability Balance at May 31, 2017 |
||||||||||||||||
Employee severance and benefit costs |
$ | 10,337 | $ | 17,328 | $ | 20 | $ | (5,085 | ) | $ | 22,600 | |||||||||
Lease costs |
3,572 | 1,151 | 26 | (1,049 | ) | 3,700 | ||||||||||||||
Asset write-off costs |
| 11,838 | (11,838 | ) | | | ||||||||||||||
Other related costs |
50 | 1,082 | | (518 | ) | 614 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total |
$ | 13,959 | $ | 31,399 | $ | (11,792 | ) | $ | (6,652 | ) | $ | 26,914 | ||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
2017 Restructuring Plan Nine Months Ended May 31, 2017 | ||||||||||||||||||||
Liability Balance at August 31,2016 |
Restructuring Related Charges |
Asset Write-off Charge and Other Non-Cash Activity |
Cash Payments |
Liability Balance at May 31, 2017 |
||||||||||||||||
Employee severance and benefit costs |
$ | | $ | 43,314 | $ | 20 | $ | (20,734 | ) | $ | 22,600 | |||||||||
Lease costs |
| 5,600 | 26 | (1,926 | ) | 3,700 | ||||||||||||||
Asset write-off costs |
| 58,543 | (58,543 | ) | | | ||||||||||||||
Other related costs |
| 1,421 | | (807 | ) | 614 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total |
$ | | $ | 108,878 | $ | (58,497 | ) | $ | (23,467 | ) | $ | 26,914 | ||||||||
|
|
|
|
|
|
|
|
|
|
15
The tables below set forth the significant components and activity in the 2017 Restructuring Plan by reportable segment during the three months and nine months ended May 31, 2017 (in thousands):
2017 Restructuring Plan Three Months Ended May 31, 2017
Liability Balance at February 28, 2017 |
Restructuring Related Charges |
Asset Write-off Charge and Other Non-Cash Activity |
Cash Payments |
Liability Balance at May 31, 2017 |
||||||||||||||||
EMS |
$ | 471 | $ | 11,061 | $ | (1,819 | ) | $ | (1,624 | ) | $ | 8,089 | ||||||||
DMS |
3,639 | 17,836 | (10,188 | ) | (2,334 | ) | 8,953 | |||||||||||||
Other |
9,849 | 2,502 | 215 | (2,694 | ) | 9,872 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total |
$ | 13,959 | $ | 31,399 | $ | (11,792 | ) | $ | (6,652 | ) | $ | 26,914 | ||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
2017 Restructuring Plan Nine Months Ended May 31, 2017 | ||||||||||||||||||||
Liability Balance at August 31, 2016 |
Restructuring Related Charges |
Asset Write-off Charge and Other Non-Cash Activity |
Cash Payments |
Liability Balance at May 31, 2017 |
||||||||||||||||
EMS |
$ | | $ | 19,118 | $ | (8,542 | ) | $ | (2,487 | ) | $ | 8,089 | ||||||||
DMS |
| 65,842 | (49,937 | ) | (6,952 | ) | 8,953 | |||||||||||||
Other |
| 23,918 | (18 | ) | (14,028 | ) | 9,872 | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total |
$ | | $ | 108,878 | $ | (58,497 | ) | $ | (23,467 | ) | $ | 26,914 | ||||||||
|
|
|
|
|
|
|
|
|
|
b. 2013 Restructuring Plan
In conjunction with the restructuring plan that was approved by the Companys Board of Directors in fiscal year 2013 (the 2013 Restructuring Plan), the Company charged $1.3 million and $4.7 million of restructuring and related charges to the Condensed Consolidated Statement of Operations during the three months and nine months ended May 31, 2017, respectively, compared to $4.5 million and $8.3 million during the three months and nine months ended May 31, 2016, respectively. The 2013 Restructuring Plan is intended to better align the Companys manufacturing capacity in certain geographies and to reduce the Companys worldwide workforce in order to reduce operating expenses. The restructuring and related charges during the three months and nine months ended May 31, 2017 include cash costs of $0.8 million and $3.4 million related to employee severance and benefit costs, respectively, and $0.5 million and $1.2 million of other related costs, respectively, as well as non-cash costs related to asset write-off costs of $0.0 million and $0.1 million, respectively. The restructuring and related charges during the three months and nine months ended May 31, 2016 include cash costs of $4.2 million and $7.7 million related to employee severance and benefit costs, respectively, and $0.3 million and $0.6 million of other related costs, respectively.
The Company currently expects to recognize approximately $179.0 million in pre-tax restructuring and other related costs over the course of the Companys fiscal years 2013 through 2018 under the 2013 Restructuring Plan. Since the inception of the 2013 Restructuring Plan, a total of $166.5 million of restructuring and related costs have been recognized. Of the $166.5 million recognized to date, $128.8 million was allocated to the EMS segment, $28.8 million was allocated to the DMS segment and $8.9 million was not allocated to a segment. A majority of the total restructuring costs are related to employee severance and benefit arrangements. The charges related to the 2013 Restructuring Plan, excluding asset write-off costs, are currently expected to result in cash expenditures of approximately $157.4 million that have been or will be payable over the course of the Companys fiscal years 2013 through 2018. The remaining $12.5 million of the restructuring and related costs expected to be recognized reflects the Companys intention only and restructuring decisions, and the timing of such decisions, at certain plants are still subject to the finalization of timetables for the transition of functions and consultation with the Companys employees and their representatives.
The tables below set forth the significant components and activity in the 2013 Restructuring Plan during the three months and nine months ended May 31, 2017 and 2016 (in thousands):
2013 Restructuring Plan Three Months Ended May 31, 2017
Liability Balance at February 28, 2017 |
Restructuring Related Charges |
Asset Write-off Charge and Other Non-Cash Activity |
Cash Payments |
Liability Balance at May 31, 2017 |
||||||||||||||||
Employee severance and benefit costs |
$ | 11,756 | $ | 843 | $ | 400 | $ | (6,875 | ) | $ | 6,124 | |||||||||
Lease costs |
21 | | | | 21 | |||||||||||||||
Other related costs |
829 | 458 | 51 | (449 | ) | 889 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total |
$ | 12,606 | $ | 1,301 | $ | 451 | $ | (7,324 | ) | $ | 7,034 | |||||||||
|
|
|
|
|
|
|
|
|
|
16
2013 Restructuring Plan Nine Months Ended May 31, 2017
Liability Balance at August 31, 2016 |
Restructuring Related Charges |
Asset Write-off Charge and Other Non-Cash Activity |
Cash Payments |
Liability Balance at May 31, 2017 |
||||||||||||||||
Employee severance and benefit costs |
$ | 17,266 | $ | 3,340 | $ | (322 | ) | $ | (14,160 | ) | $ | 6,124 | ||||||||
Lease costs |
21 | | | | 21 | |||||||||||||||
Asset write-off costs |
| 70 | (70 | ) | | | ||||||||||||||
Other related costs |
740 | 1,241 | 16 | (1,108 | ) | 889 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total |
$ | 18,027 | $ | 4,651 | $ | (376 | ) | $ | (15,268 | ) | $ | 7,034 | ||||||||
|
|
|
|
|
|
|
|
|
|
2013 Restructuring Plan Three Months Ended May 31, 2016
Liability Balance at February 29, 2016 |
Restructuring Related Charges |
Asset Write-off Charge and Other Non-Cash Activity |
Cash Payments |
Liability Balance at May 31, 2016 |
||||||||||||||||
Employee severance and benefit costs |
$ | 18,115 | $ | 4,197 | $ | 407 | $ | (3,234 | ) | $ | 19,485 | |||||||||
Lease costs |
64 | (43 | ) | | | 21 | ||||||||||||||
Other related costs |
871 | 306 | 22 | (310 | ) | 889 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total |
$ | 19,050 | $ | 4,460 | $ | 429 | $ | (3,544 | ) | $ | 20,395 | |||||||||
|
|
|
|
|
|
|
|
|
|
2013 Restructuring Plan Nine Months Ended May 31, 2016
Liability Balance at August 31, 2015 |
Restructuring Related Charges |
Asset Write-off Charge and Other Non-Cash Activity |
Cash Payments |
Liability Balance at May 31, 2016 |
||||||||||||||||
Employee severance and benefit costs |
$ | 30,047 | $ | 7,743 | $ | (404 | ) | $ | (17,901 | ) | $ | 19,485 | ||||||||
Lease costs |
64 | (43 | ) | | | 21 | ||||||||||||||
Other related costs |
846 | 649 | | (606 | ) | 889 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total |
$ | 30,957 | $ | 8,349 | $ | (404 | ) | $ | (18,507 | ) | $ | 20,395 | ||||||||
|
|
|
|
|
|
|
|
|
|
17
The tables below set forth the significant components and activity in the 2013 Restructuring Plan by reportable segment during the three months and nine months ended May 31, 2017 and 2016 (in thousands):
2013 Restructuring Plan Three Months Ended May 31, 2017
Liability Balance at February 28, 2017 |
Restructuring Related Charges |
Asset Write-off Charge and Other Non-Cash Activity |
Cash Payments |
Liability Balance at May 31, 2017 |
||||||||||||||||
EMS |
$ | 12,169 | $ | 1,371 | $ | 438 | $ | (7,309 | ) | $ | 6,669 | |||||||||
DMS |
437 | (70 | ) | 13 | (15 | ) | 365 | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total |
$ | 12,606 | $ | 1,301 | $ | 451 | $ | (7,324 | ) | $ | 7,034 | |||||||||
|
|
|
|
|
|
|
|
|
|
2013 Restructuring Plan Nine Months Ended May 31, 2017
Liability Balance at August 31, 2016 |
Restructuring Related Charges |
Asset Write-off Charge and Other Non-Cash Activity |
Cash Payments |
Liability Balance at May 31, 2017 |
||||||||||||||||
EMS |
$ | 17,338 | 4,651 | (306 | ) | (15,014 | ) | $ | 6,669 | |||||||||||
DMS |
689 | | (70 | ) | (254 | ) | 365 | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total |
$ | 18,027 | $ | 4,651 | $ | (376 | ) | $ | (15,268 | ) | $ | 7,034 | ||||||||
|
|
|
|
|
|
|
|
|
|
2013 Restructuring Plan Three Months Ended May 31, 2016
Liability Balance at February 29, 2016 |
Restructuring Related Charges |
Asset Write-off Charge and Other Non-Cash Activity |
Cash Payments |
Liability Balance at May 31, 2016 |
||||||||||||||||
EMS |
$ | 17,115 | $ | 4,460 | $ | 429 | $ | (2,858 | ) | $ | 19,146 | |||||||||
DMS |
1,935 | | | (686 | ) | 1,249 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total |
$ | 19,050 | $ | 4,460 | $ | 429 | $ | (3,544 | ) | $ | 20,395 | |||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
2013 Restructuring Plan Nine Months Ended May 31, 2016
|
||||||||||||||||||||
Restructuring | Asset Write-off | |||||||||||||||||||
Liability Balance at | Related | Charge and Other | Cash | Liability Balance at | ||||||||||||||||
August 31, 2015 | Charges | Non-Cash Activity | Payments | May 31, 2016 | ||||||||||||||||
EMS |
$ | 28,834 | $ | 7,454 | $ | (395 | ) | $ | (16,747 | ) | $ | 19,146 | ||||||||
DMS |
1,960 | 1,014 | (9 | ) | (1,716 | ) | 1,249 | |||||||||||||
Other |
163 | (119 | ) | | (44 | ) | | |||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total |
$ | 30,957 | $ | 8,349 | $ | (404 | ) | $ | (18,507 | ) | $ | 20,395 | ||||||||
|
|
|
|
|
|
|
|
|
|
13. Business Acquisitions
Fiscal year 2017
On March 1, 2017, the Company completed the acquisition of Lewis Engineering, which was not deemed to be significant. The acquired business expanded the Companys capabilities in precision machining, manufacturing and design engineering. The aggregate purchase price of the acquisition totaled approximately $31.4 million in cash.
18
The acquisition has been 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 Company is currently evaluating the fair values of the assets and liabilities related to the business combination. The preliminary estimates and measurements are, therefore, subject to change during the measurement period for intangible assets and tax adjustments. 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 nine months ended May 31, 2017. The results of operations of the acquired business were included in the Companys condensed 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.
Fiscal year 2016
On November 25, 2015, the Company entered into a master purchase agreement for certain assets and liabilities of various legal entities, collectively referred to as Hanson. On January 13, 2016, the Company completed the acquisition of the assets for approximately $139.2 million in cash, plus the assumption of certain liabilities of $230.0 million (such liabilities were subsequently paid in February 2016 and classified in our Condensed Consolidated Statement of Cash Flows as a component of cash flows from operating activities), with the exception of the real property, which closed on July 7, 2016, for approximately $33.3 million. Hanson is engaged in the business of manufacturing certain parts for customers in the DMS segment.
The acquisition of certain Hanson assets has been accounted for as a business combination using the acquisition method of accounting. Assets acquired of $406.4 million, including $276.8 million in property, plant and equipment, $129.6 million in goodwill and intangible assets assigned to customer relationships, liabilities assumed of $230.0 million and $3.9 million of deferred tax liabilities 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 was recorded to goodwill and was fully allocated to the DMS segment. None of the goodwill is currently expected to be deductible for income tax purposes. A customer relationship was valued using the multi-period excess earnings method under the income approach. The results of operations were included in the Companys condensed consolidated financial results beginning on January 13, 2016. Pro forma information has not been provided as the acquisition of Hanson is not deemed to be significant.
During the first quarter of fiscal year 2016, the Company completed two additional acquisitions (Inala Technologies Limited and various legal entities collectively referred to as Shemer Companies) which were not deemed to be significant individually or in the aggregate. The acquired businesses expanded the Companys capabilities in capital equipment, networking and telecommunications, and printing. The aggregate purchase price of these acquisitions totaled approximately $72.3 million in cash.
These two acquisitions have been accounted for as business combinations using the acquisition method of accounting. Assets acquired of $92.2 million, including $19.3 million in goodwill and $31.4 million in intangible assets, and liabilities assumed of $19.9 million were recorded at their estimated fair values as of the acquisition dates. The excess of the purchase prices over the fair values of the acquired assets and assumed liabilities of $19.3 million was recorded to goodwill and was fully allocated to the EMS segment. None of the goodwill is currently expected to be deductible for income tax purposes. The results of operations of the acquired businesses were included in the Companys condensed consolidated financial results beginning on the date of the acquisitions. Pro forma information has not been provided as the acquisitions are not deemed to be significant individually or in the aggregate.
19
14. New Accounting Guidance
Recently Issued Accounting Guidance
During the third quarter of fiscal year 2014, the FASB issued an accounting standard which will supersede existing revenue recognition guidance under current U.S. GAAP. The new standard is a comprehensive new revenue recognition model that requires a company to recognize revenue to depict the transfer of goods or services to a customer at an amount that reflects the consideration it expects to receive in exchange for those goods or services. During the fourth quarter of fiscal year 2015, the FASB issued an accounting standard deferring the effective date of this accounting guidance by one year. Therefore, the accounting standard is effective for the Company in the first quarter of fiscal year 2019. Companies may use either a full retrospective or a modified retrospective approach to adopt this standard and management is currently evaluating which transition approach to use. The Company is currently in the process of assessing what impact this new standard may have on its Condensed Consolidated Financial Statements.
During the second quarter of 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 is effective for the Company beginning in the first quarter of fiscal year 2019. Early application is permitted only for certain provisions, and the update must be applied by means of a cumulative-effect adjustment to the Condensed Consolidated Balance Sheet as of the beginning of the fiscal year of adoption and applied prospectively to equity investments that exist as of the date of adoption of the standard. The Company is currently assessing the impact this new standard may have on its Condensed Consolidated Financial Statements.
During the second quarter of 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. Early application of the new standard is permitted and must be adopted using a modified retrospective approach. The adoption of this standard will impact the Companys Condensed Consolidated Balance Sheet. The Company is currently assessing any other impacts this new standard will have on its Condensed Consolidated Financial Statements.
During the fourth quarter of fiscal year 2016, the FASB issued an accounting standard, which replaces the existing incurred loss impairment methodology with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. This guidance is effective for the Company beginning in the first quarter of fiscal year 2021 and early adoption is permitted beginning in the first quarter of fiscal year 2020. This guidance must be applied using a modified retrospective or prospective transition method, depending on the area covered by this accounting standard. The Company is currently assessing the impact this new standard may have on its Condensed Consolidated Financial Statements.
During the fourth quarter of 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 guidance is effective for the Company beginning in the first quarter of fiscal year 2019 and early adoption is permitted. The Company is currently assessing the impact this new standard may have on its Condensed Consolidated Financial Statements.
During the first quarter of 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 is effective for the Company beginning in the first quarter of fiscal year 2019 and early adoption is permitted. This guidance should be applied on a modified retrospective basis through a cumulative-effect adjustment directly to retained earnings as of the beginning of the period of adoption. The Company is currently assessing the impact this new standard may have on its Condensed Consolidated Financial Statements.
During the second quarter of fiscal year 2017, the FASB issued a new accounting standard that clarifies the definition of a business to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. This guidance is effective for the Company beginning in the first quarter of fiscal year 2019 and will be applied on a prospective basis. Early application is permitted for certain transactions. The impact on the Companys Condensed Consolidated Financial Statements will depend on the facts and circumstances of any specific future transactions.
During the second quarter of fiscal year 2017, the FASB issued a new accounting standard to simplify how an entity is required to test goodwill for impairment by eliminating the requirement to calculate the implied fair value of goodwill (i.e., Step 2 of the current goodwill impairment test) to measure a goodwill impairment charge. Goodwill will be considered impaired when the carrying amount of a reporting unit that includes goodwill exceeds its fair value. This guidance is effective for the Company beginning in the first quarter of fiscal year 2021, with early application permitted. The guidance will be applied on a prospective basis. The Company is currently assessing the impact this new standard may have on its Condensed Consolidated Financial Statements.
Recently issued accounting guidance not discussed above is not applicable or did not have, or is not expected to have, a material impact to the Company.
20
15. Income Taxes
The effective tax rate differed from the U.S. federal statutory rate of 35% during the three months and nine months ended May 31, 2017 and 2016 primarily due to: (a) restructuring costs with minimal related tax benefit; (b) income in tax jurisdictions with lower statutory tax rates than the U.S.; (c) tax incentives granted to sites in Brazil, China, Malaysia, Singapore and Vietnam; and (d) losses in tax jurisdictions with existing valuation allowances. The material tax incentives expire at various dates through fiscal year 2021. Such tax incentives are subject to conditions with which the Company expects to continue to comply.
16. Subsequent Events
The Company has evaluated subsequent events that occurred through the date of the filing of the Companys third quarter of fiscal year 2017 Form 10-Q. No significant events occurred subsequent to the balance sheet date and prior to the filing date of this report that would have a material impact on the Condensed Consolidated Financial Statements.
21
JABIL INC. AND SUBSIDIARIES
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. This Quarterly Report on Form 10-Q contains certain statements that are, or may be deemed to be, forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the Securities Act) and Section 21E of the Securities Exchange Act of 1934, as amended (the Exchange Act) which are made in reliance upon the protections provided by such acts for forward-looking statements. These forward-looking statements (such as when we describe what will, may, or should occur, what we plan, intend, estimate, believe, expect or anticipate will occur, and other similar statements) include, but are not limited to, statements regarding future sales and operating results, potential risks pertaining to these future sales and operating results, future prospects, anticipated benefits of proposed (or future) acquisitions, dispositions and new facilities, growth, the capabilities and capacities of business operations, any financial or other guidance and all statements that are not based on historical fact, but rather reflect our current expectations concerning future results and events. We make certain assumptions when making forward-looking statements, any of which could prove inaccurate, including, but not limited to, statements about our future operating results and business plans. Therefore, we can give no assurance that the results implied by these forward-looking statements will be realized. Furthermore, the inclusion of forward-looking information should not be regarded as a representation by the Company or any other person that future events, plans or expectations contemplated by the Company will be achieved. The ultimate correctness of these forward-looking statements is dependent upon a number of known and unknown risks and events, and is subject to various uncertainties and other factors that may cause our actual results, performance or achievements to be different from any future results, performance or achievements expressed or implied by these statements. The following important factors, among others, could affect future results and events, causing those results and events to differ materially from those expressed or implied in our forward-looking statements:
| business conditions and growth or declines in our customers industries, the electronic manufacturing services industry and the general economy; |
| variability of our operating results; |
| our dependence on a limited number of major customers; |
| any potential future termination, or substantial winding down, of significant customer relationships; |
| availability of components; |
| our dependence on certain industries; |
| the susceptibility of our production levels to the variability of customer requirements, including seasonal influences on the demand for certain end products; |
| our substantial international operations, and the resulting risks related to our operating internationally, including weak global economic conditions, instability in global credit markets, governmental restrictions on the transfer of funds to us from our operations outside the U.S. and unfavorable fluctuations in currency exchange rates; |
| the potential consolidation of our customer base, and the potential movement by some of our customers of a portion of their manufacturing from us in order to more fully utilize their excess internal manufacturing capacity; |
| our ability to successfully negotiate definitive agreements and consummate acquisitions, and to integrate operations following the consummation of acquisitions; |
| our ability to successfully negotiate definitive agreements and consummate dispositions, and to disentangle operations following the consummation of dispositions; |
| our ability to take advantage of our past, current and possible future restructuring efforts to improve utilization and realize savings and whether any such activity will adversely affect our cost structure, our ability to service customers and our labor relations; |
| our ability to maintain our engineering, technological and manufacturing process expertise; |
| other economic, business and competitive factors affecting our customers, our industry and our business generally; and |
| other factors that we may not have currently identified or quantified. |
22
For a further list and description of various risks, relevant 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 Managements Discussion and Analysis of Financial Condition and Results of Operations section contained in this document, as well as the Risk Factors and Managements Discussion and Analysis of Financial Condition and Results of Operations sections contained in our Annual Report on Form 10-K for the fiscal year ended August 31, 2016, any subsequent reports on Form 10-Q and Form 8-K and other filings 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 Quarterly Report on Form 10-Q are made only as of the date of this Quarterly Report on Form 10-Q, 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 and the documents that we incorporate by reference into this Quarterly Report on Form 10-Q completely and with the understanding that our actual future results may be materially different from what we expect. We may not update these forward-looking statements, even if our situation changes in the future. All forward-looking statements attributable to us are expressly qualified by these cautionary statements.
Item 2. | Managements Discussion and Analysis of Financial Condition and Results of Operations |
Overview
We are one of the leading providers of worldwide electronic manufacturing services and solutions. We provide comprehensive electronics design, production and product management services to companies in the automotive and transportation, capital equipment, consumer lifestyles and wearable technologies, computing and storage, defense and aerospace, digital home, healthcare, industrial and energy, mobility, networking and telecommunications, packaging, point of sale and printing industries. We serve our customers primarily with dedicated business units that combine highly automated, continuous flow manufacturing with advanced electronic design and design for manufacturability. We currently depend, and expect to continue to depend, upon a relatively small number of customers for a significant percentage of our net revenue and upon their growth, viability and financial stability. Based on net revenue, for the nine months ended May 31, 2017, our largest customers include Apple, Inc., Cisco Systems, Inc., GoPro, Inc., Hewlett-Packard Company, Ingenico S.A., LM Ericsson Telephone Company, NetApp, Inc., Nokia Networks, Valeo S.A. and Zebra Technologies Corporation. For the nine months ended May 31, 2017, we had net revenues of approximately $14.0 billion and net income attributable to Jabil Inc. of approximately $83.4 million.
We offer our customers comprehensive electronics design, production and product management services that are responsive to their manufacturing and supply chain management needs. Our business units are capable of providing our customers with varying combinations of the following services:
| integrated design and engineering; |
| component selection, sourcing and procurement; |
| automated assembly; |
| design and implementation of product testing; |
| parallel global production; |
| enclosure services; |
| systems assembly, direct order fulfillment and configure to order; and |
| injection molding, metal, plastics, precision machining and automation. |
We currently conduct our operations in facilities that are located in Austria, Belgium, Brazil, Canada, China, Finland, France, Germany, Hungary, India, Ireland, Israel, Italy, Japan, Malaysia, Mexico, The Netherlands, Poland, Russia, Scotland, Singapore, South Africa, South Korea, Spain, Taiwan, Ukraine, the U.S. and Vietnam. Our global manufacturing production sites allow customers to manufacture products simultaneously in the optimal locations for their products. Our services allow customers to reduce manufacturing costs, improve supply-chain management, reduce inventory obsolescence, lower transportation costs and reduce product fulfillment time. Our global presence is key to assessing our business opportunities.
23
Our reportable operating segments consist of two segments: Electronics Manufacturing Services (EMS) and Diversified Manufacturing Services (DMS). Our EMS segment is focused around leveraging IT, supply chain design and engineering, technologies largely centered on core electronics, sharing of our large scale manufacturing infrastructure and the ability to serve a broad range of end markets. Our EMS segment includes customers primarily in the automotive and transportation, capital equipment, computing and storage, digital home, industrial and energy, networking and telecommunications, point of sale and printing industries. Our DMS segment is focused on providing engineering solutions and a focus on material sciences and technologies. Our DMS segment includes customers primarily in the consumer lifestyles and wearable technologies, defense and aerospace, healthcare, mobility and packaging industries.
We continue to try to monitor the current economic environment and its potential impact on both the customers that we serve as well as our end-markets and closely manage our costs and capital resources so that we can try to respond appropriately as circumstances continue to change.
Summary of Results
The following table sets forth, for the three months and nine months ended May 31, 2017 and 2016, certain key operating results and other financial information (in thousands, except per share data):
Three months ended | Nine months ended | |||||||||||||||
May 31, 2017 | May 31, 2016 | May 31, 2017 | May 31, 2016 | |||||||||||||
Net revenue |
$ | 4,489,557 | $ | 4,310,752 | $ | 14,040,092 | $ | 13,922,323 | ||||||||
Gross profit |
$ | 326,415 | $ | 321,087 | $ | 1,119,825 | $ | 1,204,055 | ||||||||
Operating income |
$ | 43,383 | $ | 59,595 | $ | 292,173 | $ | 429,028 | ||||||||
Net (loss) income attributable to Jabil Inc. |
$ | (25,281 | ) | $ | 5,213 | $ | 83,411 | $ | 216,028 | |||||||
(Loss) earnings per sharebasic |
$ | (0.14 | ) | $ | 0.03 | $ | 0.46 | $ | 1.13 | |||||||
(Loss) earnings per sharediluted |
$ | (0.14 | ) | $ | 0.03 | $ | 0.45 | $ | 1.12 | |||||||
Cash dividend per sharedeclared |
$ | 0.08 | $ | 0.08 | $ | 0.24 | $ | 0.24 |
Key Performance Indicators
Management regularly reviews financial and non-financial performance indicators to assess the Companys operating results.
The following table sets forth, for the quarterly periods indicated, certain of managements key financial performance indicators:
Three Months Ended | ||||||||||||||||
May 31, 2017 |
February 28, 2017 |
November 30, 2016 |
August 31, 2016 |
|||||||||||||
Sales cycle |
9 days | 11 days | 1 day | 3 days | ||||||||||||
Inventory turns (annualized) |
6 turns | 7 turns | 7 turns | 7 turns | ||||||||||||
Days in accounts receivable |
29 days | 29 days | 27 days | 28 days | ||||||||||||
Days in inventory |
59 days | 55 days | 48 days | 54 days | ||||||||||||
Days in accounts payable |
79 days | 73 days | 74 days | 79 days |
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. During the three months ended May 31, 2017, days in accounts receivable remained consistent compared to the prior sequential quarter. During the three months ended May 31, 2017, days in inventory increased 4 days as compared to the prior sequential quarter to support expected sales levels in the fourth quarter of fiscal year 2017. During the three months ended May 31, 2017, days in accounts payable increased 6 days from the prior sequential quarter primarily due to higher materials purchases during the quarter and the timing of purchases and cash payments for purchases. During the three months ended May 31, 2017, inventory turns, on an annualized basis, remained relatively consistent with the prior sequential quarter. The changes in the sales cycle during the three months ended May 31, 2017, are due to the changes in accounts receivable, accounts payable and inventory that are discussed above.
Critical Accounting Policies and Estimates
The preparation of our Condensed Consolidated Financial Statements and related disclosures in conformity with U.S. generally accepted accounting principles (U.S. GAAP) requires management to make estimates and judgments that affect our reported amounts of assets and liabilities, revenues and expenses, and related disclosures of contingent assets and liabilities. On an on-going basis, we evaluate our estimates and assumptions based upon historical experience and various other factors and circumstances. Management believes that our estimates and assumptions are reasonable under the circumstances; however, actual results may vary from these estimates and assumptions under different future circumstances. For further discussion of our significant accounting
24
policies, refer to Note 1 Description of Business and Summary of Significant Accounting Policies to the Consolidated Financial Statements and Managements Discussion and Analysis of Financial Condition and Results of Operations Critical Accounting Policies and Estimates in our Annual Report on Form 10-K for the fiscal year ended August 31, 2016.
Recent Accounting Pronouncements
See Note 14 New Accounting Guidance to the Condensed Consolidated Financial Statements for a discussion of recent accounting guidance.
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Results of Operations
The following table sets forth, for the three months and nine months ended May 31, 2017 and 2016, certain statements of operations data expressed as a percentage of net revenue:
Three months ended | Nine months ended | |||||||||||||||
May 31, 2017 |
May 31, 2016 |
May 31, 2017 |
May 31, 2016 |
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Net revenue |
100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | ||||||||
Cost of revenue |
92.7 | 92.6 | 92.0 | 91.4 | ||||||||||||
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Gross profit |
7.3 | 7.4 | 8.0 | 8.6 | ||||||||||||
Operating expenses: |
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Selling, general and administrative |
5.2 | 5.5 | 4.7 | 5.1 | ||||||||||||
Research and development |
0.2 | 0.2 | 0.2 | 0.2 | ||||||||||||
Amortization of intangibles |
0.2 | 0.2 | 0.2 | 0.2 | ||||||||||||
Restructuring and related charges |
0.7 | 0.1 | 0.8 | 0.1 | ||||||||||||
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Operating income |
1.0 | 1.4 | 2.1 | 3.0 | ||||||||||||
Other expense |
0.4 | 0.1 | 0.2 | 0.0 | ||||||||||||
Interest income |
(0.1 | ) | (0.1 | ) | (0.1 | ) | (0.0 | ) | ||||||||
Interest expense |
0.8 | 0.8 | 0.7 | 0.7 | ||||||||||||
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(Loss) income before income tax |
(0.1 | ) | 0.6 | 1.3 | 2.3 | |||||||||||
Income tax expense |
0.5 | 0.4 | 0.7 | 0.8 | ||||||||||||
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Net (loss) income |
(0.6 | ) | 0.2 | 0.6 | 1.5 | |||||||||||
Net loss attributable to noncontrolling interests, net of tax |
(0.0 | ) | 0.0 | (0.0 | ) | 0.0 | ||||||||||
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Net (loss) income attributable to Jabil Inc. |
(0.6 | )% | 0.2 | % | 0.6 | % | 1.5 | % | ||||||||
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The Three Months And Nine Months Ended May 31, 2017 Compared to the Three Months And Nine Months Ended May 31, 2016
Net Revenue. Net revenue increased 4.1% to $4.5 billion during the three months ended May 31, 2017, compared to $4.3 billion during the three months ended May 31, 2016. Specifically, the DMS segment revenues increased 14% due to an 8% increase in revenues from existing customers within our mobility business and a 6% increase in revenues due to new business from existing customers in our healthcare business. EMS segment revenues decreased 1% due to a mix of increases and decreases spread across various industries within the EMS segment, with no one change being significant individually.
Net revenue remained relatively consistent at $14.0 billion during the nine months ended May 31, 2017, compared to $13.9 billion during the nine months ended May 31, 2016. The DMS segment revenues increased 3% as a result of a 4% increase in revenues due to new business from existing customers in our consumer lifestyles and wearable technologies business and a 3% increase in revenues due to new business from existing customers in our healthcare business, partially offset by a 4% decrease in revenues from existing customers within our mobility business due to weakened end user product demand. EMS segment revenues remained relatively consistent due to a mix of increases and decreases spread across various industries within the EMS segment, with no one change being significant individually.
Generally, we assess revenue on a global customer basis regardless of whether the growth is associated with organic growth or as a result of an acquisition. Accordingly, we do not differentiate or report separately revenue increases generated by acquisitions as opposed to existing business. In addition, the added cost structures associated with our acquisitions have historically been relatively insignificant when compared to our overall cost structure.
The distribution of revenue across our segments has fluctuated, and will continue to fluctuate, as a result of numerous factors, including but not limited to the following: fluctuations in customer demand as a result of recessionary and other conditions, such as the less than anticipated product demand that we have experienced in our mobility business; efforts to de-emphasize the economic performance of certain portions of our business; seasonality in our business; business growth from new and existing customers; specific product performance; and any potential termination, or substantial winding down, of significant customer relationships.
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The following table sets forth, for the periods indicated, revenue by segment expressed as a percentage of net revenue:
Three months ended | Nine months ended | |||||||||||||||
May 31, 2017 | May 31, 2016 | May 31, 2017 | May 31, 2016 | |||||||||||||
EMS |
63 | % | 66 | % | 58 | % | 59 | % | ||||||||
DMS |
37 | % | 34 | % | 42 | % | 41 | % | ||||||||
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Total |
100 | % | 100 | % | 100 | % | 100 | % | ||||||||
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Foreign source revenue represented 90.6% and 91.3% of our net revenue for the three months and nine months ended May 31, 2017, respectively, compared to 90.4% and 91.0% of net revenue for the three months and nine months ended May 31, 2016. We currently expect our foreign source revenue to remain relatively consistent as compared to current levels over the course of the next 12 months.
Gross Profit. Gross profit increased to $326.4 million (7.3% of net revenue) and decreased to $1.1 billion (8.0% of net revenue) during the three months and nine months ended May 31, 2017, respectively, compared to $321.1 million (7.4% of net revenue) and $1.2 billion (8.6% of net revenue) during the three months and nine months ended May 31, 2016, respectively. Gross profit on an absolute basis and as a percentage of net revenue remained relatively consistent during the three months ended May 31, 2017 as compared to the three months ended May 31, 2016. The decrease in gross profit on an absolute basis and as a percentage of revenue during the nine months ended May 31, 2017 is primarily due to revenues from existing customers in our DMS segment within the mobility business decreasing at a higher rate than certain of our fixed costs.
Selling, General and Administrative. Selling, general and administrative expenses remained relatively consistent at $233.9 million (5.2% of net revenue) during the three months ended May 31, 2017 compared to $239.6 million (5.5% of net revenue) during the three months ended May 31, 2016. Selling, general and administrative expenses decreased to $665.9 million (4.7% of net revenue) during the nine months ended May 31, 2017 compared to $716.1 million (5.1% of net revenue) during the nine months ended May 31, 2016. The decrease was primarily a result of a $21.0 million reversal to stock-based compensation expense during the first quarter of fiscal year 2017 due to decreased expectations for the vesting of certain performance-based restricted stock awards. The remaining decrease was primarily driven by a reduction in salary and salary related expenses and other costs.
Research and Development. Research and development expenses remained relatively consistent at $7.3 million (0.2% of net revenue) and $22.0 million (0.2% of net revenue) during the three months and nine months ended May 31, 2017, respectively, compared to $7.7 million (0.2% of net revenue) and $24.4 million (0.2% of net revenue) during the three months and nine months ended May 31, 2016, respectively.
Amortization of Intangibles. Amortization of intangibles remained relatively consistent at $9.2 million and $26.3 million during the three months and nine months ended May 31, 2017, respectively, compared to $9.7 million and $26.2 million during the three months and nine months ended May 31, 2016, respectively.
Restructuring and Related Charges.
2017 Restructuring Plan
In conjunction with the 2017 Restructuring Plan, we charged $31.4 million and $108.9 million of restructuring and related charges to the Condensed Consolidated Statements of Operations during the three months and nine months ended May 31, 2017, respectively. The restructuring and related charges during the three months and nine months ended May 31, 2017 include cash costs of $17.3 million and $43.3 million related to employee severance and benefit costs, respectively, $1.2 million and $5.6 million related to lease costs, respectively, and $1.1 million and $1.4 million of other related costs, respectively, as well as non-cash costs related to asset write-off costs of $11.8 million and $58.6 million, respectively.
We currently expect to recognize approximately $195.0 million in pre-tax restructuring and other related costs over the course of the Companys fiscal years 2017 and 2018 under the 2017 Restructuring Plan. The restructuring and related charges are expected to include $55.0 million to $75.0 million of employee severance and benefit costs; $110.0 million to $130.0 million of asset write-off costs; and $10.0 million of contract termination costs and other related costs. Since the inception of the 2017 Restructuring Plan, a total of $108.9 million of restructuring and related costs have been recognized as of May 31, 2017. The remaining $86.1 million of the restructuring and related costs expected to be recognized reflects our intention only and restructuring decisions, and the timing of such decisions, at certain plants are still subject to the finalization of timetables for the transition of functions and consultation with our employees and their representatives.
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The 2017 Restructuring Plan, once complete, is expected to yield annualized cost savings in the range of $70.0 million to $90.0 million and is expected to occur in fiscal year 2019. We have begun to realize a portion of these costs savings and we expect to realize cost savings in the range of $20.0 million to $30.0 million in fiscal year 2017. The annual cost savings is expected to be reflected as a reduction in cost of revenue as well as a reduction of selling, general and administrative expense.
2013 Restructuring Plan
In conjunction with the 2013 Restructuring Plan, we charged $1.3 million and $4.7 million of restructuring and related charges to the Condensed Consolidated Statements of Operations during the three months and nine months ended May 31, 2017, respectively, compared to $4.5 million and $8.3 million during the three months and nine months ended May 31, 2016, respectively. The restructuring and related charges during the three months and nine months ended May 31, 2017 include cash costs of $0.8 million and $3.4 million related to employee severance and benefit costs, respectively, and $0.5 million and $1.2 million of other related costs, respectively, as well as non-cash costs related to asset write-off costs of $0.0 million and $0.1 million, respectively. The restructuring and related charges during the three months and nine months ended May 31, 2016 include cash costs of $4.2 million and $7.7 million related to employee severance and benefit costs, respectively, and $0.3 million and $0.6 million of other related costs, respectively.
Upon its completion, the 2013 Restructuring Plan is expected to yield annualized cost savings of approximately $76.8 million. The expected avoided annual costs consist of a reduction in employee related expenses of $72.5 million, a reduction in depreciation expense associated with asset disposals of $3.1 million, and a reduction in rent expense associated with leased buildings when our lease obligations have been released of approximately $1.2 million. The majority of these annual cost savings are expected to be reflected as a reduction in cost of revenue as well as a reduction of selling, general and administrative expense. These annual costs savings are expected to be partially offset by decreased revenues and incremental costs expected to be incurred by those plants to which certain production will be shifted. After considering these partial cost savings offsets, we expect the annual cost savings realized to be approximately $65.0 million.
For further discussion of restructuring and related charges related to the 2017 and 2013 Restructuring Plans, refer to Note 12 Restructuring and Related Charges to the Condensed Consolidated Financial Statements.
Other Expense. Other expense increased to $15.8 million during the three months ended May 31, 2017 compared to $2.4 million during the three months ended May 31, 2016, primarily due to an other than temporary impairment on available for sale securities of $11.5 million. Other expense increased to $23.9 million during the nine months May 31, 2017 compared to $6.3 million during the nine months May 31, 2016. The increase is primarily due to an other than temporary impairment on available for sale securities of $11.5 million, an increase in fees associated with the asset-backed securitization programs of $4.4 million and the remaining change relates to a loss associated with a cost method investment.
Interest Income. Interest income remained relatively consistent over the prior periods at $3.7 million and $8.4 million during the three months and nine months ended May 31, 2017, respectively, compared to $2.3 million and $6.7 million during the three months and nine months ended May 31, 2016, respectively.
Interest Expense. Interest expense remained relatively consistent at $35.4 million and $102.1 million during the three months and nine months ended May 31, 2017, respectively, compared to $35.2 million and $102.5 million during the three months and nine months ended May 31, 2016, respectively.
Income Tax Expense. Income tax expense reflects an effective tax rate of (509.3)% and 53.5% for the three months and nine months ended May 31, 2017, respectively, compared to an effective tax rate of 75.9% and 33.9% for the three months and nine months ended May 31, 2016, respectively.
The effective tax rate for the three months ended May 31, 2017 decreased from the effective tax rate for the three months ended May 31, 2016 primarily due to the overall net loss despite having income in certain high tax-rate jurisdictions. The reduction in income, driven in part by an increase in restructuring expense, primarily occurred in tax jurisdictions in which little tax benefit has been recorded due to existing valuation allowances.
The effective tax rate for the nine months ended May 31, 2017 increased from the effective tax rate for the nine months ended May 31, 2016 primarily due to decreased income in jurisdictions with low tax rates or existing valuation allowances, driven in part by an increase in restructuring expense.
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Non-U.S. GAAP Core Financial Measures
The following discussion and analysis of our financial condition and results of operations include certain non-U.S. GAAP financial measures as identified in the reconciliation below. The non-U.S. GAAP financial measures disclosed herein do not have standard meaning and may vary from the non-U.S. GAAP financial measures used by other companies or how we may calculate those measures in other instances from time to time. Non-U.S. GAAP financial measures should not be considered a substitute for, or superior to, measures of financial performance prepared in accordance with U.S. GAAP. Also, our core financial measures should not be construed as an inference by us that our future results will be unaffected by those items which are excluded from our core financial measures.
Management believes that the non-U.S. GAAP core financial measures set forth below are useful to facilitate evaluating the past and future performance of our ongoing manufacturing operations over multiple periods on a comparable basis by excluding the effects of the amortization of intangibles, stock-based compensation expense and related charges, restructuring and related charges, distressed customer charges, acquisition costs and certain purchase accounting adjustments, loss on disposal of subsidiaries, settlement of receivables and related charges, impairment of notes receivable and related charges, goodwill impairment charges, other than temporary impairment on securities, income (loss) from discontinued operations, gain (loss) on sale of discontinued operations and certain other expenses, net of tax and certain deferred tax valuation allowance charges. Among other uses, management uses non-U.S. GAAP core financial measures to make operating decisions, assess business performance and as a factor in determining certain employee performance when determining incentive compensation.
We determine the tax effect of the items excluded from core earnings and core basic and diluted earnings per share based upon evaluation of the statutory tax treatment and the applicable tax rate of the jurisdiction in which the pre-tax items were incurred, and for which realization of the resulting tax benefit, if any, is expected. In certain jurisdictions where we do not expect to realize a tax benefit (due to a history of operating losses or other factors resulting in a valuation allowance related to deferred tax assets), a 0% tax rate is applied.
We are reporting core operating income and core earnings to provide investors with an additional method for assessing operating income and earnings, by presenting what we believe are our core manufacturing operations. A significant portion (based on the respective values) of the items that are excluded for purposes of calculating core operating income and core earnings also impacted certain balance sheet assets, resulting in a portion of an asset being written off without a corresponding recovery of cash we may have previously spent with respect to the asset. In the case of restructuring and related charges, we may be making associated cash payments in the future. In addition, although, for purposes of calculating core operating income and core earnings, we exclude stock-based compensation expense (which we anticipate continuing to incur in the future) because it is a non-cash expense, the associated stock issued may result in an increase in our outstanding shares of stock, which may result in the dilution of our stockholders ownership interest. We encourage you to evaluate these items and the limitations for purposes of analysis in excluding them.
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Included in the table below is a reconciliation of the non-U.S. GAAP financial measures to the most directly comparable U.S. GAAP financial measures as provided in our Condensed Consolidated Financial Statements (in thousands, except for per share data):
Three months ended | Nine months ended | |||||||||||||||
May 31, 2017 |
May 31, 2016 |
May 31, 2017 |
May 31, 2016 |
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Operating income (U.S. GAAP) |
$ | 43,383 | $ | 59,595 | $ | 292,173 | $ | 429,028 | ||||||||
Amortization of intangibles |
9,174 | 9,711 | 26,262 | 26,150 | ||||||||||||
Stock-based compensation expense and related charges |
18,350 | 13,445 | 33,377 | 58,505 | ||||||||||||
Restructuring and related charges |
32,700 | 4,460 | 113,529 | 8,349 | ||||||||||||
Distressed customer charges |
10,198 | | 10,198 | | ||||||||||||
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Core operating income (Non-U.S. GAAP) |
$ | 113,805 | $ | 87,211 | $ | 475,539 | $ | 522,032 | ||||||||
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Net (loss) income attributable to Jabil Inc. (U.S. GAAP) |
$ | (25,281 | ) | $ | 5,213 | $ | 83,411 | $ | 216,028 | |||||||
Amortization of intangibles |
9,174 | 9,711 | 26,262 | 26,150 | ||||||||||||
Stock-based compensation expense and related charges |
18,350 | 13,445 | 33,377 | 58,505 | ||||||||||||
Restructuring and related charges |
32,700 | 4,460 | 113,529 | 8,349 | ||||||||||||
Distressed customer charges |
10,198 | | 10,198 | | ||||||||||||
Other than temporary impairment on securities |
11,539 | | 11,539 | | ||||||||||||
Adjustments for taxes |
431 | (866 | ) | (2,793 | ) | (2,842 | ) | |||||||||
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Core earnings (Non-U.S. GAAP) |
$ | 57,111 | $ | 31,963 | $ | 275,523 | $ | 306,190 | ||||||||
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(Loss) earnings per share (U.S. GAAP): |
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Basic |
$ | (0.14 | ) | $ | 0.03 | $ | 0.46 | $ | 1.13 | |||||||
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Diluted |
$ | (0.14 | ) | $ | 0.03 | $ | 0.45 | $ | 1.12 | |||||||
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Core earnings per share (Non-U.S. GAAP): |
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Basic |
$ | 0.32 | $ | 0.17 | $ | 1.51 | $ | 1.60 | ||||||||
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Diluted |
$ | 0.31 | $ | 0.17 | $ | 1.48 | $ | 1.59 | ||||||||
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Weighted average shares outstanding used in the calculations of earnings per share (U.S. GAAP): |
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Basic |
181,038 | 191,206 | 182,982 | 190,841 | ||||||||||||
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Diluted |
181,038 | 193,069 | 186,621 | 193,058 | ||||||||||||
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Weighted average shares outstanding used in the calculations of earnings per share (Non-U.S. GAAP): |
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Basic |
181,038 | 191,206 | 182,982 | 190,841 | ||||||||||||
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Diluted |
184,940 | 193,069 | 186,621 | 193,058 | ||||||||||||
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Core operating income increased 30.5% to $113.8 million and decreased 8.9% to $475.5 million during the three months and nine months ended May 31, 2017, respectively, compared to $87.2 million and $522.0 million during the three months and nine months ended May 31, 2016, respectively. Core earnings increased 78.7% to $57.1 million and decreased 10.0% to $275.5 million during the three months and nine months ended May 31, 2017, respectively, compared to $32.0 million and $306.2 million during the three months and nine months ended May 31, 2016, respectively. These variances were the result of the same factors described above in Managements Discussion and Analysis of Financial Condition and Results of Operations The Three Months And Nine Months Ended May 31, 2017 Compared to the Three Months And Nine Months Ended May 31, 2016.
Acquisitions and Expansion
As discussed in Note 13 Business Acquisitions to the Condensed Consolidated Financial Statements, we completed one acquisition during the three months ended May 31, 2017 and three acquisitions during the fiscal year ended August 31, 2016. Acquisitions are accounted for as business combinations using the acquisition method of accounting. Our Condensed Consolidated Financial Statements include the operating results of each business from the date of acquisition.
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Seasonality
Production levels for a portion of the DMS segment are subject to seasonal influences. We may realize greater net revenue during our first fiscal quarter due to higher demand for consumer related products manufactured in the DMS segment during the holiday selling season. Therefore, quarterly results should not be relied upon as necessarily being indicative of results for the entire fiscal year.
Liquidity and Capital Resources
At May 31, 2017, our principal sources of liquidity consisted of cash, available borrowings under our credit facilities, our asset-backed securitization programs and our uncommitted trade accounts receivable sale programs.
Cash Flows
The following table sets forth selected consolidated cash flow information during the nine months ended May 31, 2017 and 2016 (in thousands):
Nine months ended | ||||||||
May 31, 2017 |
May 31, 2016 |
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Net cash provided by operating activities |
$ | 533,023 | $ | 488,209 | ||||
Net cash used in investing activities |
(477,282 | ) | (890,384 | ) | ||||
Net cash (used in) provided by financing activities |
(222,926 | ) | 375,744 | |||||
Effect of exchange rate changes on cash and cash equivalents |
(943 | ) | (541 | ) | ||||
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Net decrease in cash and cash equivalents |
$ | (168,128 | ) | $ | (26,972 | ) | ||
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Net cash provided by operating activities during the nine months ended May 31, 2017 was approximately $533.0 million. This resulted primarily from net income of $81.1 million, $570.6 million in non-cash depreciation and amortization expense, a $100.4 million decrease in prepaid expenses and other current assets, $58.6 million in non-cash restructuring and related charges and $33.4 million of recognized stock-based compensations expense and related charges; which were partially offset by a $216.1 million increase in inventories and a $85.8 million increase in accounts receivable. The decrease in prepaid expenses and other current assets was primarily due to a decrease in value added tax receivables along with a decrease in the deferred purchase price receivable under our foreign asset-backed securitization program due to an increase in funding related to the increase in the facility limit from $275.0 million to $400.0 million and the timing of cash collections. The increase in inventories is to support expected sales levels in the fourth quarter of fiscal year 2017. The increase in accounts receivable is primarily driven by the timing of sales and cash collections activity.
Net cash used in investing activities during the nine months ended May 31, 2017 was $477.3 million. This consisted primarily of capital expenditures of $482.7 million principally to support ongoing business in the DMS and EMS segments and $36.6 million of cash paid for business and intangible asset acquisitions, net of cash received, partially offset by $43.4 million of proceeds from the sale of property, plant and equipment.
Net cash used in financing activities during the nine months ended May 31, 2017 was $222.9 million. This resulted from our receipt of approximately $5.4 billion of proceeds from borrowings under existing debt agreements, which primarily included an aggregate of $4.9 billion of borrowings under the Revolving Credit Facility and $497.5 million under credit facilities with foreign subsidiaries. This was offset by repayments in an aggregate amount of approximately $5.4 billion, which primarily included an aggregate of $4.9 billion of repayments under the Revolving Credit Facility and $397.5 million under credit facilities with foreign subsidiaries. In addition, during the nine months ended May 31, 2017 we paid $237.1 million, including commissions, to repurchase 9,901,336 of our common shares, we paid $45.6 million in dividends to stockholders and we paid $11.6 million (the equivalent of 526,540 of our common shares) to the IRS on behalf of certain employees to satisfy minimum tax obligations related to the vesting of certain restricted stock awards (as consideration for these payments to the IRS, we withheld $11.6 million of employee-owned common stock related to this vesting).
Sources
We may need to finance day-to-day working capital needs, as well as future growth and any corresponding working capital needs, with additional borrowings under our Revolving Credit Facility and our other revolving credit facilities described below, as well as additional public and private offerings of our debt and equity. Currently, 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, from time-to-time over the three years following the registration, to augment our liquidity and capital resources. The current shelf registration statement will expire in the first quarter of fiscal year 2018 at which time we currently anticipate filing a new shelf registration statement. Any future sale or issuance of equity or convertible debt securities could result in dilution to current or future shareholders. Further, we may issue debt
31
securities that have rights and privileges senior to those of holders of ordinary shares, and the terms of this debt could impose restrictions on operations, increase debt service obligations, limit our flexibility as a result of debt service requirements and restrictive covenants, potentially negatively affect our credit ratings, and limit our ability to access additional capital or execute our business strategy. We continue to assess our capital structure and evaluate the merits of redeploying available cash to reduce existing debt or repurchase common shares.
We regularly sell designated pools of trade accounts receivable under two asset-backed securitization programs and four uncommitted trade accounts receivable sale programs (collectively referred to herein as the programs). Transfers of the receivables under the programs are accounted for as sales and, accordingly, net receivables sold under the programs 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. Discussion of each of the programs is included in the following paragraphs. In addition, refer to Note 7 Trade Accounts Receivable Securitization and Sale Programs to the Condensed Consolidated Financial Statements for further details on the programs.
a. Asset-Backed Securitization Programs
We continuously sell designated pools of trade accounts receivable, at a discount, under our asset-backed securitization programs to special purpose entities, which in turn sell 100% of the receivables to conduits administered by unaffiliated financial institutions (for the North American asset-backed securitization program) and to an unaffiliated financial institution and a conduit administered by an unaffiliated financial institution (for the foreign asset-backed securitization program). Any portion of the purchase price for the receivables which is not paid in cash upon the sale taking place is recorded as a deferred purchase price receivable, which is paid from available cash as payments on the receivables are collected. Net cash proceeds up to a maximum of $200.0 million for the North American asset-backed securitization program, currently scheduled to expire on October 20, 2017, are available at any one time. Net cash proceeds up to a maximum of $400.0 million for the foreign asset-backed securitization program, currently scheduled to expire on May 1, 2018, are available at any one time. The foreign asset-backed securitization program was amended to increase the facility limit from $275.0 million to $400.0 million, effective February 13, 2017.
In connection with our asset-backed securitization programs, at May 31, 2017, we sold $1.1 billion of eligible trade accounts receivable, which represents the face amount of total sold outstanding receivables at that date. In exchange, we received cash proceeds of $583.0 million and a deferred purchase price receivable. At May 31, 2017, the deferred purchase price receivable in connection with the asset-backed securitization programs totaled $501.3 million. The deferred purchase price receivable was recorded initially at fair value as prepaid expenses and other current assets on the Condensed Consolidated Balance Sheets.
b. Trade Accounts Receivable Sale Programs
In connection with four separate trade accounts receivable sale programs with unaffiliated financial institutions, we may elect to sell, at a discount, on an ongoing basis, up to a maximum of $650.0 million, $150.0 million, 800.0 million Chinese yuan renminbi (CNY) and $100.0 million, respectively, of specific trade accounts receivable at any one time. The $650.0 million trade accounts receivable sale program is an uncommitted facility that will expire on August 31, 2017 (as the agreement was automatically extended on October 31, 2016), although any party may elect to terminate the agreement upon 15 days prior notice. The $150.0 million trade accounts receivable sale program is an uncommitted facility that will expire on August 31, 2017 unless renewed. The 800.0 million CNY trade accounts receivable sale program is an uncommitted facility that was entered into on February 15, 2017 and is scheduled to expire on February 15, 2018 unless renewed. The $100.0 million trade accounts receivable sale program is an uncommitted facility that is scheduled to expire on October 31, 2017 (as the agreement was automatically extended on October 31, 2016), although any party may elect to terminate the agreement upon 15 days prior notice. The $100.0 million trade accounts receivable sale program will be automatically extended until November 1, 2018, unless any party gives no less than 30 days prior notice that the agreement should not be extended.
During the three months and nine months ended May 31, 2017, we sold $0.5 billion and $2.2 billion of trade accounts receivable under these programs, respectively, and we received cash proceeds of $0.5 billion and $2.2 billion during the three months and nine months ended May 31, 2017, respectively.
32
Notes payable, long-term debt and capital lease obligations outstanding at May 31, 2017 and August 31, 2016 are
summarized below (in thousands):
May 31, 2017 |
August 31, 2016 |
|||||||
8.250% Senior Notes due 2018 |
399,268 | 398,552 | ||||||
5.625% Senior Notes due 2020 |
396,881 | 396,212 | ||||||
4.700% Senior Notes due 2022 |
496,532 | 496,041 | ||||||
4.900% Senior Notes due 2023 |
298,511 | 298,329 | ||||||
Borrowings under credit facilities |
100,000 | | ||||||
Borrowings under loans |
464,674 | 502,210 | ||||||
Capital lease obligations |
27,709 | 28,478 | ||||||
|
|
|
|
|||||
Total notes payable, long-term debt and capital lease obligations |
2,183,575 | 2,119,822 | ||||||
Less current installments of notes payable, long-term debt and capital lease obligations |
538,985 | 45,810 | ||||||
|
|
|
|
|||||
Notes payable, long-term debt and capital lease obligations, less current installments |
$ | 1,644,590 | $ | 2,074,012 | ||||
|
|
|
|
At May 31, 2017 and August 31, 2016, we were in compliance with all covenants under our debt agreements and our asset-backed securitization programs.
Uses
At May 31, 2017, we had approximately $743.9 million in cash and cash equivalents. As our growth remains predominantly outside of the United States, a significant portion of such cash and cash equivalents are held by our foreign subsidiaries. We estimate that approximately $589.6 million of the cash and cash equivalents held by our foreign subsidiaries could not be repatriated to the United States without potential income tax consequences.
For discussion of our cash management and risk management policies see Quantitative and Qualitative Disclosures About Market Risk.
We currently anticipate that during the next 12 months, our capital expenditures, which do not include any amounts spent on acquisitions, will be in the range of $500.0 million to $600.0 million, principally to support ongoing business in the DMS and EMS segments. The amounts used to fund such capital expenditures will not be available to be deployed elsewhere by us. We believe that our level of resources, which include cash on hand, available borrowings under our revolving credit facilities, additional proceeds available under our trade accounts receivable securitization programs and potentially available under our uncommitted trade accounts receivable sale programs and funds provided by operations, will be adequate to fund these capital expenditures, the payment of any declared quarterly dividends, any potential acquisitions, debt repayments and our working capital requirements for the next 12 months.
Our 8.250% Senior Notes of $400.0 million will mature on March 15, 2018. We believe that our cash on hand and available borrowing under our credit facilities will be adequate to fund the payment of the 8.250% Senior Notes. However, we anticipate that we will enter into a new borrowing agreement to repay our $400.0 million 8.250% Senior Notes.
In June 2016, our Board of Directors authorized the repurchase of up to $400.0 million of our common shares. The share repurchase program expires on August 31, 2017. During the fourth quarter of fiscal year 2016, we repurchased 4.9 million shares, which utilized $93.7 million of the $400.0 million authorized by our Board of Directors. During the nine months ended May 31 2017, we repurchased 10.0 million shares, which utilized an additional $236.9 million of the $400.0 million authorized by our Board of Directors.
On October 20, 2016, January 26, 2017 and April 20, 2017, our Board of Directors approved payment of a quarterly dividend of $0.08 per share to shareholders of record as of November 15, 2016, February 15, 2017 and May 15, 2017. Of the total cash dividend declared on October 20, 2016 of $15.2 million, $14.7 million was paid on December 1, 2016. The remaining $0.5 million is related to dividend equivalents on unvested restricted stock units that will be payable at the time the awards vest. Of the total cash dividend declared on January 26, 2017 of $15.1 million, $14.6 million was paid on March 1, 2017. The remaining $0.5 million is related to dividend equivalents on unvested restricted stock units that will be payable at the time the awards vest. Of the total cash dividend declared on April 20, 2017 of $14.8 million, $14.4 million was paid on June 1, 2017. The remaining $0.4 million is related to dividend equivalents on unvested restricted stock units that will be payable at the time the awards vest. We currently expect to continue to
33
declare and pay regular quarterly dividends of an amount similar to our past declarations. However, the declaration and payment of future dividends are discretionary and will be subject to determination by our Board of Directors each quarter following its review of our financial performance.
Our $200.0 million North American asset-backed securitization program is scheduled to expire on October 20, 2017, and our $400.0 million foreign asset-backed securitization program, amended to increase the facility limit from $275.0 million to $400.0 million, effective February 13, 2017, is scheduled to expire on May 1, 2018. We may be unable to renew either or both of these programs. We can offer no assurance under the $650.0 million, $150.0 million, 800.0 million CNY or the $100.0 million uncommitted sales programs that if we attempt to sell receivables under 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.
Our working capital requirements and capital expenditures could continue to increase in order to support future expansions of our operations through construction of greenfield operations or acquisitions. It is possible that future expansions may be significant and may require the payment of cash. Future liquidity needs will also depend on fluctuations in levels of inventory and shipments, changes in customer order volumes and timing of expenditures for new equipment.
Should we desire to consummate significant additional acquisition opportunities or undertake significant additional expansion activities, our capital needs would increase and could possibly result in our need to increase available borrowings under our revolving credit facilities or access public or private debt and equity markets. There can be no assurance, however, that we would be successful in raising additional debt or equity on terms that we would consider acceptable.
Contractual Obligations
Our contractual obligations for short and long-term debt arrangements and capital lease obligations; future interest on notes payable, long-term debt and capital lease obligations; future minimum lease payments under non-cancelable operating lease arrangements; non-cancelable purchase order obligations for property, plant and equipment; and pension and postretirement contributions and payments as of May 31, 2017 are summarized below. While, as disclosed below, we have certain non-cancelable purchase order obligations for property, plant and equipment, we generally do not enter into non-cancelable purchase orders for materials until we receive a corresponding purchase commitment from our customer. Non-cancelable purchase orders do not typically extend beyond the normal lead time of several weeks at most. Purchase orders beyond this time frame are typically cancelable.
Payments due by period (in thousands) | ||||||||||||||||||||
Total | Less than 1 year |
1-3 years | 4-5 years | After 5 years | ||||||||||||||||
Notes payable, long-term debt and capital lease obligations |
$ | 2,183,575 | $ | 538,985 | $ | 102,940 | $ | 725,710 | $ | 815,940 | ||||||||||
Future interest on notes payable, long-term debt and capital lease obligations (a) |
373,436 | 99,988 | 148,506 | 92,825 | 32,117 | |||||||||||||||
Operating lease obligations |
520,283 | 95,426 | 153,208 | 107,777 | 163,872 | |||||||||||||||
Non-cancelable purchase order obligations (b) |
283,967 | 283,502 | 465 | | | |||||||||||||||
Pension and postretirement contributions and payments (c) |
9,199 | 3,441 | 1,100 | 1,325 | 3,333 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total contractual cash obligations (d) |
$ | 3,370,460 | $ | 1,021,342 | $ | 406,219 | $ | 927,637 | $ | 1,015,262 | ||||||||||
|
|
|
|
|
|
|
|
|
|
(a) | Certain of our notes payable and long-term debt pay interest at variable rates. In the contractual obligations table above, we have elected to apply estimated interest rates to determine the value of these expected future interest payments. |
(b) | Consists of purchase commitments entered into as of May 31, 2017 for property, plant and equipment pursuant to legally enforceable and binding agreements. |
(c) | Includes the estimated company contributions to funded pension plans for the annualized three month period following the third quarter of fiscal year 2017 and the expected benefit payments for unfunded pension and postretirement plans through 2026. These future payments are not recorded on the Condensed Consolidated Balance Sheets but will be recorded when paid. |
(d) | At May 31, 2017, we have $92.2 million recorded as a long-term liability for uncertain tax positions. We are not able to reasonably estimate the timing of payments, or the amount by which our liability for these uncertain tax positions will increase or decrease over time, and accordingly, this liability has been excluded from the above table. |
34
Item 3. | Quantitative and Qualitative Disclosures About Market Risk |
Foreign Currency Exchange Risks
We transact business in various foreign countries and are, therefore, subject to risk of foreign currency exchange rate fluctuations. We enter into forward contracts to economically hedge transactional exposure associated with commitments arising from trade accounts receivable, trade accounts payable, intercompany transactions and fixed purchase obligations denominated in a currency other than the functional currency of the respective operating entity. We do not, and do not intend to use derivative financial instruments for speculative purposes. All derivative instruments are recorded on our Condensed Consolidated Balance Sheets at their respective fair values. At May 31, 2017, except for certain foreign currency contracts with a notional amount outstanding of $178.7 million and a fair value of $4.2 million recorded in prepaid expenses and other current assets and $1.4 million recorded in accrued expenses, the forward contracts have not been designated as accounting hedges and, therefore, changes in fair value are recorded within our Condensed Consolidated Statements of Operations.
The aggregate notional amount of outstanding contracts at May 31, 2017 that are not designated as accounting hedges was $1.7 billion. The fair values of these contracts amounted to a $15.3 million asset recorded in prepaid expenses and other current assets and a $11.6 million liability recorded to accrued expenses on our Condensed Consolidated Balance Sheets.
The forward contracts (both those that are designated as accounting hedging instruments and those that are not) will generally expire in less than three months, with nine months being the maximum term of the contracts outstanding at May 31, 2017. The change in fair value related to contracts designated as accounting hedging instruments will be reflected in the revenue or expense line in which the underlying transaction occurs within our Condensed Consolidated Statements of Operations. The change in fair value related to contracts not designated as accounting hedging instruments will be reflected in cost of revenue within our Condensed Consolidated Statements of Operations. The forward contracts are denominated in Brazilian reais, British pounds, Chinese yuan renminbi, Euros, Hungarian forints, Indian rupees, Israeli shekel, Japanese yen, Malaysian ringgits, Mexican pesos, Polish zlotys, Russian rubles, Singapore dollars, South African rand, Swedish krona, Swiss francs, Taiwan dollars and U.S. dollars.
Based on our overall currency rate exposures as of May 31, 2017, including the derivative financial instruments intended to hedge the nonfunctional currency-denominated monetary assets and liabilities, an immediate 10% hypothetical change of foreign currency exchange rates would not have a material effect on our Condensed Consolidated Financial Statements.
Interest Rate Risk
A portion of our exposure to market risk for changes in interest rates relates to our domestic investment portfolio. We do not, and do not intend to, use derivative financial instruments for speculative purposes. We place cash and cash equivalents with various major financial institutions. We protect our invested principal funds by limiting default risk, market risk and reinvestment risk. We mitigate these risks by generally investing in investment grade securities and by frequently positioning the portfolio to try to respond appropriately to a reduction in credit rating of any investment issuer, guarantor or depository to levels below the credit ratings dictated by our investment policy. The portfolio typically includes only marketable securities with active secondary or resale markets to ensure portfolio liquidity. At May 31, 2017, there were no significant outstanding investments.
During the fourth quarter of fiscal year 2016, we entered into forward starting swap transactions to hedge the fixed interest rate payments for an anticipated debt issuance. The forward starting swaps have an aggregate notional amount of $200.0 million and have been designated as hedging instruments and accounted for as cash flow hedges. The forward starting swaps are scheduled to expire on March 15, 2018. If the anticipated debt issuance occurs before March 15, 2018, the contracts will be terminated simultaneously with the debt issuance. The contracts will be settled with the respective counterparties on a net basis at the time of termination or expiration. Changes in the fair value of the forward starting swap transactions are recorded on our Condensed Consolidated Balance Sheets as a component of accumulated other comprehensive income (AOCI).
During the fourth quarter of fiscal year 2016, we entered into interest rate swap transactions to hedge the variable interest rate payments for the Term Loan Facility. In connection with this transaction, we will pay interest based upon a fixed rate as agreed upon with the respective counterparties and receive variable rate interest payments based on the one-month LIBOR. The interest rate swaps have an aggregate notional amount of $200.0 million and have been designated as hedging instruments and accounted for as cash flow hedges. The interest rate swaps were effective on September 30, 2016 and are scheduled to expire on June 30, 2019. The contracts will be settled with the respective counterparties on a net basis at each settlement date. Changes in the fair value of the interest rate swap transactions are recorded on our Condensed Consolidated Balance Sheets as a component of AOCI.
We pay interest on several of our outstanding borrowings at interest rates that fluctuate based upon changes in various base interest rates. There were $562.5 million in borrowings outstanding under these facilities at May 31, 2017. See Managements Discussion and Analysis of Financial Condition and Results of Operations Liquidity and Capital Resources and Note 6 Notes Payable, Long-Term Debt and Capital Lease Obligations to the Condensed Consolidated Financial Statements for additional information regarding our outstanding debt obligations. The effect of an immediate hypothetical 10% change in variable interest rates would not have a material effect on our Condensed Consolidated Financial Statements.
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Item 4. | Controls and Procedures |
Evaluation of Disclosure Controls and Procedures
We carried out an evaluation required by Rules 13a-15 and 15d-15 under the Exchange Act (the Evaluation), under the supervision and with the participation of our Chief Executive Officer (CEO) and Chief Financial Officer (CFO), of the effectiveness of our disclosure controls and procedures as defined in Rules 13a-15 and 15d-15 under the Exchange Act (Disclosure Controls) as of May 31, 2017. Based on the Evaluation, our CEO and CFO concluded that the design and operation of our Disclosure Controls were effective to ensure that information required to be disclosed by us in reports that we file or submit under the Exchange Act is (i) recorded, processed, summarized and reported within the time periods specified in SEC rules and forms, and (ii) accumulated and communicated to our senior management, including our CEO and CFO, to allow timely decisions regarding required disclosure.
Changes in Internal Control over Financial Reporting
For our fiscal quarter ended May 31, 2017, we did not identify any modifications to our internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Many of the components of our internal controls over financial reporting are evaluated on an ongoing basis by our finance organization to ensure continued compliance with the Exchange Act. The overall goals of these various evaluation activities are to monitor our internal controls over financial reporting and to modify them as necessary. We intend to maintain our internal controls over financial reporting as dynamic processes and procedures that we adjust as circumstances merit, and we have reached our conclusions set forth above, notwithstanding certain improvements and modifications.
Limitations on the Effectiveness of Controls and Other Matters
Our management, including our CEO and CFO, does not expect that our Disclosure Controls and internal control over financial reporting will prevent all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. Additionally, controls may be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the control.
The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions; over time, a control may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.
Notwithstanding the foregoing limitations on the effectiveness of controls, we have nonetheless reached the conclusions set forth above on our disclosure controls and procedures and our internal control over financial reporting.
CEO and CFO Certifications
Exhibits 31.1 and 31.2 are the Certifications of the CEO and the CFO, respectively. The Certifications are required in accordance with Section 302 of the Sarbanes-Oxley Act of 2002 (the Section 302 Certifications). This Item of this report, which you are currently reading contains the information concerning the Evaluation referred to in the Section 302 Certifications and this information should be read in conjunction with the Section 302 Certifications for a more complete understanding of the topics presented.
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Item 1. | Legal Proceedings |
We are party to certain lawsuits in the ordinary course of business. We do not believe that these proceedings, individually or in the aggregate, will have a material adverse effect on our financial position, results of operations or cash flows.
Item 1A. | Risk Factors |
For information regarding risk factors that could affect our business, results of operations, financial condition or future results, see Part I, Item 1A. Risk Factors of our Annual Report on Form 10-K for the fiscal year ended August 31, 2016. For further information on our forward-looking statements see Part I of this Quarterly Report on Form 10-Q.
Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds |
The following table provides information relating to our repurchase of common stock during the three months ended May 31, 2017:
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) |
||||||||||||
March 1, 2017 March 31, 2017 |
499,852 | $ | 28.84 | 485,000 | $ | 140,980 | ||||||||||
April 1, 2017 April 30, 2017 |
1,694,494 | $ | 28.83 | 1,683,628 | $ | 92,447 | ||||||||||
May 1, 2017 May 31, 2017 |
795,122 | $ | 29.04 | 794,103 | $ | 69,387 | ||||||||||
|
|
|
|
|||||||||||||
Total |
2,989,468 | $ | 28.88 | 2,962,731 | $ | 69,387 |
(1) | The purchases include amounts that are attributable to shares surrendered to us by employees to satisfy, in connection with the vesting of restricted stock awards and the exercise of stock options and stock appreciation rights, their tax withholding obligations. |
(2) | In June 2016, our Board of Directors authorized the repurchase of up to $400.0 million of our common shares. The share repurchase program expires on August 31, 2017. During the fourth quarter of fiscal year 2016, we repurchased 4.9 million shares, which utilized $93.7 million of the $400.0 million authorized by our Board of Directors. During the first, second and third quarters of fiscal year 2017, we repurchased 5.3 million shares, 1.7 million shares and 3.0 million shares, respectively, which utilized an additional $236.9 million of the $400.0 million authorized by our Board of Directors. |
Item 3. | Defaults Upon Senior Securities |
None.
Item 4. | Mine Safety Disclosures |
Not applicable.
Item 5. | Other Information |
None.
37
Item 6. | Exhibits |
Exhibit No. |
Description | |
3.1 | Registrants Certificate of Incorporation, as amended. | |
3.2 | Registrants Bylaws, as amended. | |
4.1(1) | Form of Certificate for Shares of the Registrants Common Stock. | |
4.2(2) | Indenture, dated January 16, 2008, with respect to Senior Debt Securities of the Registrant, between the Registrant and The Bank of New York Mellon Trust Company, N.A. (formerly known as The Bank of New York Trust Company, N.A.), as trustee. | |
4.3(3) | Form of 8.250% Registered Senior Notes issued on July 18, 2008. | |
4.4(4) | Form of 7.750% Registered Senior Notes issued on August 11, 2009. | |
4.5(5) | Form of 5.625% Registered Senior Notes issued on November 2, 2010. | |
4.6(6) | Form of 4.700% Registered Senior Notes issued on August 3, 2012. | |
4.7(4) | Officers Certificate of the Registrant pursuant to the Indenture, dated August 11, 2009. | |
4.8(5) | Officers Certificate of the Registrant pursuant to the Indenture, dated November 2, 2010. | |
4.9(6) | Officers Certificate of the Registrant pursuant to the Indenture, dated August 3, 2012. | |
31.1 | Rule 13a-14(a)/15d-14(a) Certification by the Chief Executive Officer of the Registrant. | |
31.2 | Rule 13a-14(a)/15d-14(a) Certification by the Chief Financial Officer of the Registrant. | |
32.1 | Section 1350 Certification by the Chief Executive Officer of the Registrant. | |
32.2 | Section 1350 Certification by the Chief Financial Officer of the Registrant. | |
101.INS | XBRL Instance Document. | |
101.SCH | XBRL Taxonomy Extension Schema Document. | |
101.CAL | XBRL Taxonomy Extension Calculation Linkbase Document. | |
101.DEF | XBRL Taxonomy Extension Definitions Linkbase Document. | |
101.LAB | XBRL Taxonomy Extension Label Linkbase Document. | |
101.PRE | XBRL Taxonomy Extension Presentation Linkbase Document. |
38
(1) | Incorporated by reference to exhibit Amendment No. 1 to the Registration Statement on Form S-1 (File No. 33-58974) filed by the Registrant on March 17, 1993. |
(2) | Incorporated by reference to the Registrants Current Report on Form 8-K (File No. 001-14063) filed by the Registrant on January 17, 2008. |
(3) | Incorporated by reference to the Registrants Annual Report on Form 10-K (File No. 001-14063) for the fiscal year ended August 31, 2008. |
(4) | Incorporated by reference to the Registrants Current Report on Form 8-K (File No. 001-14063) filed by the Registrant on August 12, 2009. |
(5) | Incorporated by reference to the Registrants Current Report on Form 8-K (File No. 001-14063) filed by the Registrant on November 2, 2010. |
(6) | Incorporated by reference to the Registrants Current Report on Form 8-K (File No. 001-14063) filed by the Registrant on August 6, 2012. |
Certain instruments with respect to long-term debt of the Registrant and its consolidated subsidiaries are not filed herewith pursuant to Item 601(b)(4)(iii) of Regulation S-K since the total amount of securities authorized under each such instrument does not exceed
10% of the total assets of the Registrant and its subsidiaries on a consolidated basis. The Registrant agrees to furnish a copy of any such instrument to the Securities and Exchange Commission upon request.
39
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
JABIL INC. Registrant | ||||
Date: June 30, 2017 | By: | /s/ MARK T. MONDELLO | ||
Mark T. Mondello Chief Executive Officer | ||||
Date: June 30, 2017 | By: | /s/ FORBES I.J. ALEXANDER | ||
Forbes I.J. Alexander Chief Financial Officer |
40
Exhibit Index
Exhibit No. |
Description | |||
3.1 | | Registrants Certificate of Incorporation, as amended. | ||
3.2 | | Registrants Bylaws, as amended. | ||
31.1 | | Rule 13a-14(a)/15d-14(a) Certification by the Chief Executive Officer of the Registrant. | ||
31.2 | | Rule 13a-14(a)/15d-14(a) Certification by the Chief Financial Officer of the Registrant. | ||
32.1 | | Section 1350 Certification by the Chief Executive Officer of the Registrant. | ||
32.2 | | Section 1350 Certification by the Chief Financial Officer of the Registrant. | ||
101.INS | | XBRL Instance Document. | ||
101.SCH | | XBRL Taxonomy Extension Schema Document. | ||
101.CAL | | XBRL Taxonomy Extension Calculation Linkbase Document. | ||
101.DEF | | XBRL Taxonomy Extension Definitions Linkbase Document. | ||
101.LAB | | XBRL Taxonomy Extension Label Linkbase Document. | ||
101.PRE | | XBRL Taxonomy Extension Presentation Linkbase Document. |
41
Exhibit 3.1
CERTIFICATE OF INCORPORATION
OF
JABIL INC.
FIRST: | The name of the corporation is Jabil Inc. (the Corporation). | |
SECOND: | The address of the Corporations registered office in the State of Delaware is Corporation Trust Center, 1209 Orange Street, in the City of Wilmington, County of New Castle. The name of its registered agent at such address is The Corporation Trust Company. | |
THIRD: | The nature of the business or purposes to be conducted or promoted by the Corporation is to engage in any lawful act or activity for which corporations may be organized under the General Corporation Law of Delaware. | |
FOURTH: | This Corporation is authorized to issue two classes of shares to be designated respectively Preferred Stock (Preferred) and Common Stock (Common). The total number of shares of Preferred this corporation shall have the authority to issue shall be 10,000,000, $.001 par value, and the total number of shares of Common this corporation shall have the authority to issue shall be 500,000,000, $.001 par value. | |
The Preferred Stock may be issued from time to time in one or more series pursuant to a resolution or resolutions providing for such issue duly adopted by the Board of Directors (authority to do so being hereby expressly vested in the Board). The Board of Directors is further authorized to determine or alter the rights, preferences, privileges and restrictions granted to or imposed upon any wholly unissued series of Preferred Stock and, to fix the number of shares of any series of Preferred Stock and the designation of any such series of Preferred Stock. The Board of Directors, within the limits and restrictions stated in any resolution or resolutions of the Board of Directors originally fixing the number of shares constituting any series, may increase or decrease (but not below the number of shares in any such series then outstanding) the number of shares of any series subsequent to the issue of shares of that series. | ||
FIFTH: | The name and mailing address of the incorporator are as follows: Richard J. Char, Esq. Wilson, Sonsini, Goodrich & Rosati Two Palo Alto Square Palo Alto, CA 94306 | |
SIXTH: | The Corporation is to have perpetual existence. | |
SEVENTH: | Elections of directors need not be by written ballot unless a stockholder demands election by written ballot at the meeting and before voting begins or unless the Bylaws of the Corporation shall so provide. |
EIGHTH: | The number of directors which constitute the whole Board of Directors of the Corporation shall be designated in the Bylaws of the Corporation. | |
NINTH: | In furtherance and not in limitation of the powers conferred by statute, the Board of Directors is expressly authorized to make, alter, amend or repeal the Bylaws of the Corporation. | |
TENTH: | (a) To the fullest extent permitted by the Delaware General Corporation Law as the same exists or as may hereafter be amended, a director of the corporation shall not be personally liable to the corporation or its stockholders for monetary damages for breach of fiduciary duty as a director. | |
(b) The corporation shall indemnify to the fullest extent permitted by law any person made or threatened to be made a party to an action or proceeding, whether criminal, civil, administrative or investigative, by reason of the fact that he, his testator or intestate is or was a director, officer or employee of the corporation or any predecessor of the corporation or serves or served at any other enterprise as a director, officer or employee at the request of the corporation or any predecessor to the corporation. | ||
(c) Neither any amendment nor repeal of this Article, nor the adoption of any provision of this corporations Certificate of Incorporation inconsistent with this Article, shall eliminate or reduce the effect of this Article in respect of any matter occurring, or any action or proceeding accruing or arising or that, but for this Article, would accrue or arise, prior to such amendment, repeal or adoption of an inconsistent provision. | ||
ELEVENTH: | Meetings of stockholders may be held within or without the State of Delaware, as the Bylaws may provide. The books of the Corporation may be kept (subject to any provision contained in the statutes) outside of the State of Delaware at such place or places as may be designated from time to time by the Board of Directors or in the Bylaws of the Corporation. | |
TWELFTH: | Following the effectiveness of the registration of any class of securities of the Corporation pursuant to the requirements of the Securities Exchange Act of 1934, as amended, no action shall be taken by the stockholders of the Corporation except at an annual or special meeting of the stockholders called in accordance with the Bylaws and no action shall be taken by the stockholders by written consent. |
Exhibit 3.2
AMENDED AND RESTATED BYLAWS
OF
JABIL INC., a Delaware corporation
as of June 5, 2017
BYLAWS OF | ||||||
JABIL INC., a Delaware corporation | ||||||
TABLE OF CONTENTS | ||||||
ARTICLE I. CORPORATE OFFICES | 1 | |||||
1.1. |
REGISTERED OFFICE |
1 | ||||
1.2. |
OTHER OFFICES |
1 | ||||
ARTICLE II. MEETINGS OF STOCKHOLDERS | 1 | |||||
2.1. |
ANNUAL MEETING |
1 | ||||
2.2. |
SPECIAL MEETING |
1 | ||||
2.3. |
NOTICE OF STOCKHOLDERS MEETINGS; AFFIDAVIT OF NOTICE |
2 | ||||
2.4. |
QUORUM |
2 | ||||
2.5. |
ADJOURNED MEETING; NOTICE |
3 | ||||
2.6. |
VOTING |
3 | ||||
2.7. |
VALIDATION OF MEETINGS; WAIVER OF NOTICE; CONSENT |
4 | ||||
2.8. |
NO STOCKHOLDER ACTION BY WRITTEN CONSENT |
5 | ||||
2.9. |
RECORD DATE FOR STOCKHOLDER NOTICE; VOTING |
5 | ||||
2.10. |
PROXIES |
5 | ||||
2.11. |
INSPECTORS OF ELECTION |
5 | ||||
2.12. |
ORGANIZATION |
6 | ||||
2.13. |
CONDUCT OF MEETINGS |
6 | ||||
2.14. |
NOTICE OF STOCKHOLDER BUSINESS AND NOMINATIONS |
6 | ||||
ARTICLE III. DIRECTORS | 8 | |||||
3.1. |
POWERS |
8 | ||||
3.2. |
NUMBER OF DIRECTORS |
9 | ||||
3.3. |
ELECTION AND TERM OF OFFICE OF DIRECTORS |
9 | ||||
3.4. |
REMOVAL, RESIGNATION AND VACANCIES |
9 | ||||
3.5. |
ANNUAL AND REGULAR MEETINGS; MEETINGS BY TELEPHONE |
10 | ||||
3.6. |
SPECIAL MEETINGS; NOTICE |
10 | ||||
3.7. |
QUORUM |
11 | ||||
3.8. |
WAIVER OF NOTICE |
11 | ||||
3.9. |
ADJOURNMENT |
11 | ||||
3.10. |
NOTICE OF ADJOURNMENT |
11 | ||||
3.11. |
BOARD ACTION BY WRITTEN CONSENT WITHOUT A MEETING |
11 | ||||
3.12. |
FEES AND COMPENSATION OF DIRECTORS |
12 | ||||
3.13. |
CHAIRMAN |
12 | ||||
3.14. |
VICE CHAIRMAN |
12 | ||||
ARTICLE IV. COMMITTEES | 12 |
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4.1. |
COMMITTEES OF DIRECTORS |
12 | ||||
4.2. |
MEETINGS AND ACTIONS OF COMMITTEES |
13 | ||||
ARTICLE V. OFFICERS | 13 | |||||
5.1. |
OFFICERS |
13 | ||||
5.2. |
ELECTION OF OFFICERS |
13 | ||||
5.3. |
SUBORDINATE OFFICERS |
13 | ||||
5.4. |
REMOVAL AND RESIGNATION OF OFFICERS |
14 | ||||
5.5. |
VACANCIES IN OFFICES |
14 | ||||
5.6. |
CHIEF EXECUTIVE OFFICER |
14 | ||||
5.7. |
PRESIDENT |
14 | ||||
5.8. |
CHIEF OPERATING OFFICER |
14 | ||||
5.9. |
CHIEF FINANCIAL OFFICER |
15 | ||||
5.10. |
TREASURER |
15 | ||||
5.11. |
CONTROLLER |
15 | ||||
5.12. |
VICE PRESIDENTS |
15 | ||||
5.13. |
SECRETARY |
15 | ||||
ARTICLE VI. INDEMNIFICATION OF DIRECTORS, OFFICERS, EMPLOYEES, AND OTHER AGENTS | 16 | |||||
6.1. |
INDEMNIFICATION OF DIRECTORS AND OFFICERS |
16 | ||||
6.2. |
INDEMNIFICATION OF OTHERS |
16 | ||||
6.3. |
NON-EXCLUSIVITY OF RIGHTS |
16 | ||||
6.4. |
SURVIVAL; PRESERVATION OF OTHER RIGHTS; NATURE OF RIGHTS |
16 | ||||
6.5. |
INSURANCE |
17 | ||||
ARTICLE VII. RECORDS AND REPORTS | 17 | |||||
7.1. |
MAINTENANCE AND INSPECTION OF RECORDS |
17 | ||||
7.2. |
INSPECTION BY DIRECTORS |
18 | ||||
7.3. |
REPRESENTATION OF SHARES OF OTHER CORPORATIONS |
18 | ||||
ARTICLE VIII. GENERAL MATTERS | 18 | |||||
8.1. |
RECORD DATE FOR PURPOSES OTHER THAN NOTICE AND VOTING |
18 | ||||
8.2. |
CHECKS; DRAFTS; EVIDENCES OF INDEBTEDNESS |
18 | ||||
8.3. |
CORPORATE CONTRACTS AND INSTRUMENTS; HOW EXECUTED |
19 | ||||
8.4. |
STOCK CERTIFICATES; PARTLY PAID SHARES |
19 | ||||
8.5. |
SPECIAL DESIGNATION ON CERTIFICATES |
19 | ||||
8.6. |
LOST CERTIFICATES |
20 | ||||
8.7. |
FISCAL YEAR |
20 | ||||
8.8. |
CONSTRUCTION; DEFINITIONS |
20 | ||||
8.9. |
FORUM FOR ADJUDICATION OF DISPUTES |
20 | ||||
ARTICLE IX. AMENDMENTS | 21 |
ii
BYLAWS
OF
JABIL INC., a Delaware corporation
ARTICLE I.
CORPORATE OFFICES
1.1. REGISTERED OFFICE
The registered office of the corporation shall be fixed in the Certificate of Incorporation of the corporation.
1.2. OTHER OFFICES
The corporation may maintain offices or places of business at such other locations, both within and without the state of Delaware, as the board of directors may from time to time determine or as the business of the corporation may require.
ARTICLE II.
MEETINGS OF STOCKHOLDERS
2.1. ANNUAL MEETING
The annual meeting of stockholders, for the election of directors or for the transaction of such other business as properly may come before such meeting, shall be held at such place, or, within the sole discretion of the board of directors, by remote electronic communication technologies, and at such date and time as may be designated by the board of directors.
2.2. SPECIAL MEETING
A special meeting of the stockholders may be called at any time by the board of directors, or by the chairman of the board, or by the chief executive officer, or by one or more stockholders holding shares in the aggregate entitled to cast not less than a majority of the votes at that meeting.
If a special meeting is requested by any person or persons other than the board of directors or the chief executive officer or the chairman of the board, then the request shall be in writing, specifying the general nature of the business proposed to be transacted, and shall be delivered personally or sent by registered mail or by telegraphic or other facsimile transmission to the chairman of the board, the chief executive officer, any vice president or the secretary of the corporation. No business may be transacted at such special meeting otherwise than specified in such notice. The board of directors shall determine the time and place of such special meeting, which shall be held not less than 35 nor more than 120 days after the receipt of the request. Upon determination of the time and the place of the meeting, the officer receiving the
request shall cause notice to be given to the stockholders entitled to vote, in accordance with the provisions of Section 2.3 of these bylaws. If the notice is not given within 61 days after the receipt of the request, the person or persons requesting the meeting may set the time and place of the meeting and give the notice. Nothing contained in this paragraph of this Section 2.2 shall be construed as limiting, fixing or affecting the time when a meeting of stockholders called by action of the board of directors may be held.
2.3. NOTICE OF STOCKHOLDERS MEETINGS; AFFIDAVIT OF NOTICE
Whenever stockholders are required or permitted to take any action at a meeting, a written notice of the meeting shall be given which shall state the place, if any, date and time of the meeting, the means of remote communications, if any, by which stockholders and proxy holders may be deemed to be present in person and vote at such meeting, and, in the case of a special meeting, the purpose or purposes for which the meeting is called.
Unless otherwise provided by the General Corporation Law of Delaware, the written notice of any meeting shall be given personally, by mail or by electronic transmission not less than 10 nor more than 60 days before the date of the meeting to each stockholder entitled to vote at such meeting. If mailed, notice is given when deposited in the United States mail, postage prepaid, directed to the stockholder at such stockholders address as it appears on the records of the corporation. For notice given by electronic transmission to a stockholder to be effective, such stockholder must consent to the corporations giving notice by that particular form of electronic transmission. A stockholder may revoke consent to receive notice by electronic transmission by written notice to the corporation. A stockholders consent to notice by electronic transmission is automatically revoked if the corporation is unable to deliver two consecutive electronic transmission notices and such inability becomes known to the secretary of the corporation, any assistant secretary, the transfer agent or other person responsible for giving notice. Notices are deemed given (a) if by facsimile, when faxed to a number where the stockholder has consented to receive notice; (b) if by electronic mail, when mailed electronically to an electronic mail address at which the stockholder has consented to receive such notice; (c) if by posting on an electronic network (such as a website or chatroom) together with a separate notice to the stockholder of such specific posting, upon the later to occur of (i) such posting or (ii) the giving of the separate notice of such posting; or (d) if by any other form of electronic communication, when directed to the stockholder in the manner consented to by the stockholder.
An affidavit of the secretary or an assistant secretary or of the transfer agent or other agent of the corporation that the notice has been given shall, in the absence of fraud, be prima facie evidence of the giving of such notice.
2.4. QUORUM
Except as otherwise required by law, by the Certificate of Incorporation of the corporation or by these bylaws, the presence in person or by proxy of the holders of a majority of the shares entitled to vote thereat constitutes a quorum for the transaction of business at all meetings of stockholders.
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Shares of its own stock belonging to the corporation or to another corporation, if a majority of the shares entitled to vote in the election of directors of such other corporation is held, directly or indirectly, by the corporation, will neither be entitled to vote nor be counted for quorum purposes; provided, however, that the foregoing will not limit the right of the corporation or any subsidiary of the corporation to vote stock, including but not limited to its own stock, held by it in a fiduciary capacity.
2.5. ADJOURNED MEETING; NOTICE
Any stockholders meeting, annual or special, whether or not a quorum is present, may be adjourned from time to time by the vote of the majority of the shares represented at that meeting, either in person or by proxy. In the absence of a quorum, no other business may be transacted at that meeting except as provided in Section 2.4 of these bylaws.
When any meeting of stockholders, either annual or special, is adjourned to another time or place, notice need not be given of the adjourned meeting if the time and place, if any, are announced at the meeting at which the adjournment is taken. However, if a new record date for the adjourned meeting is fixed or if the adjournment is for more than 30 days from the date set for the original meeting, then notice of the adjourned meeting shall be given. Notice of any such adjourned meeting shall be given to each stockholder of record entitled to vote at the adjourned meeting in accordance with the provisions of Section 2.3 of these bylaws. At any adjourned meeting the corporation may transact any business which might have been transacted at the original meeting.
2.6. VOTING
The stockholders entitled to vote at any meeting of stockholders shall be determined in accordance with the provisions of Section 2.9 of these bylaws. Except as may be otherwise provided in the Certificate of Incorporation, each outstanding share, regardless of class, shall be entitled to one vote on each matter submitted to a vote of the stockholders.
If a quorum is present, on each matter other than the election of directors, the affirmative vote of the majority of the shares present in person or represented by proxy at the meeting and actually cast on such subject matter shall be the act of the stockholders, unless the vote of a greater number or a vote by classes is required by law or by the Certificate of Incorporation.
Each director to be elected by stockholders shall be elected by the vote of the majority of the votes of the shares present in person or represented by proxy at the meeting and actually cast with respect to the director; provided, however, that if the board of directors determines that the election is contested then directors shall be elected by a plurality of the votes of the shares present in person or represented by proxy at the meeting and entitled to vote on the election of directors. For the purposes of this Section 2.6, a majority of the votes of the shares present in person or represented by proxy at the meeting and actually cast shall mean that the number of shares voted for a directors election exceeds 50% of the number of votes actually cast with respect to that directors election. Votes actually cast shall include votes where the authority to cast a vote for the directors election is explicitly withheld and exclude abstentions with respect to that directors election.
3
If a nominee for director who is an incumbent director is not elected and no successor has been elected at such meeting, the director shall promptly tender his or her conditional resignation following certification of the stockholder vote. The nominating and corporate governance committee shall consider the resignation offer and recommend to the board of directors whether to accept it. The nominating and corporate governance committee and the board of directors may consider any factors they deem relevant in deciding whether to accept a directors resignation. The board of directors will endeavor to act on the nominating and corporate governance committees recommendation within 90 days following the nominating and corporate governance committees recommendation. Thereafter, the board of directors will promptly disclose its decision whether to accept the directors resignation offer (and the reasons for rejecting the resignation offer, if applicable) in a Report on Form 8-K or by a press release disseminated in the manner that company press releases typically are distributed. Any director who tenders his or her resignation pursuant to this provision shall not participate in the nominating and corporate governance committee recommendation or board of directors action regarding whether to accept the resignation offer. However, if each member of the nominating and corporate governance committee received a majority withheld vote at the same uncontested election, then the independent directors who did not receive a majority withheld vote shall appoint a committee amongst themselves to consider the resignation offer and recommend to the board of directors whether to accept them. However, if the only directors who did not receive a majority withheld vote in the same election constitute three or fewer directors, all directors may participate in the action regarding whether to accept the resignation offers. If a directors resignation is accepted by the board of directors pursuant to this Section 2.6, or if a nominee for director is not elected and the nominee is not an incumbent director, then the board of directors, in its sole discretion, may fill any resulting vacancy pursuant to the provisions of Section 3.4 of these bylaws or may decrease the size of the board of directors pursuant to the provisions of Section 3.2 of these bylaws.
2.7. VALIDATION OF MEETINGS; WAIVER OF NOTICE; CONSENT
The transactions of any meeting of stockholders, either annual or special, however called and noticed, and wherever held, shall be as valid as though they had been taken at a meeting duly held after regular call and notice, if a quorum be present either in person or by proxy, and if, either before or after the meeting, each person entitled to vote, who was not present in person or by proxy, signs a written waiver of notice, consent to the holding of the meeting or approval of the minutes thereof or provides a waiver of notice by electronic transmission. The waiver of notice or consent or approval need not specify either the business to be transacted or the purpose of any annual or special meeting of stockholders. All such waivers, consents, and approvals shall be filed with the corporate records or made a part of the minutes of the meeting.
Attendance by a person at a meeting shall also constitute a waiver of notice of and presence at that meeting, except when the person objects at the beginning of the meeting to the transaction of any business because the meeting is not lawfully called or convened. Attendance at a meeting is not a waiver of any right to object to the consideration of matters required by law to be included in the notice of the meeting but not so included, if that objection is expressly made at the meeting.
4
2.8. NO STOCKHOLDER ACTION BY WRITTEN CONSENT
No action shall be taken by the stockholders of the corporation except at an annual or special meeting of the stockholders called in accordance with these bylaws, and no action shall be taken by the stockholders by written consent.
2.9. RECORD DATE FOR STOCKHOLDER NOTICE; VOTING
For purposes of determining the stockholders entitled to notice of any meeting or to vote thereat, the board of directors may fix, in advance, a record date, which shall not be more than 60 days nor less than 10 days before the date of any such meeting, and in such event only stockholders of record on the date so fixed are entitled to notice and to vote, notwithstanding any transfer of any shares on the books of the corporation after the record date.
If the board of directors does not so fix a record date, the record date for determining stockholders entitled to notice of or to vote at a meeting of stockholders shall be at the close of business on the business day next preceding the day on which notice is given, or, if notice is waived, at the close of business on the business day next preceding the day on which the meeting is held. The record date for any other purpose shall be as provided in Article VIII of these bylaws.
2.10. PROXIES
Every person entitled to vote for directors, or on any other matter, shall have the right to do so either in person or by one or more agents authorized by a written proxy signed by the person and filed with the secretary of the corporation, or by the transmitting or authorizing the transmission of a telegram, cablegram, any other means of electronic transmission, or any other acceptable means under the General Corporation Law of Delaware, to the person who will be the holder of the proxy to receive such transmission, provided that any such telegram, cablegram, or other means of electronic transmission must either set forth or be submitted with information from which it can be determined that the telegram, cablegram or other electronic transmission was authorized by the stockholder. Any copy, facsimile telecommunication or other reliable reproduction of such writing or transmission may be substituted or used in lieu of the original writing or transmission for any and all purposes for which the original writing or transmission could be used, provided that any such reproduction is a complete reproduction of the entire original writing or transmission. However, no such proxy shall be voted or acted upon after three years from its date, unless the proxy provides for a longer period. A proxy shall be deemed signed if the stockholders name is placed on the proxy by any reasonable means by the stockholder or the stockholders attorney-in-fact. Every proxy is revocable at the pleasure of the stockholder signing it, except in those cases where applicable law provides that a proxy shall be irrevocable.
2.11. INSPECTORS OF ELECTION
Before any meeting of stockholders, the board of directors or the chief executive officer may appoint an inspector or inspectors of election to act at the meeting or its adjournment. If no inspector of election is so appointed, then the chairman of the meeting may appoint an inspector or inspectors of election to act at the meeting. If any person appointed as inspector fails to
5
appear or fails or refuses to act, then the chairman of the meeting may appoint a person to fill that vacancy. Each inspector, before entering upon the discharge of his or her duties, shall take and sign an oath to faithfully execute the duties of inspector at such meeting with strict impartiality and according to the best of his or her ability. Inspectors may appoint or retain other persons to assist in the performance of their duties.
Such inspectors shall:
(a) determine the number of shares outstanding and the voting power of each, the number of shares represented at the meeting, the existence of a quorum, and the authenticity, validity, and effect of proxies;
(b) receive votes, ballots or consents;
(c) hear and determine all challenges and questions in any way arising in connection with the right to vote;
(d) count and tabulate all votes or consents;
(e) determine the result; and
(f) do any other acts that may be proper to conduct the election or vote with fairness to all stockholders.
2.12. ORGANIZATION
Meetings of the stockholders shall be presided over by the chairman of the board, or in the chairman of the boards absence, the vice chairman of the board, or in the vice chairman of the boards absence, by a person designated by the board of directors. The secretary of the corporation shall act as secretary of the meeting, but if the secretary is not present the chairman of the meeting shall appoint a secretary of the meeting.
2.13. CONDUCT OF MEETINGS
The chairman of the meeting shall determine the order of business and the procedure at the meeting, including such regulation of the manner of voting and the conduct of discussion as seems in order to the chairman of the meeting.
2.14. NOTICE OF STOCKHOLDER BUSINESS AND NOMINATIONS
(a) To be properly brought before the annual meeting or special meeting, nominations of persons for election to the board of directors or other business must be either (i) specified in the notice of meeting (or any supplement thereto) given by or at the direction of the board of directors; (ii) otherwise properly brought before the meeting by or at the direction of the board of directors or (iii) otherwise properly brought before the meeting by a stockholder of record.
6
(b) For nominations or other business to be properly brought before an annual meeting by a stockholder pursuant to clause (iii) of the Section 2.14(a) of these bylaws, (i) the subject matter thereof must be a matter which is a proper subject matter for stockholder action at such meeting; (ii) the stockholder must have been a stockholder of record of the corporation at the time the notice required by this Section 2.14 is delivered to the corporation and must be entitled to vote at the meeting; and (iii) the stockholder must have given timely written notice thereof by mail, courier or personal delivery to (A) the Nominating and Corporate Governance Committee of the board of directors, care of the corporate secretary of the corporation, for nominations, or (B) the corporate secretary of the corporation, for other business. To be considered timely, a stockholders notice must be delivered to or mailed and received by the secretary of the corporation at the principal executive offices of the corporation not less than 120 calendar days prior to the first anniversary of the date of the proxy statement for the prior annual meeting of stockholders; provided, however, that in the event that the date of the annual meeting of stockholders for the current year is more than 30 days following the first anniversary date of the annual meeting of stockholders for the prior year, the submission of a recommendation will be considered timely if it is submitted a reasonable time in advance of the mailing of the corporations proxy statement for the annual meeting of stockholders for the current year.
A stockholders notice shall set forth: (i) as to each person whom the stockholder proposes to nominate for election as a director, (A) all information relating to such person that is required by Item 401 of the Securities and Exchange Commissions (SEC) Regulation S-K; (B) the information required by Item 403 of SEC Regulation S-K; (C) the information required by Item 404 of SEC Regulation S-K; (D) a description of all relationships between the proposed nominee and the recommending stockholder and any agreements or understandings between the recommending stockholder and the nominee regarding the nomination; (E) a description of all relationships between the proposed nominee and any of the corporations competitors, customers, suppliers, labor unions or other persons with special interests regarding the corporation known to the recommending stockholder or nominee in the corporations filings with the SEC; (F) a statement by the stockholder supporting its view that the proposed nominee possesses the minimum qualifications prescribed by the Nominating and Corporate Governance Committee of the board of directors for nominees or directors from time to time, including those that may be set forth in the corporations Corporate Governance Guidelines, and a brief description of the contributions that the nominee would be expected to make to the board of directors and to the governance of the corporation; (G) a statement whether, in the view of the stockholder, the nominee, if elected, would represent all stockholders and not serve for the purpose of advancing or favoring any particular stockholder or other constituency of the corporation; and (H) such nominees written consent to being interviewed by the Nominating and Corporate Governance Committee of the board of directors (including the nominees contact information for this purpose), and, if nominated and elected, to serve as a director of the corporation; (ii) as to any other business the stockholder proposes to bring before the annual meeting, (A) a brief description of such business and the reasons for conducting such business at the annual meeting and (B) any material interest in such business of the stockholder and any beneficial owner on whose behalf the proposal or nomination is made; and (iii) as to the stockholder giving the notice (or, if submitted by a group of two or more stockholders, as to each stockholder in the group), (A) the name and address, including telephone number, of such stockholder; (B) the number of shares of the corporation that are beneficially owned and held of record by such stockholder and the time period for which such shares have been held; (C) if the
7
stockholder is not a stockholder of record, a statement from the record holder of the shares verifying the holdings of the stockholder and a statement from the stockholder of the length of time that the shares have been held (alternatively, the stockholder may furnish a current Schedule 13D, Schedule 13G, Form 3, Form 4, or Form 5 filed with the SEC reflecting the holdings of the stockholder, together with a statement of the length of time that the shares have been held); and (D) a statement from the stockholder as to whether the stockholder has a good faith intention to continue to hold the reported shares through the date of the corporations next annual meeting of stockholders.
(c) Notwithstanding anything in Section 2.14(b) of these bylaws to the contrary, in the event that the number of directors to be elected to the board of directors at an annual meeting is increased and there is no public announcement by the corporation naming the nominees for the additional directorships at least 100 days prior to the first anniversary of the preceding years annual meeting, a stockholders notice required by this Section 2.14(c) shall also be considered timely, but only with respect to nominees for the additional directorships, if it shall be delivered to the secretary at the principal executive offices of the corporation not later than the close of business on the 10th day following the day on which such public announcement is first made by the corporation.
(d) Notwithstanding the foregoing provisions of this Section 2.14, a stockholder who seeks to have any proposal included in the corporations proxy materials must provide notice as required by and otherwise comply with the applicable requirements of the rules and regulations under the Securities Exchange Act of 1934. Nothing in this Section 2.14 shall be deemed to affect any rights of stockholders to request inclusion of proposals or nominations in the corporations proxy statement pursuant to applicable rules and regulations promulgated under the Securities Exchange Act of 1934.
Only persons nominated in accordance with the procedures set forth in this Section 2.14 shall be eligible to serve as directors and only such business shall be conducted at an annual meeting of stockholders as shall have been brought before the meeting in accordance with the procedures set forth in this Section 2.14. The chairman of the meeting shall have the power and the duty to determine whether a nomination or any business proposed to be brought before the meeting has been made in accordance with the procedures set forth in these bylaws and, if any proposed nomination or business is not in compliance with these bylaws, to declare that such business shall not be transacted at such meeting and such nomination shall be disregarded.
ARTICLE III.
DIRECTORS
3.1. POWERS
Subject to the provisions of the General Corporation Law of Delaware and to any limitations in the Certificate of Incorporation or these bylaws relating to action required to be approved by the stockholders or by the outstanding shares, the business and affairs of the corporation shall be managed and all corporate powers shall be exercised by or under the direction of the board of directors.
8
3.2. NUMBER OF DIRECTORS
The number of directors shall be fixed from time to time by resolution of the board of directors. No reduction of the authorized number of directors shall have the effect of removing any director before that directors term of office expires.
3.3. ELECTION AND TERM OF OFFICE OF DIRECTORS
Except as provided in Section 3.4 of these bylaws, directors shall be elected at each annual meeting of stockholders. Each director, including a director elected to fill a vacancy, shall hold office until the next annual meeting of stockholders following his or her election and until a successor has been elected and qualified, or until his or her earlier death, resignation or removal.
3.4. REMOVAL, RESIGNATION AND VACANCIES
Any director may resign at any time by giving written notice to the chairman of the board, the chief executive officer, the president, the secretary or the board of directors. Such resignation shall take effect at the time specified therein or, if no time is specified, upon receipt by the chairman of the board, the president, the secretary or the board of directors. The acceptance of a resignation shall not be necessary to make it effective.
Any director may be removed, with or without cause, by the holders of a majority of the shares then entitled to vote at an election of directors.
Vacancies in the board of directors may be filled by a majority of the remaining directors, even if less than a quorum, or by a sole remaining director; however, a vacancy created by the removal of a director by the vote of the stockholders or by court order may be filled only by the affirmative vote of a majority of the shares represented and voting at a duly held meeting at which a quorum is present (which shares voting affirmatively also constitute a majority of the required quorum). Each director so elected shall hold office until the next annual meeting of the stockholders and until a successor has been elected and qualified.
Unless otherwise provided in the Certificate of Incorporation or these bylaws:
(a) Vacancies and newly created directorships resulting from any increase in the authorized number of directors elected by all of the stockholders having the right to vote as a single class may be filled by a majority of the directors then in office, although less than a quorum, or by a sole remaining director.
(b) Whenever the holders of any class or classes of stock or series thereof are entitled to elect one or more directors by the provisions of the Certificate of Incorporation, vacancies and newly created directorships of such class or classes or series may be filled by a majority of the directors elected by such class or classes or series thereof then in office, or by a sole remaining director so elected.
9
If at any time, by reason of death or resignation or other cause, the corporation should have no directors in office, then any officer or any stockholder or an executor, administrator, trustee or guardian of a stockholder, or other fiduciary entrusted with like responsibility for the person or estate of a stockholder, may call a special meeting of stockholders in accordance with the provisions of the Certificate of Incorporation or these bylaws, or may apply to the Court of Chancery for a decree summarily ordering an election as provided in Section 211 of the General Corporation Law of Delaware.
If, at the time of filling any vacancy or any newly created directorship, the directors then in office constitute less than a majority of the whole board (as constituted immediately prior to any such increase), then the Court of Chancery may, upon application or any stockholder or stockholders holding at least 10% of the total number of the shares at the time outstanding having the right to vote for such directors, summarily order an election to be held to fill any such vacancies or newly created directorships, or to replace the directors chosen by the directors then in office as aforesaid, which election shall be governed by the provisions of Section 217 of the General Corporation Law of Delaware as far as applicable.
3.5. ANNUAL AND REGULAR MEETINGS; MEETINGS BY TELEPHONE
The annual meeting of the board of directors for the purpose of electing officers and for the transaction of such other business as may come before the meeting shall be held as soon as possible following adjournment of the annual meeting of the stockholders. Annual and regular meetings may be held at any place within or outside the State of Delaware that has been designated from time to time by resolution of the board. In the absence of such a designation, annual and regular meetings shall be held at the principal executive office of the corporation. Special meetings of the board may be held at any place within or outside the State of Delaware that has been designated in the notice of the meeting or, if not stated in the notice or if there is no notice, at the principal executive office of the corporation.
Any meeting may be held by conference telephone or similar communication equipment, so long as all directors participating in the meeting can hear one another, and all such directors shall be deemed to be present in person at the meeting.
3.6. SPECIAL MEETINGS; NOTICE
Special meetings of the board of directors for any purpose or purposes may be called at any time by the chairman of the board, the chief executive officer, the president, any vice president, the secretary or any two directors.
Notice of regular meetings need not be given, provided, however, that if the board of directors shall fix or change the time or place of any regular meeting, notice of such action shall be given as set forth herein. Notice of the time and place of special meetings and any required notice of regular meetings shall be delivered personally, sent by first-class mail or sent by telephone, including a voice messaging system or other system or technology designed to record and communicate messages, telegraph, facsimile, electronic mail or other electronic means, to each director, addressed to him or her at his or her address as it is shown on the records of the corporation.
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If the notice is mailed, it shall be deposited in the United States mail at least four days before the time of the holding of the meeting. If the notice is delivered personally or by telephone, telegram, electronic mail or other electronic means, it shall be delivered personally or by telephone, to the telegraph company or by other electronic means at least 24 hours before the time of the holding of the meeting. Any oral notice given personally or by telephone may be communicated either to the director or to a person at the office of the director who the person giving the notice has reason to believe will promptly communicate it to the director. The notice need not specify the purpose or the place of the meeting, if the meeting is to be held at the principal executive office of the corporation.
3.7. QUORUM
A majority of the authorized number of directors shall constitute a quorum for the transaction of business, except to adjourn as provided in Section 3.9 of these bylaws. Every act or decision done or made by a majority of the directors present at a duly held meeting at which a quorum is present shall be regarded as the act of the board of directors, subject to the provisions of the Certificate of Incorporation and applicable law.
A meeting at which a quorum is initially present may continue to transact business notwithstanding the withdrawal of directors, if any action taken is approved by at least a majority of the required quorum for that meeting.
3.8. WAIVER OF NOTICE
Notice of a meeting need not be given to any director (a) who signs a waiver of notice or a consent to holding the meeting or an approval of the minutes thereof, whether before or after the meeting, or (b) who attends the meeting without protesting, prior thereto or at its commencement, the lack of notice to such directors. All such waivers, consent, and approvals shall be filed with the corporate records or made part of the minutes of the meeting. A waiver of notice need not specify the purpose of any regular or special meeting of the board of directors.
3.9. ADJOURNMENT
A majority of the directors present, whether or not constituting a quorum, may adjourn any meeting to another time and place.
3.10. NOTICE OF ADJOURNMENT
Notice of the time and place of holding an adjourned meeting need not be given unless the meeting is adjourned for more than 24 hours. If the meeting is adjourned for more than 24 hours, then notice of the time and place of the adjourned meeting shall be given before the adjourned meeting takes place, in the manner specified in Section 3.6 of these bylaws, to the directors who were not present at the time of the adjournment.
3.11. BOARD ACTION BY WRITTEN CONSENT WITHOUT A MEETING
Any action required or permitted to be taken by the board of directors may be taken without a meeting, provided that all members of the board individually or collectively consent in writing or by electronic transmission to that action. Such action by written consent shall have the same force and effect as a unanimous vote of the board of directors. Such written consent and any counterparts thereof, including any consents by electronic transmission, shall be filed with the minutes of the proceedings of the board.
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3.12. FEES AND COMPENSATION OF DIRECTORS
Directors and members of committees may receive such compensation, if any, for their services and such reimbursement of expenses as may be fixed or determined by resolution of the board of directors. This Section 3.12 shall not be construed to preclude any director from serving the corporation in any other capacity as an officer, agent, employee or otherwise and receiving compensation for those services.
3.13. CHAIRMAN
At all meetings of the board of directors, the Chairman of the board of directors shall, when present, preside as Chairman at all meetings of the stockholders and board of directors. The Chairman may call meetings of the stockholders and board of directors and of the committees of the board of directors whenever he shall deem it necessary. The Chairman shall have such other powers and perform such other duties as from time to time may be prescribed by the board of directors.
3.14. VICE CHAIRMAN
In the absence of, or in the case of a vacancy in the office of, the Chairman of the board of directors, the Vice Chairman of the board of directors shall preside as chairman at meetings of the stockholders and board of directors or, if both the Chairman of the board of directors and Vice Chairman of the board of directors are absent, a chairman selected by the remaining directors shall preside over such meetings. The Vice Chairman shall have such other powers and perform such other duties as from time to time may be prescribed by the board of directors.
ARTICLE IV.
COMMITTEES
4.1. COMMITTEES OF DIRECTORS
The board of directors may designate one or more committees, each committee consisting of one or more directors. The board may designate one or more directors as alternate members of any committee, who may replace any absent or disqualified member at any meeting of the committee. In the absence or disqualification of a member of a committee, the member or members present at any meeting and not disqualified from voting, whether or not such member or members constitute a quorum, may unanimously appoint another member of the board of directors to act at the meeting in the place of any such absent or disqualified member. Any committee, to the extent provided in the resolution of the board, shall have and may exercise all the powers and authority of the board of directors in the management of the business and affairs of the corporation, and may authorize the seal of the corporation to be affixed to all papers which may require it; but no such committee shall have the power or authority in reference to the following matters: (a) approving or adopting, or recommending to the stockholders, any action or matter (other than the election or removal of directors) expressly required by this chapter to be submitted to stockholders for approval or (b) adopting, amending or repealing any bylaw of the corporation.
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4.2. MEETINGS AND ACTIONS OF COMMITTEES
Meetings and actions of committees shall be governed by, and held and taken in accordance with, the provisions of Article III of these bylaws, including Section 3.5 (annual and regular meetings; meetings by telephone), Section 3.6 (special meetings and notice), Section 3.7 (quorum), Section 3.8 (waiver of notice), Section 3.9 (adjournment), Section 3.10 (notice of adjournment), and Section 3.11 (action without meeting), with such changes in the context of those bylaws as are necessary to substitute the committee and its members for the board of directors and its members; provided, however, that the time of regular meetings of committees may be determined either by resolution of the board of directors or by resolution of the committee, that special meetings of committees may also be called by resolution of the board of directors, and that notice of special meetings of committees shall also be given to all alternate members, who shall have the right to attend all meetings of the committee. The board of directors may adopt rules for the government of any committee not inconsistent with the provisions of these bylaws.
ARTICLE V.
OFFICERS
5.1. OFFICERS
The officers of the corporation shall be a chief executive officer, a president, a secretary, a treasurer, a chief financial officer, a chief operating officer, and a controller. The corporation may also have, at the discretion of the board of directors, one or more vice presidents, one or more assistant secretaries, one or more assistant treasurers, and such other officers as may be appointed in accordance with the provisions of Section 5.3 of these bylaws. Any number of offices may be held by the same person.
5.2. ELECTION OF OFFICERS
The officers of the corporation, except such officers as may be appointed in accordance with the provisions of Section 5.3 or Section 5.5 of these bylaws, shall be chosen by the board, subject to the rights, if any, of an officer under any contract of employment.
5.3. SUBORDINATE OFFICERS
The board of directors may appoint, or may empower the chief executive officer to appoint, such other officers as the business of the corporation may require, each of whom shall hold office for such period, have such authority, and perform such duties as are provided in these bylaws or as the board of directors may from time to time determine.
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5.4. REMOVAL AND RESIGNATION OF OFFICERS
Subject to the rights, if any, of an officer under any contract of employment, any officer may be removed, either with or without cause, by the board of directors at any regular or special meeting of the board or, except in case of an officer chosen by the board of directors, by any officer upon whom such power of removal may be conferred by the board of directors.
Any officer may resign at any time by giving written notice to the corporation. Any resignation shall take effect at the date of the receipt of that notice or at any later time specified in that notice; and, unless otherwise specified in that notice, the acceptance of the resignation shall not be necessary to make it effective. Any resignation is without prejudice to the rights, if any, of the corporation under any contract to which the officer is a party.
5.5. VACANCIES IN OFFICES
A vacancy in any office because of death, resignation, removal, disqualification or any other cause shall be filled in the manner prescribed in these bylaws for regular appointments to that office.
5.6. CHIEF EXECUTIVE OFFICER
The chief executive officer shall, subject to the control of the board of directors, have general supervision, direction, and control of the affairs and business of the corporation and general supervision of its officers, officials, employees and agents. The chief executive officer shall preside at all meetings of the stockholders. The chief executive officer shall see that all orders and resolutions of the board of directors are carried into effect, and in addition shall have such other powers and perform such other duties as from time to time may be prescribed by the board of directors or these bylaws.
5.7. PRESIDENT
Unless the board of directors specifies another officer, the president shall be the chief executive officer of the corporation. If another officer is specified, the president shall have such powers and perform such duties as are prescribed by the chief executive officer or the board of directors, and in the absence or disability of the chief executive officer the president shall have the powers and perform the duties of the chief executive officer except to the extent the board of directors shall have otherwise provided. In addition, the president shall have such other powers and perform such other duties as from time to time may be prescribed by the board of directors, the chief executive officer or these bylaws.
5.8. CHIEF OPERATING OFFICER
The chief operating officer shall assist the chief executive officer and the president in the active management of and supervision and direction over the business and affairs of the corporation, subject, however, to the direction of the chief executive officer and the president and the control of the board of directors. In the absence or disability of the chief executive officer and the president, the chief operating officer will assume the powers and responsibilities of the chief executive officer. The chief operating officer shall also have such other powers and perform such other duties as from time to time may be prescribed by the board of directors, the chief executive officer, the president or these bylaws.
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5.9. CHIEF FINANCIAL OFFICER
The chief financial officer shall have responsibility for the administration of the financial affairs of the corporation and shall exercise supervisory responsibility for the performance of the duties of the treasurer and the controller. The chief financial officer shall have such other powers and perform such other duties as from time to time may be prescribed by the board of directors or these bylaws.
5.10. TREASURER
The treasurer shall oversee the custody of the corporate funds and securities and shall perform all such other duties as are incident to the office of treasurer. The treasurer may be required to give the corporation a bond for the faithful performance of his or her duties, and shall have such other powers and perform such other duties as from time to time may be prescribed by the board of directors, the chief financial officer or these bylaws.
5.11. CONTROLLER
The controller shall have supervision and charge of the accounts of the corporation. He or she shall be responsible for the maintenance of adequate accounting records and shall perform such other duties as shall be assigned to him or her by the board of directors or the chief financial officer.
5.12. VICE PRESIDENTS
In the absence or disability of the chief executive officer, the president and the chief operating officer, the vice presidents, if any, in order of their rank as fixed by the board of directors or, if not ranked, a vice president designated by the board of directors, shall perform all the duties of the chief executive officer and when so acting shall have all the powers of, and be subject to all the restrictions upon, the president. The vice presidents shall have such other powers and perform such other duties as from time to time may be prescribed for them respectively by the board of directors, these bylaws, the chief executive officer or the president.
5.13. SECRETARY
The secretary shall keep or cause to be kept, at the principal executive office of the corporation or such other place as the board of directors may direct, a book of minutes of all meetings and actions of directors, committees of directors and stockholders, and shall keep or cause to be kept, at the principal executive office of the corporation or at the office of the corporations transfer agent or registrar, a share register, or a duplicate share register, showing the names of all stockholders and their addresses, the number and classes of shares held by each, the number and date of certificates evidencing such shares, and the number and date of cancellation of every certificate surrendered for cancellation. The secretary shall also give, or cause to be given, notice of all meetings of the stockholders and of the board of directors required to be given by law or by these bylaws. He or she shall keep the seal of the corporation, if one be adopted, in safe custody and shall have such other powers and perform such other duties as from time to time may be prescribed by the board of directors or by these bylaws.
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ARTICLE VI.
INDEMNIFICATION OF DIRECTORS, OFFICERS, EMPLOYEES,
AND OTHER AGENTS
6.1. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The corporation shall, to the maximum extent and in the manner permitted by the General Corporation Law of Delaware, indemnify each of its directors and officers against expenses (including attorneys fees), judgments, fines, settlements and other amounts actually and reasonably incurred in connection with any proceeding, arising by reason of the fact that such person is or was an agent of the corporation. For purposes of this Section 6.1, a director or officer of the corporation includes any person (a) who is or was a director or officer of the corporation, (b) who is or was serving at the request of the corporation as a director or officer of another corporation, partnership, joint venture, trust or other enterprise, or (c) who was a director or officer of a corporation which was a predecessor corporation of the corporation or of another enterprise at the request of such predecessor corporation.
6.2. INDEMNIFICATION OF OTHERS
The corporation shall have the power, to the maximum extent and in the manner permitted by the General Corporation Law of Delaware, to indemnify each of its employees and agents (other than directors and officers) against expenses (including attorneys fees), judgments, fines, settlements and other amounts actually and reasonably incurred in connection with any proceeding, arising by reason of the fact that such person is or was an agent of the corporation. For purposes of this Section 6.2, an employee or agent of the corporation (other than a director or officer) includes any person (a) who is or was an employee or agent of the corporation, (b) who is or was serving at the request of the corporation as an employee or agent of another corporation, partnership, joint venture, trust or other enterprise, or (c) who was an employee or agent of a corporation which was a predecessor corporation of the corporation or of another enterprise at the request of such predecessor corporation.
6.3. NON-EXCLUSIVITY OF RIGHTS
The rights to indemnification and to the advancement of expenses conferred in this Article VI shall not be exclusive of any other right which any person may have or hereunder acquire under any statute, certificate of incorporation, bylaws, agreement, vote of stockholders or disinterested directors or otherwise.
6.4. SURVIVAL; PRESERVATION OF OTHER RIGHTS; NATURE OF RIGHTS
The rights conferred upon persons claiming indemnity in this Article VI shall be contract rights and such rights shall continue as to a claimant who has ceased to be a director or officer and shall inure to the benefit of the claimants heirs, executors and administrators. Any amendment, alteration or repeal of this Article VI that adversely affects any right of a claimant or his or her successors shall be prospective only and shall not limit or eliminate any such right with respect to any proceeding involving any occurrence or alleged occurrence of any action or omission to act that took place prior to such amendment or repeal.
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6.5. INSURANCE
The corporation may purchase and maintain insurance on behalf of any person who is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise against any liability asserted against him or her and incurred by him or her in any such capacity, or arising out of his or her status as such, whether or not the corporation would have the power to indemnify him or her against such liability under the provisions of the General Corporation Law of Delaware.
ARTICLE VII.
RECORDS AND REPORTS
7.1. MAINTENANCE AND INSPECTION OF RECORDS
The corporation shall, either at its principal executive office or at such place or places as designated by the board of directors, keep a record of its stockholders listing their names and addresses and the number and class of shares held by each stockholder, a copy of these bylaws as amended to date, accounting books and other records.
Any stockholder of record, in person or by attorney or other agent, shall, upon written demand under oath stating the purpose thereof, have the right during the usual hours for business to inspect for any proper purpose the corporations stock ledger, a list of its stockholders, and its other books and records and to make copies or extracts therefrom. A proper purpose shall mean a purpose reasonably related to such persons interest as a stockholder. In every instance where an attorney or other agent is the person who seeks the right to inspection, the demand under oath shall be accompanied by a power of attorney or such other writing that authorizes the attorney or other agent to so act on behalf of the stockholder. The demand under oath shall be directed to the corporation at its registered office in Delaware or at its principal place of business.
The officer who has charge of the stock ledger of a corporation shall prepare and make, at least 10 days before every meeting of stockholders, a complete list of the stockholders entitled to vote at the meeting, arranged in alphabetical order, and showing the address of each stockholder and the number of shares registered in the name of each stockholder. Such list shall be open to the examination of any stockholder, for any purpose germane to the meeting, during ordinary business hours, for a period of at least 10 days prior to the meeting, either at a place within the city where the meeting is to beheld, which place shall be specified in the notice of the meeting, or, if not so specified, at the place where the meeting is to be held. The list shall also be produced and kept at the time and place of the meeting during the whole time thereof, and may be inspected by any stockholder who is present.
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7.2. INSPECTION BY DIRECTORS
Any director shall have the right to examine the corporations stock ledger, a list of its stockholders and its other books and records for a purpose reasonably related to his or her position as a director. The Court of Chancery is hereby vested with the exclusive jurisdiction to determine whether a director is entitled to the inspection sought. The Court may summarily order the corporation to permit the director to inspect any and all books and records, the stock ledger, and the stock list and to make copies or extracts therefrom. The Court may, in its discretion, prescribe any limitations or conditions with reference to the inspection, or award such other and further relief as the Court may deem just and proper.
7.3. REPRESENTATION OF SHARES OF OTHER CORPORATIONS
The chairman of the board, the president, any vice president, the chief financial officer, the secretary or assistant secretary of this corporation, or any other person authorized by the board of directors or the president or a vice president, is authorized to vote, represent, and exercise on behalf of this corporation all rights incident to any and all shares of any other corporation or corporations standing in the name of this corporation. The authority herein granted may be exercised either by such person directly or by any other person authorized to do so by proxy or power of attorney duly executed by such person having the authority.
ARTICLE VIII.
GENERAL MATTERS
8.1. RECORD DATE FOR PURPOSES OTHER THAN NOTICE AND VOTING
For purposes of determining the stockholders entitled to receive payment of any dividend or other distribution or allotment of any rights or the stockholders entitled to exercise any rights in respect of any other lawful action, the board of directors may fix, in advance, a record date, which shall not be more than 60 days before any such action. In that case, only stockholders of record at the close of business on the date so fixed are entitled to receive the dividend, distribution or allotment of rights, or to exercise such rights, as the case may be, notwithstanding any transfer of any shares on the books of the corporation after the record date so fixed, except as otherwise provided by law.
If the board of directors does not so fix a record date, then the record date for determining stockholders for any such purpose shall be at the close of business on the day on which the board adopts the applicable resolution or the 60th day before the date of that action, whichever is later.
8.2. CHECKS; DRAFTS; EVIDENCES OF INDEBTEDNESS
From time to time, the board of directors shall determine by resolution which person or persons may sign or endorse all checks, drafts, other orders for payment of money, notes or other evidences of indebtedness that are issued in the name of or payable to the corporation, and only the persons so authorized shall sign or endorse those instruments.
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8.3. CORPORATE CONTRACTS AND INSTRUMENTS; HOW EXECUTED
The board of directors, except as otherwise provided in these bylaws, may authorize any officer or officers, or agent or agents, to enter into any contract or execute any instrument in the name of and on behalf of the corporation; such authority may be general or confined to specific instances. Unless so authorized or ratified by the board of directors or within the agency power of an officer, no officer, agent or employee shall have any power or authority to bind the corporation by any contract or engagement or to pledge its credit or to render it liable for any purpose or for any amount.
8.4. STOCK CERTIFICATES; PARTLY PAID SHARES
The shares of a corporation may be represented by certificates or the board of directors of the corporation may provide by resolution or resolutions that some or all of any or all classes or series of its stock may be uncertificated shares. Any such resolution shall not apply to shares represented by a certificate until such certificate is surrendered to the corporation. Notwithstanding the adoption of such a resolution by the board of directors, every holder of stock represented by certificates and upon request every holder of uncertificated shares shall be entitled to have a certificate signed by, or in the name of the corporation by, the chairman or vice chairman of the board of directors, or the president or vice president, and by the chief financial officer, the treasurer, the secretary or an assistant secretary of such corporation representing the number of shares registered in certificate form. Any or all of the signatures on the certificate may be a facsimile. In case any officer, transfer agent or registrar who has signed or whose facsimile signature has been placed upon a certificate has ceased to be such officer, transfer agent or registrar before such certificate is issued, it may be issued by the corporation with the same effect as if he or she were such officer, transfer agent or registrar at the date of issue.
The corporation may issue the whole or any part of its shares as partly paid and subject to call for the remainder of the consideration to be paid therefor. Upon the face or back of each stock certificate issued to represent any such partly paid shares, upon the books and records of the corporation in the case of uncertificated partly paid shares, the total amount of the consideration to be paid therefor and the amount paid thereon shall be stated. Upon the declaration of any dividend on fully paid shares, the corporation shall declare a dividend upon partly paid shares of the same class, but only upon the basis of the percentage of the consideration actually paid thereon.
8.5. SPECIAL DESIGNATION ON CERTIFICATES
If the corporation is authorized to issue more than one class of stock or more than one series of any class, then the powers, the designations, the preferences, and the relative, participating, optional or other special rights of each class of stock or series thereof and the qualifications, limitations or restrictions of such preferences and/or rights shall be set forth in full or summarized on the face or back of the certificate that the corporation shall issue to represent such class or series of stocks provided, however, that, except as otherwise provided in Section 202 of the General Corporation Law of Delaware, in lieu of the foregoing requirements there may be set forth on the face or back of the certificate that the corporation shall issue to represent such class or series of stock a statement that the corporation will furnish without charge to each stockholder who so requests the powers, the designations, the preferences, and the relative, participating, optional or other special rights of each class of stock or series thereof and the qualifications, limitations or restrictions of such preferences and/or rights.
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8.6. LOST CERTIFICATES
Except as provided in this Section 8.6, no new certificates for shares shall be issued to replace a previously issued certificate unless the latter is surrendered to the corporation and cancelled at the same time. The board of directors may, in case any share certificate or certificate for any other security is lost, stolen or destroyed, authorize the issuance of replacement certificates on such terms and conditions as the board may require; the board may require indemnification of the corporation secured by a bond or other adequate security sufficient to protect the corporation against any claim that may be made against it, including any expense or liability, on account of the alleged loss, theft or destruction of the certificate or the issuance of the replacement certificate.
8.7. FISCAL YEAR
The fiscal year of the corporation shall end on August 31 or such other date as shall be fixed by resolution of the board of directors from time to time.
8.8. CONSTRUCTION; DEFINITIONS
Unless the context requires otherwise, the general provisions, rules of construction, and definitions in the General Corporation Law of Delaware shall govern the construction of these bylaws. Without limiting the generality of this provision, the singular number includes the plural, the plural number includes the singular, and the term person includes both a corporation and a natural person.
8.9. FORUM FOR ADJUDICATION OF DISPUTES
Unless the corporation consents in writing to the selection of an alternative forum, the sole and exclusive forum shall be the Court of Chancery of the State of Delaware (or, if the Court of Chancery does not have jurisdiction, the federal district court for the District of Delaware) for (a) any derivative action or proceeding brought on behalf of the corporation, (b) any action asserting a claim of breach of a fiduciary duty owed by any director, officer or other employee of the corporation to the corporation or the corporations stockholders, (c) any action asserting a claim arising pursuant to any provision of the Delaware General Corporation Law, or (d) any action asserting a claim governed by the internal affairs doctrine. Any person or entity purchasing or otherwise acquiring any interest in shares of capital stock of the corporation shall be deemed to have notice of and consented to the provisions of this Section 8.9.
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ARTICLE IX.
AMENDMENTS
The original or other bylaws of the corporation may be adopted, amended or repealed by the stockholders entitled to vote; provided, however, that the corporation may, in its Certificate of Incorporation, confer the power to adopt, amend or repeal bylaws upon the directors. The fact that such power has been so conferred upon the directors shall not divest the stockholders of the power, nor limit their power to adopt, amend or repeal bylaws.
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EXHIBIT 31.1
CERTIFICATIONS
I, Mark T. Mondello, certify that:
1. | I have reviewed this quarterly report on Form 10-Q of Jabil Inc.; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrants other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a 15 (e) and 15d 15 (e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a 15(f) and 15d 15(f)) for the registrant and have: |
a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c) | Evaluated the effectiveness of the registrants disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d) | Disclosed in this report any change in the registrants internal control over financial reporting that occurred during the registrants most recent fiscal quarter (the registrants fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrants internal control over financial reporting; and |
5. | The registrants other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrants auditors and the audit committee of the registrants board of directors (or persons performing the equivalent functions): |
a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrants ability to record, process, summarize and report financial information; and |
b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants internal control over financial reporting. |
Date: June 30, 2017 |
/s/ MARK T. MONDELLO | |||||
Mark T. Mondello | ||||||
Chief Executive Officer |
EXHIBIT 31.2
CERTIFICATIONS
I, Forbes I.J. Alexander, certify that:
1. | I have reviewed this quarterly report on Form 10-Q of Jabil Inc.; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrants other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a 15 (e) and 15d 15 (e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a 15(f) and 15d 15(f)) for the registrant and have: |
a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c) | Evaluated the effectiveness of the registrants disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d) | Disclosed in this report any change in the registrants internal control over financial reporting that occurred during the registrants most recent fiscal quarter (the registrants fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrants internal control over financial reporting; and |
5. | The registrants other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrants auditors and the audit committee of the registrants board of directors (or persons performing the equivalent functions): |
a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrants ability to record, process, summarize and report financial information; and |
b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants internal control over financial reporting. |
Date: June 30, 2017 |
/s/ FORBES I.J. ALEXANDER | |||||
Forbes I.J. Alexander | ||||||
Chief Financial Officer |
EXHIBIT 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO SECTION 906
OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Jabil Inc. (the Company) on Form 10-Q for the fiscal quarter ended May 31, 2017 as filed with the Securities and Exchange Commission on the date hereof (the Form 10-Q), I, Mark T. Mondello, Chief Executive Officer of the Company, hereby certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
(1) The Form 10-Q fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m or 78o(d)); and
(2) The information contained in the Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of the Company.
Date: June 30, 2017 |
/s/ MARK T. MONDELLO | |||||
Mark T. Mondello | ||||||
Chief Executive Officer |
EXHIBIT 32.2
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO SECTION 906
OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Jabil Inc. (the Company) on Form 10-Q for the fiscal quarter ended May 31, 2017 as filed with the Securities and Exchange Commission on the date hereof (the Form 10-Q), I, Forbes I.J. Alexander, Chief Financial Officer of the Company, hereby certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:
(1) The Form 10-Q fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m or 78o(d)); and
(2) The information contained in the Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of the Company.
Date: June 30, 2017 |
/s/ FORBES I.J. ALEXANDER | |||||
Forbes I.J. Alexander | ||||||
Chief Financial Officer |
Document and Entity Information - shares |
9 Months Ended | |
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May 31, 2017 |
Jun. 21, 2017 |
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Document And Entity Information [Abstract] | ||
Document Type | 10-Q | |
Amendment Flag | false | |
Document Period End Date | May 31, 2017 | |
Document Fiscal Year Focus | 2017 | |
Document Fiscal Period Focus | Q3 | |
Trading Symbol | JBL | |
Entity Registrant Name | JABIL INC | |
Entity Central Index Key | 0000898293 | |
Current Fiscal Year End Date | --08-31 | |
Entity Filer Category | Large Accelerated Filer | |
Entity Common Stock, Shares Outstanding | 179,242,687 |
CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($) $ in Thousands |
May 31, 2017 |
Aug. 31, 2016 |
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Statement of Financial Position [Abstract] | ||
Accounts receivable, allowance for doubtful accounts | $ 14,267 | $ 11,094 |
Property, plant and equipment, accumulated depreciation | 3,024,934 | 2,721,972 |
Intangible assets, accumulated amortization | $ 259,444 | $ 232,618 |
Preferred stock, par value | $ 0.001 | $ 0.001 |
Preferred stock, shares authorized | 10,000,000 | 10,000,000 |
Preferred stock, shares issued | ||
Preferred stock, shares outstanding | ||
Common stock, par value | $ 0.001 | $ 0.001 |
Common stock, shares authorized | 500,000,000 | 500,000,000 |
Common stock, shares issued | 252,656,479 | 249,763,699 |
Common stock, shares outstanding | 179,463,376 | 186,998,472 |
Treasury stock, shares | 73,193,103 | 62,765,227 |
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($) shares in Thousands, $ in Thousands |
3 Months Ended | 9 Months Ended | ||
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May 31, 2017 |
May 31, 2016 |
May 31, 2017 |
May 31, 2016 |
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Income Statement [Abstract] | ||||
Net revenue | $ 4,489,557 | $ 4,310,752 | $ 14,040,092 | $ 13,922,323 |
Cost of revenue | 4,163,142 | 3,989,665 | 12,920,267 | 12,718,268 |
Gross profit | 326,415 | 321,087 | 1,119,825 | 1,204,055 |
Operating expenses: | ||||
Selling, general and administrative | 233,884 | 239,646 | 665,879 | 716,097 |
Research and development | 7,274 | 7,675 | 21,982 | 24,431 |
Amortization of intangibles | 9,174 | 9,711 | 26,262 | 26,150 |
Restructuring and related charges | 32,700 | 4,460 | 113,529 | 8,349 |
Operating income | 43,383 | 59,595 | 292,173 | 429,028 |
Other expense | 15,821 | 2,412 | 23,872 | 6,346 |
Interest income | (3,663) | (2,302) | (8,407) | (6,653) |
Interest expense | 35,443 | 35,212 | 102,087 | 102,509 |
(Loss) income before income tax | (4,218) | 24,273 | 174,621 | 326,826 |
Income tax expense | 21,481 | 18,434 | 93,495 | 110,639 |
Net (loss) income | (25,699) | 5,839 | 81,126 | 216,187 |
Net (loss) income attributable to noncontrolling interests, net of tax | (418) | 626 | (2,285) | 159 |
Net (loss) income attributable to Jabil Inc. | $ (25,281) | $ 5,213 | $ 83,411 | $ 216,028 |
Basic: | ||||
Net income [per share] | $ (0.14) | $ 0.03 | $ 0.46 | $ 1.13 |
Diluted: | ||||
Net income [per share] | $ (0.14) | $ 0.03 | $ 0.45 | $ 1.12 |
Weighted average shares outstanding: | ||||
Basic | 181,038 | 191,206 | 182,982 | 190,841 |
Diluted | 181,038 | 193,069 | 186,621 | 193,058 |
Cash dividends declared per common share | $ 0.08 | $ 0.08 | $ 0.24 | $ 0.24 |
Basis of Presentation |
9 Months Ended |
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May 31, 2017 | |
Basis of Presentation [Abstract] | |
Basis of Presentation | 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. 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, 2016. Results for the nine months ended May 31, 2017 are not necessarily an indication of the results that may be expected for the full fiscal year ending August 31, 2017. |
Earnings Per Share and Dividends |
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Earnings Per Share and Dividends [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Earnings Per Share and Dividends | 2. Earnings Per Share and Dividends a. Earnings Per Share The Company calculates its basic earnings per share by dividing net income attributable to Jabil Inc. 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. To the extent these securities are anti-dilutive, they are excluded from the calculation of diluted earnings per share. No potential common shares relating to outstanding stock awards have been included in the computation of diluted earnings per share as a result of the Company’s net loss for the three months ended May 31, 2017. The Company accordingly excluded from the computation of diluted earnings per share 4,230,665 restricted stock awards and 513,693 stock appreciation rights for the three months ended May 31, 2017. For the nine months ended May 31, 2017, 334,152 stock appreciation rights were excluded from the computation of diluted earnings per share as their effect would have been anti-dilutive. For the three months and nine months ended May 31, 2016, 2,124,084 and 2,454,562 stock appreciation rights, respectively, were excluded from the computation of diluted earnings per share as their effect would have been anti-dilutive. b. Dividends The following table sets forth cash dividends declared by the Company to common stockholders during the nine months ended May 31, 2017 and 2016 (in thousands, except for per share data):
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Stock-Based Compensation |
9 Months Ended |
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May 31, 2017 | |
Stock-Based Compensation [Abstract] | |
Stock-Based Compensation | 4. Stock-Based Compensation The Company recognizes stock-based compensation expense, reduced for estimated forfeitures, on a straight-line basis over the requisite service period of the award, which is generally the vesting period for outstanding stock awards. The Company recorded $18.4 million and $33.4 million of stock-based compensation expense gross of tax effects, which is included in selling, general and administrative expenses within the Condensed Consolidated Statements of Operations for the three months and nine months ended May 31, 2017, respectively. During the first quarter of fiscal year 2017, the Company recorded a $21.0 million reversal to stock-based compensation expense due to decreased expectations for the vesting of certain performance-based restricted stock awards. The Company recorded tax benefits related to the stock-based compensation expense of $0.3 million and $0.7 million, which is included in income tax expense within the Condensed Consolidated Statements of Operations for the three months and nine months ended May 31, 2017, respectively. The Company recorded $13.4 million and $58.5 million of stock-based compensation expense gross of tax effects, which is included in selling, general and administrative expenses within the Condensed Consolidated Statements of Operations for the three months and nine months ended May 31, 2016, respectively. The Company recorded tax benefits related to the stock-based compensation expense of $0.1 million and $0.8 million, which is included in income tax expense within the Condensed Consolidated Statements of Operations for the three months and nine months ended May 31, 2016, respectively. Certain key employees have been granted time-based, performance-based and market-based restricted stock awards. The time-based restricted awards granted generally vest on a graded vesting schedule over three years. The performance-based restricted awards generally vest on a cliff vesting schedule over three to five years and provide a range of vesting possibilities of up to a maximum of 100% or 150%, depending on the specified performance condition and the level of achievement obtained. The market-based restricted awards generally vest on a cliff vesting schedule over three years and provide a range of vesting possibilities of up to a maximum of 200%. The market-based awards have a vesting condition that is tied to the Company’s stock performance in relation to the Standard and Poor’s (S&P) Super Composite Technology Hardware and Equipment Index. The market conditions are considered in the grant date fair value using a Monte Carlo valuation model, which utilizes multiple input variables to determine the probability of the Company achieving the specified market conditions. During the nine months ended May 31, 2017 and 2016, the Company awarded approximately 1.8 million and 2.6 million time-based restricted stock units, respectively, 0.6 million and 1.3 million performance-based restricted stock units, respectively and 0.4 million and 0.4 million market-based stock units, respectively. At May 31, 2017, there was $58.5 million of total unrecognized stock-based compensation expense related to restricted stock awards. This expense is expected to be recognized over a weighted-average period of 1.5 years. |
Concentration of Risk and Segment Data |
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Concentration of Risk and Segment Data [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Concentration of Risk and Segment Data | 5. Concentration of Risk and Segment Data a. Concentration of Risk Sales of the Company’s products are concentrated among specific customers. During the nine months ended May 31, 2017, the Company’s five largest customers accounted for approximately 46% 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. Almost all of the products manufactured by the Company require one or more components that are available from only a single source. Production levels for a portion of the DMS segment are subject to seasonal influences. The Company may realize greater net revenue during its first fiscal quarter due to higher demand for consumer related products manufactured in the DMS segment during the holiday selling season. Therefore, quarterly results should not be relied upon as necessarily being indicative of results for the entire fiscal year. b. Segment Data Operating segments are defined as components of an enterprise that engage in business activities from which they may earn revenues and incur expenses; for which separate financial information is available; and whose operating results are regularly reviewed by the chief operating decision maker to assess the performance of the individual segment and make decisions about resources to be allocated to the segment. The Company derives its revenue from providing comprehensive electronics design, production and product management services. The chief operating decision maker evaluates performance and allocates resources on a segment basis. The Company’s operating segments consist of two segments – EMS and DMS, which are also the Company’s reportable segments. The EMS segment is focused around leveraging IT, supply chain design and engineering, technologies largely centered on core electronics, sharing of the Company’s large scale manufacturing infrastructure and the ability to serve a broad range of end markets. The EMS segment includes customers primarily in the automotive and transportation, capital equipment, computing and storage, digital home, industrial and energy, networking and telecommunications, point of sale and printing industries. The DMS segment is focused on providing engineering solutions and a focus on material sciences and technologies. The DMS segment includes customers primarily in the consumer lifestyles and wearable technologies, defense and aerospace, healthcare, mobility and packaging industries. 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. Segment income does not include amortization of intangibles, stock-based compensation expense and related charges, restructuring and related charges, distressed customer charges, acquisition costs and certain purchase accounting adjustments, loss on disposal of subsidiaries, settlement of receivables and related charges, impairment of notes receivable and related charges, goodwill impairment charges, income (loss) from discontinued operations, gain (loss) on sale of discontinued operations, other expense, interest income, interest expense, income tax expense or adjustment for net income (loss) attributable to noncontrolling interests. Total segment assets are defined as accounts receivable, inventories, net customer-related property, plant and equipment, intangible assets net of accumulated amortization and goodwill. All other non-segment assets are reviewed on a global basis by management. Transactions between operating segments are generally recorded at amounts that approximate those at which we would transact with third parties.
As of May 31, 2017, the Company operated in 28 countries worldwide. Sales to unaffiliated customers are based on the Company’s location that maintains the customer relationship and transacts the external sale. Total foreign net revenue represented 90.6% and 91.3% of net revenue during the three months and nine months ended May 31, 2017, respectively, compared to 90.4% and 91.0% of net revenue during the three months and nine months ended May 31, 2016, respectively. |
Notes Payable, Long-Term Debt and Capital Lease Obligations |
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Notes Payable, Long-Term Debt and Capital Lease Obligations [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Notes Payable, Long-Term Debt and Capital Lease Obligations | 6. Notes Payable, Long-Term Debt and Capital Lease Obligations
The $400.0 million of 8.250% senior unsecured notes, $400.0 million of 5.625% senior unsecured notes, $500.0 million of 4.700% senior unsecured notes and $300.0 million of 4.900% senior unsecured notes outstanding are carried at the principal amount of each note, less any unamortized discount and unamortized debt issuance costs. The estimated fair values of the Company's publicly traded debt, including the 8.250%, 5.625% and 4.700% senior notes, were approximately $419.1 million, $433.9 million and $531.9 million respectively, at May 31, 2017. The fair value estimates are based upon observable market data (Level 2 criteria). The estimated fair value of the Company's private debt, the 4.900% senior notes, was approximately $313.1 million, at May 31, 2017. This fair value estimate is based on the Company's indicative borrowing cost derived from discounted cash flows (Level 3 criteria). The carrying amounts of borrowings under credit facilities and under loans approximates fair value as interest rates on these instruments approximates current market rates. |
Trade Accounts Receivable Securitization and Sale Programs |
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Trade Accounts Receivable Securitization and Sale Programs [Abstract] | |
Trade Accounts Receivable Securitization and Sale Programs | 7. Trade Accounts Receivable Securitization and Sale Programs The Company regularly sells designated pools of trade accounts receivable under two asset-backed securitization programs and four uncommitted trade accounts receivable sale programs (collectively referred to herein as the “programs”). The Company continues servicing the receivables sold and in exchange receives a servicing fee under each of the programs. Servicing fees related to each of the programs recognized during the three months and nine months ended May 31, 2017 and 2016 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. Transfers of the receivables under the programs are accounted for as sales and, accordingly, net receivables sold under the programs 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. a. Asset-Backed Securitization Programs The Company continuously sells designated pools of trade accounts receivable, at a discount, under its North American asset-backed securitization program, currently scheduled to expire on October 20, 2017, and its foreign asset-backed securitization program, currently scheduled to expire on May 1, 2018, (collectively referred to herein as the “asset-backed securitization programs”) to special purpose entities, which in turn sell 100% of the receivables to conduits administered by unaffiliated financial institutions (for the North American asset-backed securitization program) and to an unaffiliated financial institution and a conduit administered by an unaffiliated financial institution (for the foreign asset-backed securitization program). The special purpose entity in the North American asset-backed securitization program is a wholly-owned subsidiary of the Company. 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 entities associated with these asset-backed securitization programs are included in the Company’s Condensed Consolidated Financial Statements. Any portion of the purchase price for the receivables which is not paid in cash upon the sale taking place is recorded as a deferred purchase price receivable, which is paid from available cash as payments on the receivables are collected. Net cash proceeds of up to a maximum of $200.0 million and $400.0 million for the North American and foreign asset-backed securitization programs, respectively, are available at any one time. The foreign asset-backed securitization program was amended to increase the facility limit from $275.0 million to $400.0 million, effective February 13, 2017. In connection with the asset-backed securitization programs, the Company sold $2.1 billion and $6.6 billion of eligible trade accounts receivable during the three months and nine months ended May 31, 2017, respectively. In exchange, the Company received cash proceeds of $1.6 billion and $6.1 billion during the three months and nine months ended May 31, 2017, respectively, (which represented proceeds from collections reinvested in revolving-period transfers as there were no new transfers during these periods) and a deferred purchase price receivable. The Company sold $2.0 billion and $5.8 billion of eligible trade accounts receivable during the three months and nine months ended May 31, 2016, respectively. In exchange, the Company received cash proceeds of $1.5 billion and $5.3 billion during the three months and nine months ended May 31, 2016, respectively, (of which approximately $0.0 million and $3.0 million, respectively, represented new transfers and the remainder represented proceeds from collections reinvested in revolving-period transfers) and a deferred purchase price receivable. At May 31, 2017 and 2016, the deferred purchase price receivables recorded in connection with the asset-backed securitization programs totaled approximately $501.3 million and $517.3 million, respectively. The Company recognized pretax losses on the sales of receivables under the asset-backed securitization programs of approximately $2.5 million and $6.6 million during the three months and nine months ended May 31, 2017, respectively, and approximately $1.3 million and $3.5 million during the three months and nine months ended May 31, 2016, respectively, which are recorded to other expense within the Condensed Consolidated Statements of Operations. The deferred purchase price receivables recorded under the asset-backed securitization programs are recorded initially at fair value as prepaid expenses and other current assets on the Condensed Consolidated Balance Sheets and are valued using unobservable inputs (Level 3 inputs), primarily discounted cash flows, and due to their credit quality and short-term maturity the fair values approximated book values. The unobservable inputs consist of estimated credit losses and estimated discount rates, which both have an immaterial impact on the fair value calculations of the deferred purchase price receivables. b. Trade Accounts Receivable Sale Programs In connection with four separate trade accounts receivable sale programs with unaffiliated financial institutions, the Company may elect to sell, at a discount, on an ongoing basis, up to a maximum of $650.0 million, $150.0 million, 800.0 million Chinese yuan renminbi (“CNY”) and $100.0 million, respectively, of specific trade accounts receivable at any one time. The $650.0 million trade accounts receivable sale program is an uncommitted facility that will expire on August 31, 2017 (as the agreement was automatically extended on October 31, 2016), although any party may elect to terminate the agreement upon 15 days prior notice. The $150.0 million trade accounts receivable sale program is an uncommitted facility that will expire on August 31, 2017 unless renewed. The 800.0 million CNY trade accounts receivable sale program is an uncommitted facility that was entered into on February 15, 2017 and is scheduled to expire on February 15, 2018 unless renewed. The $100.0 million trade accounts receivable sale program is an uncommitted facility that is scheduled to expire on October 31, 2017 (as the agreement was automatically extended on October 31, 2016), although any party may elect to terminate the agreement upon 15 days prior notice. The $100.0 million trade accounts receivable sale program will be automatically extended until November 1, 2018, unless any party gives no less than 30 days prior notice that the agreement should not be extended. During the three months and nine months ended May 31, 2017, the Company sold $0.5 billion and $2.2 billion of trade accounts receivable under these programs, respectively, compared to $0.7 billion and $3.0 billion during the three months and nine months ended May 31, 2016, respectively. In exchange, the Company received cash proceeds of $0.5 billion and $2.2 billion during the three months and nine months ended May 31, 2017, respectively, compared to $0.7 billion and $2.9 billion during the three months and nine months ended May 31, 2016, respectively. The resulting losses on the sales of trade accounts receivable were approximately $1.5 million and $4.1 million during the three months and nine months ended May 31, 2017, respectively, compared to approximately $1.1 million and $3.1 million during the three months and nine months ended May 31, 2016, respectively, and were recorded to other expense within the Condensed Consolidated Statements of Operations. |
Accumulated Other Comprehensive Income |
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Accumulated Other Comprehensive Income [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Accumulated Other Comprehensive Income | 8. Accumulated Other Comprehensive Income The following table sets forth the changes in accumulated other comprehensive income (“AOCI”), net of tax, by component from August 31, 2016 to May 31, 2017 (in thousands):
The portion of AOCI reclassified into earnings during the nine months ended May 31, 2017 for foreign currency translation adjustments was not material. The portion of AOCI reclassified into earnings during the nine months ended May 31, 2017 for derivative instruments was primarily classified as a component of cost of revenue. The portion of AOCI reclassified into earnings during the nine months ended May 31, 2017 for available for sale securities was due to an other than temporary impairment on securities and was classified as a component of other expense. The tax benefit (expense) on the derivative instruments component of AOCI, including reclassification adjustments, is not material for the three months and nine months ended May 31, 2017. There was no tax benefit (expense) on the foreign currency translation adjustment and the available for sale securities components of AOCI, including reclassification adjustments, for the three months and nine months ended May 31, 2017. |
Postretirement and Other Employee Benefits |
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Postretirement and Other Employee Benefits [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Postretirement and Other Employee Benefits | 9. Postretirement and Other Employee Benefits The Company sponsors defined benefit pension plans in several countries in which it operates. The pension obligations relate primarily to the following: (a) a funded retirement plan in the United Kingdom and (b) both funded and unfunded retirement plans, mainly in Austria, France, Germany, The Netherlands, Poland, and Taiwan, which provide benefits based upon years of service and compensation at retirement.
During the nine months ended May 31, 2017, the Company made contributions of approximately $6.4 million to its defined benefit pension plans. The Company expects to make total cash contributions of between $6.8 million and $7.6 million to its funded pension plans during the fiscal year ended August 31, 2017. |
Commitments and Contingencies |
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Commitments and Contingencies [Abstract] | |
Commitments and Contingencies | 10. Commitments and Contingencies 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. 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 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 a Revenue Agent’s Report on April 19, 2017. The proposed adjustments from both examination periods relate primarily to U.S. taxation of certain intercompany transactions. If the IRS ultimately prevails in its positions, the Company’s income tax payment due for the fiscal years 2009 through 2011 and fiscal years 2012 through 2014 would be approximately $28.6 million and $5.3 million, respectively, after utilization of tax loss carry forwards available through fiscal year 2014. Also, the IRS has proposed interest and penalties with respect to fiscal years 2009 through 2011. The IRS may make similar claims in future audits with respect to these types of transactions. At this time, anticipating the amount of any future IRS proposed adjustments, interest, and penalties is not practicable. The Company disagrees with the proposed adjustments and intends to vigorously contest these matters through the applicable IRS administrative and judicial procedures, as appropriate. As the final resolution of the proposed adjustments remains uncertain, the Company continues to provide for the uncertain tax positions based on the more likely than not standard. While the resolution of the issues may result in tax liabilities, interest and penalties, which are significantly higher than the amounts accrued for these matters, management currently believes that the resolution will not have a material adverse effect on the Company’s financial position, results of operations or cash flows. Despite this belief, an unfavorable resolution could have a material adverse effect on the Company’s results of operations and financial condition. |
Derivative Financial Instruments and Hedging Activities |
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Derivative Financial Instruments and Hedging Activities [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Derivative Financial Instruments and Hedging Activities | 11. 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 fluctuation risk and interest rate risk. All derivative instruments are recorded gross on the Condensed Consolidated Balance Sheets at their respective fair values. The accounting for changes in the fair value of a derivative instrument depends on the intended use and designation of the derivative instrument. For derivative instruments that are designated and qualify as a fair value hedge, the gain or loss on the derivative and the offsetting gain or loss on the hedged item attributable to the hedged risk are recognized in current earnings. For derivative instruments that are designated and qualify as a cash flow hedge, the effective portion of the gain or loss on the derivative instrument is initially reported as a component of AOCI, net of tax, and is subsequently reclassified into the line item within the Condensed Consolidated Statements of Operations in which the hedged items are recorded in the same period in which the hedged item affects earnings. The ineffective portion of the gain or loss is recognized immediately in current earnings. For derivative instruments that are not designated as hedging instruments, gains and losses from changes in fair values are recognized in earnings. Cash receipts and cash payments related to derivative instruments are recorded in the same category as the cash flows from the items being hedged on the Condensed Consolidated Statements of Cash Flows. a. 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 $178.7 million and $323.3 million at May 31, 2017 and August 31, 2016, 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, 2017 and February 28, 2018. 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 at May 31, 2017 and August 31, 2016, was $1.7 billion and $1.7 billion, respectively. The following table presents the Company’s assets and liabilities related to forward foreign exchange contracts measured at fair value on a recurring basis as of May 31, 2017, aggregated by the level in the fair-value hierarchy in which those measurements are classified (in thousands):
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. The following table presents the fair values of the Company’s derivative instruments located on the Condensed Consolidated Balance Sheets utilized for foreign currency risk management purposes at May 31, 2017 and August 31, 2016 (in thousands):
As of May 31, 2017 and August 31, 2016, the Company also included gains and losses in AOCI related to changes in fair value of its derivatives utilized for foreign currency risk management purposes and designated as hedging instruments. These gains and losses were not material and the portion that is expected to be reclassified into earnings during the next 12 months will be classified as components of net revenue, cost of revenue and selling, general and administrative expense. 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. The Company recognized gains and losses in earnings related to changes in fair value of derivatives utilized for foreign currency risk management purposes and not designated as hedging instruments during the three months and nine months ended May 31, 2017 and 2016. These amounts were not material and were recognized as components of cost of revenue. b. 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 During the fourth quarter of fiscal year 2007, the Company entered into forward interest rate swap transactions to hedge the fixed interest rate payments for an anticipated debt issuance, which was the issuance of the 8.250% Senior Notes. The swaps were accounted for as a cash flow hedge and had a notional amount of $400.0 million. Concurrently with the pricing of the 8.250% Senior Notes, the Company settled the swaps by its payment of $43.1 million. The ineffective portion of the swaps was immediately recorded to interest expense within the Condensed Consolidated Statements of Operations. The effective portion of the swaps is recorded on the Company’s Condensed Consolidated Balance Sheets as a component of AOCI and is being amortized to interest expense within the Company’s Condensed Consolidated Statements of Operations over the life of the 8.250% Senior Notes, which is through March 15, 2018. The effective portions of the swaps amortized to interest expense during the three months and nine months ended May 31, 2017 and 2016 were not material. Existing losses related to interest rate risk management hedging arrangements that are expected to be reclassified into earnings during the next 12 months are not material. During the fourth quarter of fiscal year 2016, the Company entered into forward starting swap transactions to hedge the fixed interest rate payments for an anticipated debt issuance. The forward starting swaps have an aggregate notional amount of $200.0 million and have been designated as hedging instruments and accounted for as cash flow hedges. The forward starting swaps are scheduled to expire on March 15, 2018. If the anticipated debt issuance occurs before March 15, 2018, the contracts will be terminated simultaneously with the debt issuance. The contracts will be settled with the respective counterparties on a net basis at the time of termination or expiration. Changes in the fair value of the forward starting swap transactions are recorded on the Company’s Condensed Consolidated Balance Sheets as a component of AOCI. During the fourth quarter of fiscal year 2016, the Company entered into interest rate swap transactions to hedge the variable interest rate payments for the Term Loan Facility. In connection with this transaction, the Company will pay interest based upon a fixed rate as agreed upon with the respective counterparties and receive variable rate interest payments based on the one-month LIBOR. The interest rate swaps have an aggregate notional amount of $200.0 million and have been designated as hedging instruments and accounted for as cash flow hedges. The interest rate swaps were effective on September 30, 2016 and are scheduled to expire on June 30, 2019. The contracts will be settled with the respective counterparties on a net basis at each settlement date. Changes in the fair value of the interest rate swap transactions are recorded on the Company’s Condensed Consolidated Balance Sheets as a component of AOCI. |
Restructuring and Related Charges |
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Restructuring and Related Charges [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Restructuring and Related Charges | 12. Restructuring and Related Charges a. 2017 Restructuring Plan In conjunction with the restructuring plan that was approved by the Company’s Board of Directors on September 15, 2016 (the “2017 Restructuring Plan”), the Company charged $31.4 million and $108.9 million of restructuring and related charges to the Condensed Consolidated Statement of Operations during the three months and nine months ended May 31, 2017, respectively. The 2017 Restructuring Plan is intended to better align the Company’s global capacity and administrative support infrastructure in order to further optimize organizational effectiveness. This action includes headcount reductions across the Company’s Selling, General and Administrative cost base and capacity realignment in higher cost locations. The restructuring and related charges during the three months and nine months ended May 31, 2017 include cash costs of $17.3 million and $43.3 million related to employee severance and benefit costs, respectively, $1.2 million and $5.6 million related to lease costs, respectively, $1.1 million and $1.4 million of other related costs, respectively, as well as non-cash costs related to asset write-off costs of $11.8 million and $58.6 million, respectively. The Company currently expects to recognize approximately $195.0 million in pre-tax restructuring and other related costs over the course of the Company’s fiscal years 2017 and 2018 under the 2017 Restructuring Plan. The restructuring and related charges are expected to include $55.0 million to $75.0 million of employee severance and benefit costs; $110.0 million to $130.0 million of asset write-off costs; and $10.0 million of contract termination costs and other related costs. Since the inception of the 2017 Restructuring Plan, a total of $108.9 million of restructuring and related costs have been recognized. Of the $108.9 million recognized to date, $19.1 million was allocated to the EMS segment, $65.9 million was allocated to the DMS segment and $23.9 million was not allocated to a segment. The remaining $86.1 million of the restructuring and related costs expected to be recognized reflects the Company’s intention only and restructuring decisions, and the timing of such decisions, at certain plants are still subject to the finalization of timetables for the transition of functions and consultation with the Company’s employees and their representatives. The tables below set forth the significant components and activity in the 2017 Restructuring Plan during the three months and nine months ended May 31, 2017 (in thousands):
The tables below set forth the significant components and activity in the 2017 Restructuring Plan by reportable segment during the three months and nine months ended May 31, 2017 (in thousands):
b. 2013 Restructuring Plan In conjunction with the restructuring plan that was approved by the Company’s Board of Directors in fiscal year 2013 (the “2013 Restructuring Plan”), the Company charged $1.3 million and $4.7 million of restructuring and related charges to the Condensed Consolidated Statement of Operations during the three months and nine months ended May 31, 2017, respectively, compared to $4.5 million and $8.3 million during the three months and nine months ended May 31, 2016, respectively. The 2013 Restructuring Plan is intended to better align the Company’s manufacturing capacity in certain geographies and to reduce the Company’s worldwide workforce in order to reduce operating expenses. The restructuring and related charges during the three months and nine months ended May 31, 2017 include cash costs of $0.8 million and $3.4 million related to employee severance and benefit costs, respectively, and $0.5 million and $1.2 million of other related costs, respectively, as well as non-cash costs related to asset write-off costs of $0.0 million and $0.1 million, respectively. The restructuring and related charges during the three months and nine months ended May 31, 2016 include cash costs of $4.2 million and $7.7 million related to employee severance and benefit costs, respectively, and $0.3 million and $0.6 million of other related costs, respectively. The Company currently expects to recognize approximately $179.0 million in pre-tax restructuring and other related costs over the course of the Company’s fiscal years 2013 through 2018 under the 2013 Restructuring Plan. Since the inception of the 2013 Restructuring Plan, a total of $166.5 million of restructuring and related costs have been recognized. Of the $166.5 million recognized to date, $128.8 million was allocated to the EMS segment, $28.8 million was allocated to the DMS segment and $8.9 million was not allocated to a segment. A majority of the total restructuring costs are related to employee severance and benefit arrangements. The charges related to the 2013 Restructuring Plan, excluding asset write-off costs, are currently expected to result in cash expenditures of approximately $157.4 million that have been or will be payable over the course of the Company’s fiscal years 2013 through 2018. The remaining $12.5 million of the restructuring and related costs expected to be recognized reflects the Company’s intention only and restructuring decisions, and the timing of such decisions, at certain plants are still subject to the finalization of timetables for the transition of functions and consultation with the Company’s employees and their representatives. The tables below set forth the significant components and activity in the 2013 Restructuring Plan during the three months and nine months ended May 31, 2017 and 2016 (in thousands):
The tables below set forth the significant components and activity in the 2013 Restructuring Plan by reportable segment during the three months and nine months ended May 31, 2017 and 2016 (in thousands):
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Business Acquisitions |
9 Months Ended |
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May 31, 2017 | |
Business Acquisitions [Abstract] | |
Business Acquisitions [Text Block] | 13. Business Acquisitions Fiscal year 2017 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 price of the acquisition totaled approximately $31.4 million in cash. The acquisition has been 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 Company is currently evaluating the fair values of the assets and liabilities related to the business combination. The preliminary estimates and measurements are, therefore, subject to change during the measurement period for intangible assets and tax adjustments. 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 nine months ended May 31, 2017. The results of operations of the acquired business were included in the Company’s condensed 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. Fiscal year 2016 On November 25, 2015, the Company entered into a master purchase agreement for certain assets and liabilities of various legal entities, collectively referred to as “Hanson”. On January 13, 2016, the Company completed the acquisition of the assets for approximately $139.2 million in cash, plus the assumption of certain liabilities of $230.0 million (such liabilities were subsequently paid in February 2016 and classified in our Condensed Consolidated Statement of Cash Flows as a component of cash flows from operating activities), with the exception of the real property, which closed on July 7, 2016, for approximately $33.3 million. Hanson is engaged in the business of manufacturing certain parts for customers in the DMS segment. The acquisition of certain Hanson assets has been accounted for as a business combination using the acquisition method of accounting. Assets acquired of $406.4 million, including $276.8 million in property, plant and equipment, $129.6 million in goodwill and intangible assets assigned to customer relationships, liabilities assumed of $230.0 million and $3.9 million of deferred tax liabilities 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 was recorded to goodwill and was fully allocated to the DMS segment. None of the goodwill is currently expected to be deductible for income tax purposes. A customer relationship was valued using the multi-period excess earnings method under the income approach. The results of operations were included in the Company’s condensed consolidated financial results beginning on January 13, 2016. Pro forma information has not been provided as the acquisition of Hanson is not deemed to be significant. During the first quarter of fiscal year 2016, the Company completed two additional acquisitions (Inala Technologies Limited and various legal entities collectively referred to as “Shemer Companies”) which were not deemed to be significant individually or in the aggregate. The acquired businesses expanded the Company’s capabilities in capital equipment, networking and telecommunications, and printing. The aggregate purchase price of these acquisitions totaled approximately $72.3 million in cash. These two acquisitions have been accounted for as business combinations using the acquisition method of accounting. Assets acquired of $92.2 million, including $19.3 million in goodwill and $31.4 million in intangible assets, and liabilities assumed of $19.9 million were recorded at their estimated fair values as of the acquisition dates. The excess of the purchase prices over the fair values of the acquired assets and assumed liabilities of $19.3 million was recorded to goodwill and was fully allocated to the EMS segment. None of the goodwill is currently expected to be deductible for income tax purposes. The results of operations of the acquired businesses were included in the Company’s condensed consolidated financial results beginning on the date of the acquisitions. Pro forma information has not been provided as the acquisitions are not deemed to be significant individually or in the aggregate. |
New Accounting Guidance |
9 Months Ended |
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May 31, 2017 | |
New Accounting Guidance [Abstract] | |
New Accounting Guidance | 14. New Accounting Guidance Recently Issued Accounting Guidance During the third quarter of fiscal year 2014, the FASB issued an accounting standard which will supersede existing revenue recognition guidance under current U.S. GAAP. The new standard is a comprehensive new revenue recognition model that requires a company to recognize revenue to depict the transfer of goods or services to a customer at an amount that reflects the consideration it expects to receive in exchange for those goods or services. During the fourth quarter of fiscal year 2015, the FASB issued an accounting standard deferring the effective date of this accounting guidance by one year. Therefore, the accounting standard is effective for the Company in the first quarter of fiscal year 2019. Companies may use either a full retrospective or a modified retrospective approach to adopt this standard and management is currently evaluating which transition approach to use. The Company is currently in the process of assessing what impact this new standard may have on its Condensed Consolidated Financial Statements. During the second quarter of 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 is effective for the Company beginning in the first quarter of fiscal year 2019. Early application is permitted only for certain provisions, and the update must be applied by means of a cumulative-effect adjustment to the Condensed Consolidated Balance Sheet as of the beginning of the fiscal year of adoption and applied prospectively to equity investments that exist as of the date of adoption of the standard. The Company is currently assessing the impact this new standard may have on its Condensed Consolidated Financial Statements. During the second quarter of 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. Early application of the new standard is permitted and must be adopted using a modified retrospective approach. The adoption of this standard will impact the Company’s Condensed Consolidated Balance Sheet. The Company is currently assessing any other impacts this new standard will have on its Condensed Consolidated Financial Statements. During the fourth quarter of fiscal year 2016, the FASB issued an accounting standard, which replaces the existing incurred loss impairment methodology with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. This guidance is effective for the Company beginning in the first quarter of fiscal year 2021 and early adoption is permitted beginning in the first quarter of fiscal year 2020. This guidance must be applied using a modified retrospective or prospective transition method, depending on the area covered by this accounting standard. The Company is currently assessing the impact this new standard may have on its Condensed Consolidated Financial Statements. During the fourth quarter of 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 guidance is effective for the Company beginning in the first quarter of fiscal year 2019 and early adoption is permitted. The Company is currently assessing the impact this new standard may have on its Condensed Consolidated Financial Statements. During the first quarter of 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 is effective for the Company beginning in the first quarter of fiscal year 2019 and early adoption is permitted. This guidance should be applied on a modified retrospective basis through a cumulative-effect adjustment directly to retained earnings as of the beginning of the period of adoption. The Company is currently assessing the impact this new standard may have on its Condensed Consolidated Financial Statements. During the second quarter of fiscal year 2017, the FASB issued a new accounting standard that clarifies the definition of a business to assist entities with evaluating whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses. This guidance is effective for the Company beginning in the first quarter of fiscal year 2019 and will be applied on a prospective basis. Early application is permitted for certain transactions. The impact on the Company’s Condensed Consolidated Financial Statements will depend on the facts and circumstances of any specific future transactions. During the second quarter of fiscal year 2017, the FASB issued a new accounting standard to simplify how an entity is required to test goodwill for impairment by eliminating the requirement to calculate the implied fair value of goodwill (i.e., Step 2 of the current goodwill impairment test) to measure a goodwill impairment charge. Goodwill will be considered impaired when the carrying amount of a reporting unit that includes goodwill exceeds its fair value. This guidance is effective for the Company beginning in the first quarter of fiscal year 2021, with early application permitted. The guidance will be applied on a prospective basis. The Company is currently assessing the impact this new standard may have on its Condensed Consolidated Financial Statements. |
Income Taxes |
9 Months Ended |
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May 31, 2017 | |
Income Taxes [Abstract] | |
Income Taxes | 15. Income Taxes The effective tax rate differed from the U.S. federal statutory rate of 35% during the three months and nine months ended May 31, 2017 and 2016 primarily due to: (a) restructuring costs with minimal related tax benefit; (b) income in tax jurisdictions with lower statutory tax rates than the U.S.; (c) tax incentives granted to sites in Brazil, China, Malaysia, Singapore and Vietnam; and (d) losses in tax jurisdictions with existing valuation allowances. The material tax incentives expire at various dates through fiscal year 2021. Such tax incentives are subject to conditions with which the Company expects to continue to comply. |
Subsequent Events |
9 Months Ended |
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May 31, 2017 | |
Subsequent Events [Abstract] | |
Subsequent Events | 16. Subsequent Events The Company has evaluated subsequent events that occurred through the date of the filing of the Company’s third quarter of fiscal year 2017 Form 10-Q. No significant events occurred subsequent to the balance sheet date and prior to the filing date of this report that would have a material impact on the Condensed Consolidated Financial Statements. |
Earnings Per Share and Dividends (Tables) |
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Cash Dividends Declared to Common Stockholders | The following table sets forth cash dividends declared by the Company to common stockholders during the nine months ended May 31, 2017 and 2016 (in thousands, except for per share data):
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Inventories (Tables) |
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Inventories |
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Concentration of Risk and Segment Data (Tables) |
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Reconciliation of Revenue from Segments to Consolidated |
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Reconciliation of Operating Profit (Loss) from Segments to Consolidated |
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Reconciliation of Assets from Segment to Consolidated |
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Notes Payable, Long-Term Debt and Capital Lease Obligations (Tables) |
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Notes Payable, Long-Term Debt and Capital Lease Obligations Outstanding |
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Accumulated Other Comprehensive Income (Tables) |
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Summary of Changes in Accumulated Other Comprehensive Income | The following table sets forth the changes in accumulated other comprehensive income (“AOCI”), net of tax, by component from August 31, 2016 to May 31, 2017 (in thousands):
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Postretirement and Other Employee Benefits (Tables) |
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Information about Net Periodic Benefit Cost for Pension Plans |
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Derivative Financial Instruments and Hedging Activities (Tables) |
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Fair Value of Assets and Liabilities Related to Foreign Forward Exchange Contracts Measured on Recurring Basis | The following table presents the Company’s assets and liabilities related to forward foreign exchange contracts measured at fair value on a recurring basis as of May 31, 2017, aggregated by the level in the fair-value hierarchy in which those measurements are classified (in thousands):
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Fair Value of Derivative Instruments Located on Condensed Consolidated Balance Sheets Utilized for Foreign Currency Risk Management Purposes | The following table presents the fair values of the Company’s derivative instruments located on the Condensed Consolidated Balance Sheets utilized for foreign currency risk management purposes at May 31, 2017 and August 31, 2016 (in thousands):
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Restructuring and Related Charges (Tables) |
9 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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May 31, 2017 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2013 Restructuring Plan | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Restructuring Cost and Reserve [Line Items] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Significant Components and Activity in Restructuring Plan | The tables below set forth the significant components and activity in the 2013 Restructuring Plan during the three months and nine months ended May 31, 2017 and 2016 (in thousands):
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Significant Components and Activity in Restructuring Plan by Reportable Segment | The tables below set forth the significant components and activity in the 2013 Restructuring Plan by reportable segment during the three months and nine months ended May 31, 2017 and 2016 (in thousands):
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2017 Restructuring Plan | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Restructuring Cost and Reserve [Line Items] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Significant Components and Activity in Restructuring Plan | The tables below set forth the significant components and activity in the 2017 Restructuring Plan during the three months and nine months ended May 31, 2017 (in thousands):
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Significant Components and Activity in Restructuring Plan by Reportable Segment | The tables below set forth the significant components and activity in the 2017 Restructuring Plan by reportable segment during the three months and nine months ended May 31, 2017 (in thousands):
|
Earnings Per Share and Dividends (Additional Information) (Details 1) - shares |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
May 31, 2017 |
May 31, 2016 |
May 31, 2017 |
May 31, 2016 |
|
Restricted Stock | ||||
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||||
Common shares excluded from computation of diluted earnings per share | 4,230,665 | |||
Stock Appreciation Rights (SARs) | ||||
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||||
Common shares excluded from computation of diluted earnings per share | 513,693 | 2,124,084 | 334,152 | 2,454,562 |
Inventories (Details) - USD ($) $ in Thousands |
May 31, 2017 |
Aug. 31, 2016 |
---|---|---|
Inventories [Abstract] | ||
Raw materials | $ 1,468,471 | $ 1,302,481 |
Work in process | 722,833 | 675,867 |
Finished goods | 567,556 | 510,485 |
Reserve for inventory obsolescence | (52,330) | (32,221) |
Total inventories | $ 2,706,530 | $ 2,456,612 |
Concentration of Risk and Segment Data (Segment Revenue) (Details 2) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
May 31, 2017 |
May 31, 2016 |
May 31, 2017 |
May 31, 2016 |
|
Segment Reporting, Revenue Reconciling Item [Line Items] | ||||
Net revenue | $ 4,489,557 | $ 4,310,752 | $ 14,040,092 | $ 13,922,323 |
EMS [Member] | ||||
Segment Reporting, Revenue Reconciling Item [Line Items] | ||||
Net revenue | 2,819,711 | 2,846,919 | 8,205,812 | 8,228,595 |
DMS [Member] | ||||
Segment Reporting, Revenue Reconciling Item [Line Items] | ||||
Net revenue | $ 1,669,846 | $ 1,463,833 | $ 5,834,280 | $ 5,693,728 |
Concentration of Risk and Segment Data (Segment Income) (Details 3) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
May 31, 2017 |
May 31, 2016 |
May 31, 2017 |
May 31, 2016 |
|
Reconciling items: | ||||
Amortization of intangibles | $ 9,174 | $ 9,711 | $ 26,262 | $ 26,150 |
Stock-based compensation expense and related charges | 18,350 | 13,445 | 33,377 | 58,505 |
Restructuring and related charges | 32,700 | 4,460 | 113,529 | 8,349 |
Distressed customer charges | 10,198 | 10,198 | ||
Other expense | 15,821 | 2,412 | 23,872 | 6,346 |
Interest income | (3,663) | (2,302) | (8,407) | (6,653) |
Interest expense | 35,443 | 35,212 | 102,087 | 102,509 |
(Loss) income before income tax | (4,218) | 24,273 | 174,621 | 326,826 |
EMS [Member] | ||||
Reconciling items: | ||||
(Loss) income before income tax | 109,783 | 99,758 | 297,418 | 267,717 |
DMS [Member] | ||||
Reconciling items: | ||||
(Loss) income before income tax | 4,022 | (12,547) | 178,121 | 254,315 |
Operating Segments [Member] | ||||
Reconciling items: | ||||
(Loss) income before income tax | $ 113,805 | $ 87,211 | $ 475,539 | $ 522,032 |
Concentration of Risk and Segment Data (Segment Assets) (Details 4) - USD ($) $ in Thousands |
May 31, 2017 |
Aug. 31, 2016 |
---|---|---|
Segment Reporting Asset Reconciling Item [Line Items] | ||
Assets | $ 10,329,649 | $ 10,322,677 |
EMS [Member] | ||
Segment Reporting Asset Reconciling Item [Line Items] | ||
Assets | 2,802,613 | 2,615,237 |
DMS [Member] | ||
Segment Reporting Asset Reconciling Item [Line Items] | ||
Assets | 5,030,763 | 5,012,798 |
Other non-allocated assets | ||
Segment Reporting Asset Reconciling Item [Line Items] | ||
Assets | $ 2,496,273 | $ 2,694,642 |
Notes Payable, Long-Term Debt and Capital Lease Obligations (Details 1) - USD ($) $ in Thousands |
May 31, 2017 |
Aug. 31, 2016 |
---|---|---|
Debt Instrument [Line Items] | ||
Borrowings under credit facilities | $ 100,000 | |
Borrowings under loans | 464,674 | $ 502,210 |
Capital lease obligations | 27,709 | 28,478 |
Total notes payable, long-term debt and capital lease obligations | 2,183,575 | 2,119,822 |
Less current installments of notes payable, long-term debt and capital lease obligations | 538,985 | 45,810 |
Notes payable, long-term debt and capital lease obligations, less current installments | 1,644,590 | 2,074,012 |
8.250% Senior Notes Due 2018 | ||
Debt Instrument [Line Items] | ||
Senior Notes | 399,268 | 398,552 |
5.625% Senior Notes Due 2020 | ||
Debt Instrument [Line Items] | ||
Senior Notes | 396,881 | 396,212 |
4.700% Senior Notes due 2022 | ||
Debt Instrument [Line Items] | ||
Senior Notes | 496,532 | 496,041 |
4.900% Senior Notes due 2023 | ||
Debt Instrument [Line Items] | ||
Senior Notes | $ 298,511 | $ 298,329 |
Notes Payable, Long-Term Debt and Capital Lease Obligations (Details 2) - USD ($) $ in Thousands |
May 31, 2017 |
Aug. 31, 2016 |
---|---|---|
Notes Payable, Long-Term Debt and Capital Lease Obligations [Abstract] | ||
Total notes payable, long-term debt and capital lease obligations | $ 2,183,575 | $ 2,119,822 |
Less current installments of notes payable, long-term debt and capital lease obligations | 538,985 | 45,810 |
Notes payable, long-term debt and capital lease obligations, less current installments | $ 1,644,590 | $ 2,074,012 |
Notes Payable, Long-Term Debt and Capital Lease Obligations (Additional Information) (Details 3) - USD ($) $ in Thousands |
May 31, 2017 |
Aug. 31, 2016 |
---|---|---|
Debt Instrument [Line Items] | ||
Debt obligation utilized | $ 464,674 | $ 502,210 |
Total assets | 10,329,649 | 10,322,677 |
Total liabilities | $ 7,986,806 | $ 7,865,180 |
Notes Payable, Long-Term Debt and Capital Lease Obligations (Fair Value) (Details 4) $ in Millions |
May 31, 2017
USD ($)
|
---|---|
8.250% Senior Notes Due 2018 | |
Debt Instrument [Line Items] | |
Estimated fair value of senior notes | $ 419.1 |
5.625% Senior Notes Due 2020 | |
Debt Instrument [Line Items] | |
Estimated fair value of senior notes | 433.9 |
4.700% Senior Notes due 2022 | |
Debt Instrument [Line Items] | |
Estimated fair value of senior notes | 531.9 |
4.900% Senior Notes due 2023 | |
Debt Instrument [Line Items] | |
Estimated fair value of senior notes | $ 313.1 |
Accumulated Other Comprehensive Income (Additional Information) (Details 2) |
9 Months Ended |
---|---|
May 31, 2017
USD ($)
| |
Accumulated Other Comprehensive Income [Abstract] | |
Other Comprehensive Income (Loss), Foreign Currency Translation Adjustment, Tax | $ 0 |
Other Comprehensive Income (Loss), Available-for-sale Securities, Tax | $ 0 |
Postretirement and Other Employee Benefits (Details 1) - USD ($) $ in Thousands |
3 Months Ended | 9 Months Ended | ||
---|---|---|---|---|
May 31, 2017 |
May 31, 2016 |
May 31, 2017 |
May 31, 2016 |
|
Postretirement and Other Employee Benefits [Abstract] | ||||
Service cost | $ 259 | $ 222 | $ 771 | $ 662 |
Interest cost | 744 | 1,208 | 2,222 | 3,693 |
Expected long-term return on plan assets | (1,127) | (1,383) | (3,365) | (4,243) |
Recognized actuarial loss | 479 | 264 | 1,422 | 790 |
Amortization of prior service credit | (34) | (35) | (101) | (104) |
Net periodic benefit cost | $ 321 | $ 276 | $ 949 | $ 798 |
Postretirement and Other Employee Benefits (Details 2) $ in Millions |
9 Months Ended |
---|---|
May 31, 2017
USD ($)
| |
Defined Benefit Plan Disclosure [Line Items] | |
Contributions to defined benefit pension plans | $ 6.4 |
Minimum | |
Defined Benefit Plan Disclosure [Line Items] | |
Expected cash contributions to funded pension plans during the fiscal year ended August 31, 2017 | 6.8 |
Maximum | |
Defined Benefit Plan Disclosure [Line Items] | |
Expected cash contributions to funded pension plans during the fiscal year ended August 31, 2017 | $ 7.6 |
Commitments and Contingencies (Details) $ in Millions |
May 31, 2017
USD ($)
|
---|---|
Fiscal years 2009 through 2011 [Member] | |
Loss Contingencies [Line Items] | |
Potential additional income tax payment due | $ 28.6 |
Fiscal Years 2012 Through 2014 [Member] | |
Loss Contingencies [Line Items] | |
Potential additional income tax payment due | $ 5.3 |
Derivative Financial Instruments and Hedging Activities (Details 1) - USD ($) $ in Millions |
3 Months Ended | 12 Months Ended | |
---|---|---|---|
Aug. 31, 2007 |
Aug. 31, 2016 |
May 31, 2017 |
|
Forward foreign exchange contracts | |||
Derivative [Line Items] | |||
Aggregate notional amount outstanding | $ 1,700.0 | $ 1,700.0 | |
Forward foreign exchange contracts | Cash Flow Hedging | |||
Derivative [Line Items] | |||
Aggregate notional amount outstanding | 323.3 | $ 178.7 | |
8.250% Senior Notes Due 2018 | Interest rate swap | Cash Flow Hedging | |||
Derivative [Line Items] | |||
Aggregate notional amount outstanding | $ 400.0 | ||
Payment to settle interest rate swaps | $ 43.1 | ||
Expiry date | Mar. 15, 2018 | ||
Anticipated Debt Issuance [Member] | Cash Flow Hedging | |||
Derivative [Line Items] | |||
Aggregate notional amount outstanding | $ 200.0 | ||
Expiry date | Mar. 15, 2018 | ||
Term Loan Facility [Member] | Cash Flow Hedging | |||
Derivative [Line Items] | |||
Aggregate notional amount outstanding | $ 200.0 | ||
Expiry date | Jun. 30, 2019 |
Derivative Financial Instruments and Hedging Activities (Fair Value of Assets and Liabilities Related to Recurring Foreign Forward Exchange Contracts) (Details 2) - Recurring $ in Thousands |
May 31, 2017
USD ($)
|
---|---|
Assets: | |
Forward foreign exchange contracts, Assets | $ 19,466 |
Liabilities: | |
Forward foreign exchange contracts, Liabilities | (12,972) |
Total | 6,494 |
Level 2 | |
Assets: | |
Forward foreign exchange contracts, Assets | 19,466 |
Liabilities: | |
Forward foreign exchange contracts, Liabilities | (12,972) |
Total | $ 6,494 |
Derivative Financial Instruments and Hedging Activities (Fair Value of Derivative Instruments on Condensed Consolidated Balance Sheets for Foreign Currency Risk Management Purposes) (Details 3) - Forward foreign exchange contracts - USD ($) $ in Thousands |
May 31, 2017 |
Aug. 31, 2016 |
---|---|---|
Designated as Hedging Instruments | Accrued expenses | ||
Derivatives, Fair Value [Line Items] | ||
Forward foreign exchange contracts, Liability Derivatives | $ 1,400 | $ 1,986 |
Designated as Hedging Instruments | Prepaid expenses and other current assets | ||
Derivatives, Fair Value [Line Items] | ||
Forward foreign exchange contracts, Asset Derivatives | 4,200 | 420 |
Not Designated as Hedging Instrument | Accrued expenses | ||
Derivatives, Fair Value [Line Items] | ||
Forward foreign exchange contracts, Liability Derivatives | 11,572 | 10,801 |
Not Designated as Hedging Instrument | Prepaid expenses and other current assets | ||
Derivatives, Fair Value [Line Items] | ||
Forward foreign exchange contracts, Asset Derivatives | $ 15,266 | $ 3,850 |
Income Taxes (Details) |
9 Months Ended |
---|---|
May 31, 2017 | |
Income Taxes [Abstract] | |
U.S federal statutory rate | 35.00% |
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