www.jabil.com
2018 ANNUAL REPORT
10560 Dr. Martin Luther King Jr. Street North
St. Petersburg, Florida 33716 USA
www.jabil.com
Dear Shareholders, Employees and Partners:
Fiscal 2018 was a great year for Jabil.
I’m proud of our team’s many
accomplishments from our strong
nancial performance to the
tremendous progress we made in
execung our strategy, aimed at
diversifying earnings and cash ows.
MARK T. MONDELLO
CHIEF EXECUTIVE OFFICER
2018
ANNUAL
REPORT
CEO MESSAGE
I’d like to begin by oering a sincere and hearelt THANK YOU to our people here at Jabil for your unwavering
commitment to each other, our customers, the communies we serve and our shareholders.
Throughout much of this past year, we were faced with a dicult and highly constrained components and materials
market. Despite these challenges, Jabil prevailed and delivered for our 300+ customers, because of you. THANK YOU.
Many of you acvely sponsored and parcipated in
our Jabil Cares iniaves, which made a dierence in
the lives of the people in the communies where we
operate around the world. THANK YOU.
And nally, in a world of accelerang speed, change and
complexity, you made safety our top priority for every
employee, within our factories and across our enre
enterprise. THANK YOU.
At Jabil, we clearly have a special culture, which serves
as the foundaon for our success. Our autonomous
market-facing business sectors are fully empowered to
always do what’s right. This structure, and our approach,
are true dierenators we believe will help propel us
to becoming the most technologically advanced and
trusted manufacturing soluons provider.
Together, our nearly 200,000 employees simplify
complex challenges to benet our customers with
higher quality products, more ecient supply chains
and innovave soluons – all of which help them
successfully lead and grow their brands in the
markets they serve.
I believe this is what will connue to drive sustainable,
long-term value for both Jabil and our shareholders.
Fiscal 2018 was a great year for Jabil.
I’m proud of our team’s many accomplishments, from
our strong nancial performance to the tremendous
progress we made in execung our strategy, aimed at
diversifying earnings and cash ows.
At the enterprise-level, our goal is simple: to bring
together a balanced porolio of businesses, in markets
where we have earned a proven “right to win.” In doing
so, we endeavor to have no single product or product
family represent more than ve percent of either annual
cash ows or income.
2018
ANNUAL
REPORT
TIMOTHY L.
MAIN
Chairman of the Board
Director since 1999
Age 61
ANOUSHEH
ANSARI
Director since 2016
Age 52
CHRISTOPHER
S. HOLLAND
Director since 2018
Age 52
THOMAS A.
SANSONE
Vice Chairman of the Board
Director since 1983
Age 69
DAVID M.
STOUT
Director since 2009
Age 64
JOHN C.
PLANT
Director since 2016
Age 65
MARK T.
MONDELLO
Chief Executive Officer
Director since 2013
Age 54
MARTHA F.
BROOKS
Director since 2011
Age 59
STEVEN A.
RAYMUND
Director since 1996
Age 63
Jabil’s Board of Directors has standing Audit, Compensation and Nominating & Corporate Governance Committees.
AUDIT: Raymund (Chair), Ansari, Holland
COMPENSATION: Stout (Chair), Brooks, Plant
NOMINATING & CORPORATE GOVERNANCE: Sansone (Chair), Brooks, Stout
Jabil’s Corporate Governance Guidelines, the charters of these committees and the Jabil Code of Conduct can be found on Jabil’s website:
www.jabil.com
INVESTOR INQUIRIES & INFORMATION
Investor Relations
Jabil Inc.
10560 Dr. Martin Luther King Jr. Street N.
St. Petersburg, Florida 33716
Phone: 727.803.3349
E-mail: [email protected]
Our Form 10-K for our fiscal year ended
August 31, 2018 has been filed with the
Securities and Exchange Commission and
is included as a part of this Annual Report.
An online version of the 2018 Annual Report
is available at:
https://www.jabil.com/2018annualreport
ANNUAL MEETING
January 24, 2019 10:00 AM ET
Jabil Headquarters
10560 Dr. Martin Luther King Jr. Street N.
St. Petersburg, Florida 33716
The Annual Meeting proxy statement
contains a description of procedures to
nominate persons for election as directors
or to introduce an item of business at
that meeting, as well as certain Securities
and Exchange Commission requirements
regarding the date by which we must
receive shareholder proposals for
inclusion in our proxy materials.
INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM
Ernst & Young LLP audited the consolidated
financial statements and the effectiveness of
internal control over financial reporting of Jabil
for the fiscal year ended August 31, 2018. A
representative of Ernst & Young LLP is
expected to be present at the Annual Meeting
and available to respond to questions.
TRANSFER AGENT AND REGISTRAR
The transfer agent maintains shareholder
records for Jabil Inc. Please contact the
agent directly for change of address, transfer
of stock, replacement of lost certificates, and
dividend checks. Phone: 877.498.8865.
BOARD OF DIRECTORS AND
SHAREHOLDER INFORMATION
2018
ANNUAL
REPORT
In parallel, we’ve accelerated our investments to
assure we protect our core business and dierenate
our soluons – namely, addive manufacturing/3D
prinng, factory of the future and our “Gartner
award-winning” InControl suite of supply chain
soware and analycs tools. Each of these
thoughully selected investments are designed to
enable Jabil to beer partner with our customers to
bring the world’s greatest products to market.
In terms of our nancial performance, our team
connued to deliver on the mul-year management
plan we laid out in September 2016. In year two of
this plan, we produced double-digit revenue growth
and expanded core EPS for scal 2018 by nearly 25
percent to $2.62 per share – once again, achieving
our commitments.
Addionally, our team produced nearly $1 billion
in operang cash ows, which allowed us to make
approximately $700 million in net capital expenditures
and invest roughly $100 million into strategic
acquisions. We also stayed true to our commitment
to return 40 percent of operang cash ows back to
investors by way of share repurchases and dividends,
totaling $500 million for scal 2018.
We delivered on our promises; produced strong
nancial results; and stayed the course on our stated
mul-year strategy.
Looking at each of our two reporng segments,
starng with Electronics Manufacturing
Services (EMS), the team connued to successfully
transform its business model, creang further
specializaon in large form factor manufacturing
and tailored customer soluons. Our EMS segment
has made a deliberate pivot toward higher-margin
businesses by incorporang engineering excellence
and deep domain knowledge in markets such as
cloud, energy, industrial, print, retail, automove,
transportaon, semi-cap equipment, networking
and telecom.
Our EMS segment results for the year were impressive.
This team grew revenue 11 percent year-over-year
to $12.3 billion and maintained strong core operang
margins of 3.7 percent. This represents the fourth
consecuve year of expanding core operang income,
complimented by solid margins, validang that our
value proposion within our EMS segment connues
to be well-received by customers.
Our Diversied Manufacturing Services (DMS)
segment also performed well in scal 2018.
Revenue grew 23 percent year-over-year to $9.8 billion,
while the team expanded core operang margins by 30
basis points to 3.2 percent. Our DMS core operang
income of $317 million for scal 2018 represents our
best year since scal 2015.
Our DMS team also connued to successfully drive
their business during the year by collang precision
machining with intricate assembly and material sciences.
This approach to delve deeply into complex engineering
soluons opened up high value opportunies across
healthcare, edge devices, mobility and consumer
packaging end-markets. Our leverage of core
capabilies, proven process and an experienced team
of experts has resulted in desired income and cash
ow diversicaon.
I’d like to highlight that our mulfaceted technical
experse, combined with our long-standing healthcare
experience, led to an incredibly impacul new business
award within our DMS segment. I am pleased to
share with you that Jabil has entered into a long-term,
strategic collaboraon with the Johnson & Johnson
Medical Devices Companies, signicantly expanding our
exisng relaonship. This engagement posions Jabil
as one of the world’s largest independent hardware
soluon providers in the healthcare space.
In the near-term, we expect this collaboraon will be
neutral to Jabil’s scal 2019 core earnings as we embark
upon integrang a network of endo-surgical, spine,
trauma and instrumentaon manufacturing facilies.
As we enter scal 2020, I ancipate annual revenues
to reach $1 billion and produce accreve margins with
strong cash ows.
I’m excited and enthused about this transformaonal
relaonship and the trust that has been placed in Jabil.
$22.1B
REVENUE
EMS
56%
DMS
44%
FY18 Business Mix
2018
ANNUAL
REPORT
* This letter uses and references non-GAAP financial measures. Please refer to “Management’s Discussion and Analysis of Financial Condition and Results of Operations - Non-GAAP (Core) Financial
Measures” on pages 39 through 41 of our Annual Report on Form 10-K filed on October 19, 2018 for definitions of these terms and reconciliations of core operating income and core earnings per
share to the most comparable U.S. GAAP financial measures. Core operating margins are defined as core operating income divided by net revenue.
** Jabil’s oer has been accepted with respect to the North American sites and is pending applicable consultative processes for sites in Switzerland and Germany. Completion of this transaction, which
is subject to regulatory clearance and customary closing conditions, is expected to occur during fiscal years 2019 and 2020.
COMPOUNDED ANNUAL GROWTH RATES
FY16
$1.86
FY17
$2.11
FY18
$2.62
+19
%
CAGR
Core EPS
FY16
$630
FY17
$667
FY18
$768
+10
%
CAGR
Core Op Income
(In millions)
FY16
$18.4
FY17
$19.1
FY18
$22.1
+10
%
CAGR
Revenue
(In billions)
Mark T. Mondello
Chief Execuve Ocer
I oen consider a quote aributed to novelist C.S. Lewis:
“Isn’t it funny how day-by-day nothing changes, but
when you look back so much is dierent.”
This is certainly true here at Jabil.
When our team is execung and working their day-
to-day magic (which I get the honor and pleasure to
see rst-hand), it’s somemes hard to appreciate or
see progress. However, when I step back and take a
more expansive view, I recognize the change for Jabil
has been enormous and certainly for the beer. For
example, if we expand the view of our me horizon to a
three-year window, encompassing scal 2016 through
scal 2018, this posive change really comes into
perspecve with the following Compounded Annual
Growth Rates:
Moreover, since mid-2016 we’ve repurchased roughly
33 million shares of Jabil stock, and returned in excess
of $1 billion to shareholders over this meframe,
inclusive of share buybacks and dividends.
In summary, there will always be challenges on the
horizon in the compeve and fast-paced world in
which we operate. But, as this world becomes more
interconnected and certainly more complex, I’ve never
been more condent in Jabil and our future.
Today, our team has a bird’s-eye view of the
convergence that’s occurring all around us – converging
markets, technologies, business models, cultures and
products. This unique vantage point, coupled with our
proven structure and approach, is allowing us to capture
value and produce steady, predictable earnings and
cash ows.
What we’re doing is working; and I’m honored to have
served you this year.
Lastly, we remain xated on making our factories and
our communies beer, healthier and safer – all while
we deliver for our shareholders.
Thank you for your trust and support.
Humbly Yours,
EMPLOYEE RECOGNITION
Respect. Recognize. Reward.
2018
ANNUAL
REPORT
Jabil recognizes the positive contributions employees make to benefit our
customers, communities and one another. Our global recognition program
connects employee actions to Jabil’s cultural values of Integrity, Ingenuity
and Inspiration and shares them across internal and external platforms.
ORIOL NADAL
TORTOSA, SPAIN
I have realized that the people are
the real power of the company;
people make the difference.
“
”
2,401
PROJECTS SUBMITTED
67
SITES PARTICIPATED
DELIVER BEST PRACTICES
COMPETITION
This year, Jabil celebrated the 10th Anniversary of Deliver Best Practices, a
global competition that shares innovative process improvements, employee
programs and social and environmental initiatives across the company.
A record-breaking 2,401 projects were submitted by employees, bringing
the total number of projects submitted to 10,604 since the program’s
inception in 2009.
Our employees use this platform to share, learn and drive innovation
across sites and business divisions. More importantly, the competition
demonstrates the importance of diverse teams, collaboration and
camaraderie among our employees.
Diverse Perspectives Spark Big Ideas
2018
ANNUAL
REPORT
YELIZ KOKEL
SUZHOU, CHINA
You can have fun and interact with other people from
different cultures and learn about what they are doing
in their sites.
“
”
EMPLOYEE DIVERSITY
& INCLUSION
2018
ANNUAL
REPORT
Celebrating Diversity & Inclusion
Jabil teams around the world organized regional forums this year to celebrate
diversity and inclusion. At these sessions, over 1,000 employees gathered to
connect, learn and share.
Events were held in Guadalajara, Mexico; Penang, Malaysia; St. Petersburg,
Florida; Taichung, Taiwan and Tiszaújváros, Hungary. The forums provided
employees a place to grow personally and professionally with discussions
centered on connecting and networking, inspiring others and goal-setting.
They were also an opportunity to learn how diversity of all kinds – experience,
background, beliefs and ideas – brings value and success to Jabil.
MING-YEN LEE
TAICHUNG, TAIWAN
As an international company, Jabil has a diverse culture
and way of thinking. It is important to create opportunities
for colleagues to interact across the enterprise in order to
bring novel and ‘disruptive’ ideas to our business.
“
”
JABIL CARES
Making a Difference Together
Jabil Cares, our community outreach, volunteerism and philanthropy platform,
supports a localized strategy where our global sites are empowered to foster
relationships with community organizations to maximize impact through
charitable giving and employee volunteerism.
Sites align their efforts around causes related to Education, Empowerment
and the Environment by encouraging employees to come together and make a
difference in areas that are important and relevant in their community.
Jabil employees drive our global community outreach. They do what’s right;
show pride in their community; and demonstrate their commitment through
action. The outcomes of hundreds of our local efforts are truly making
a global impact.
2018
ANNUAL
REPORT
PAUL KLUBEK
ST. PETERSBURG, FLORIDA
In my first year here, I’ve begun to know the
depths of Jabil’s generosity. I am proud to be part
of an organization whose community involvement
touches so many lives… we make a difference.
“
”
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended August 31, 2018
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
Registrant’s telephone number, including area code
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
Common Stock, $0.001 par value per share New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☒ No ☐
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒
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 every Interactive Data File required to be submitted 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 such files). Yes ☒ No ☐
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained
herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in
Part III of this Form 10-K or any amendment to this Form 10-K. ☒
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company ,
or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated f iler,” “smaller reporting company,” and “emerging
growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer ☒ Accelerated f iler ☐
Non-accelerated f iler ☐ 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 Act). Yes ☐ No ☒
The aggregate market value of the voting common stock held by non-affiliates of the registrant based on the closing sale price of the Common
Stock as reported on the New York Stock Exchange on February 28, 2018 was approximately $4.0 billion. For purposes of this determination, shares
of Common Stock held by each officer and director and by each person who owns 10% or more of the outstanding Common Stock have been
excluded in that such persons may be deemed to be affiliates. This determination of affiliate status is not necessarily a conclusive determination for
other purposes. The number of outstanding shares of the registrant’s Common Stock as of the close of business on October 9, 2018, was 161,878,931.
The registrant does not have any non-voting stock outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
The registrant’s definitive Proxy Statement for the Annual Meeting of Stockholders scheduled to be held on January 24, 2019 is incorporated by
reference in Part III of this Annual Report on Form 10-K to the extent stated herein.
JABIL INC. AND SUBSIDIARIES
2018 FORM 10-K ANNUAL REPORT
TABLE OF CONTENTS
Part I.
Item 1. Business ........................................................ 1
Item 1A. Risk Factors ..................................................... 10
Item 1B. Unresolved Staff Comments .......................................... 24
Item 2. Properties ....................................................... 25
Item 3. Legal Proceedings ................................................. 26
Item 4. Mine Safety Disclosures ............................................. 26
Part II.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer
Purchases of Equity Securities . ....................................... 27
Item 6. Selected Financial Data ............................................. 29
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of
Operations ...................................................... 31
Item 7A. Quantitative and Qualitative Disclosures About Market Risk ................... 50
Item 8. Financial Statements and Supplementary Data ............................. 50
Item 9. Changes in and Disagreements With Accountants on Accounting and Financial
Disclosure ...................................................... 50
Item 9A. Controls and Procedures ............................................ 51
Item 9B. Other Information ................................................. 51
Part III.
Item 10. Directors, Executive Officers and Corporate Governance ...................... 52
Item 11. Executive Compensation . . . ......................................... 52
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters ............................................... 52
Item 13. Certain Relationships and Related Transactions, and Director Independence . . . . . . . . 52
Item 14. Principal Accounting Fees and Services .................................. 52
Part IV.
Item 15. Exhibits and Financial Statement Schedules . .............................. 53
Item 16. Form 10-K Summary ............................................... 101
Signatures ................................................................ 102
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 Annual Report on Form 10-K 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”). 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, expected capital
expenditures and dividends, expected restructuring charges and related savings 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,
i
including assumptions 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
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:
• fluctuation in our operating results;
• our dependence on a limited number of customers;
• our ability to manage growth effectively;
• competitive factors affecting our customers’ businesses and ours;
• the susceptibility of our production levels to the variability of customer requirements;
• our ability to keep pace with technological changes and competitive conditions;
• our reliance on a limited number of suppliers for critical components;
• exposure to financially troubled customers and suppliers;
• our exposure to the risks of a substantial international operation;
• our ability to achieve the expected profitability from our acquisitions;
For a further list and description of various risks, factors and uncertainties that could cause future results
or events to differ materially from those expressed or implied in our forward-looking statements, see the “Risk
Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations”
sections contained in this document, and any subsequent reports on Form 10-Q and Form 8-K, and other filings
we make with the Securities and Exchange Commission (“SEC”). Given these risks and uncertainties, the
reader should not place undue reliance on these forward-looking statements.
All forward-looking statements included in this Annual Report on Form 10-K are made only as of the date
of this Annual Report on Form 10-K, and we do not undertake any obligation to publicly update or correct any
forward-looking statements to reflect events or circumstances that subsequently occur, or of which we hereafter
become aware. You should read this document completely and with the understanding that our actual future
results or events may be materially different from what we expect. All forward-looking statements attributable
to us are expressly qualified by these cautionary statements.
ii
PART I
Item 1. Business
The Company
We are one of the leading providers of worldwide manufacturing services and solutions. We provide
comprehensive electronics design, production and product management services to companies in various
industries and end markets. Our services enable our customers to reduce manufacturing costs, improve
supply-chain management, reduce inventory obsolescence, lower transportation costs and reduce product
fulfillment time. Our manufacturing and supply chain management services and solutions include
innovation, design, planning, fabrication and assembly, delivery and managing the flow of resources and
products.
We serve our customers primarily through dedicated business units that combine highly automated,
continuous flow manufacturing with advanced electronic design and design for manufacturability. We
depend, and expect to continue to depend, upon a relatively small number of customers for a
significant percentage of our net revenue, which in turn depends upon their growth, viability and financial
stability. Based on net revenue, for the fiscal year ended August 31, 2018, our largest customers include
Apple, Inc., Cisco Systems, Inc., Hewlett-Packard Company, Keysight Technologies, LM Ericsson
Telephone Company, NetApp, Inc., Nokia Networks, SolarEdge Technologies Inc., Valeo S.A. and Zebra
Technologies Corporation. For the fiscal year ended August 31, 2018, we had net revenues of $22.1 billion
and net income attributable to Jabil Inc. of $86.3 million.
We conduct our operations in facilities that are located worldwide, including but not limited to, China,
Hungary, Malaysia, Mexico, Singapore and the United States. We derived a substantial majority, 91.7%, of
net revenue from our international operations for the fiscal year ended August 31, 2018. Our global
manufacturing production sites allow customers to manufacture products simultaneously in the optimal
locations for their products. Our global presence is key to assessing and executing on our business
opportunities.
We have two reporting segments: Electronics Manufacturing Services (“EMS”) and Diversified
Manufacturing Services (“DMS”), which are organized based on the economic profiles of the services
performed, including manufacturing capabilities, market strategy, margins, return on capital and risk
prof iles. Our EMS segment is focused around leveraging IT, supply chain design and engineering,
technologies largely centered on core electronics, utilizing our large-scale manufacturing infrastructure and
our ability to serve a broad range of end markets. Our EMS segment is typically a lower-margin but
high-volume business that produces products at a quicker rate (i.e. cycle time) and in larger quantities and
includes customers primarily in the automotive and transportation, capital equipment, computing and
storage, defense and aerospace, digital home, industrial and energy, networking and telecommunications,
point of sale and printing industries. Our DMS segment is focused on providing engineering solutions, with
an emphasis on material sciences and technologies. Our DMS segment is typically a higher-margin business
and includes customers primarily in the consumer wearables, healthcare, mobility and packaging industries.
The following table sets forth, for the periods indicated, revenue by segment expressed as a percentage
of net revenue:
Fiscal Year Ended August 31,
2018 2017 2016
EMS ............................................... 56% 58% 60%
DMS............................................... 44% 42% 40%
Total ............................................... 100% 100% 100%
Additional financial information regarding our reportable operating segments is included in Item 7 of
this report and Note 12 — “Concentration of Risk and Segment Data” to the Consolidated Financial
Statements.
1
Industry Background
The industry in which we operate has historically been composed of companies that provide a range of
design and manufacturing services to companies that utilize electronics components in their products.
We monitor the current economic environment and its potential impact on both the customers we serve
as well as our end markets and closely manage our costs and capital resources so that we can respond
appropriately as circumstances change. Over the long term we believe the factors driving our customers and
potential customers to use our industry’s services include:
• Efficient Manufacturing. Manufacturing service providers are often able to manufacture
products at a reduced total cost to companies. These cost advantages result from higher utilization
of capacity and efficiencies of scale because of diversified product demand and, generally, a
greater focus on the components of manufacturing cost. Companies are increasingly seeking to
reduce their investment in inventory, facilities and equipment used in manufacturing and
prioritizing capital investments in other activities such as sales and marketing and research and
development (“R&D”). This strategic shift in capital deployment has contributed to increased
demand for and interest in outsourcing to external manufacturing service providers.
• Accelerated Product Time-to-Market and Time-to-Volume. Manufacturing service providers are
often able to deliver accelerated production start-ups and achieve high efficiencies in bringing new
products to production. Providers are also able to more rapidly scale production for changing
markets and to position themselves in global locations that serve the leading world markets. With
increasingly shorter product life cycles, these key services allow new products to be sold in the
marketplace in an accelerated time frame.
• Access to Advanced Design and Manufacturing Technologies. By utilizing manufacturing service
providers, customers gain access to additional advanced technologies in manufacturing processes,
as well as to product and production design, which can offer customers significant improvements
in the performance, quality, cost, time-to-market and manufacturability of their products.
• Improved Inventory Management and Purchasing Power. Manufacturing service providers are
often able to more efficiently manage both procurement and inventory, and have demonstrated
prof iciency in purchasing components at improved pricing due to the scale of their operations and
continuous interaction with the materials marketplace.
Our Strategy
Our vision for the future is to become the world’s most technologically advanced manufacturing
services and solutions provider. As we work to achieve our vision, we continue to pursue the following
strategies:
• Establish and Maintain Long-Term Customer Relationships. An important element of our
strategy is to establish and maintain long-term relationships with leading companies in expanding
industries with size and growth characteristics that can benefit from highly automated, continuous
flow manufacturing on a global scale. We have made concentrated efforts to diversify our industry
sectors and customer base. Because of these efforts, we have experienced business growth from
both existing and new customers as well as from acquisitions. We focus on maintaining long-term
relationships with our customers and seek to expand these relationships to include additional
product lines and services. In addition, we focus on identifying and developing relationships with
new customers that meet our targeted profile, which includes financial stability, the need for
technology-driven turnkey manufacturing, anticipated unit volume and long-term relationship
stability.
• Utilize Customer-Centric Business Units. Most of our business units are dedicated to serve one
customer each and operate by primarily utilizing dedicated production equipment, production
workers, supervisors, buyers, planners and engineers to provide comprehensive manufacturing
solutions that are customized to each customer’s needs. We believe our customer-centric
business units promote increased responsiveness to our customers’ needs, particularly for
customer relationships that extend across multiple production locations.
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• Leverage Global Production. We believe that global production is a key strategy to reduce
obsolescence risk and secure the lowest possible landed costs while simultaneously supplying
products of equivalent or comparable quality throughout the world. Consistent with this strategy,
we have established or acquired operations in Europe, Asia, Latin America and Africa.
• Offer Systems Assembly, Direct-Order Fulfillment and Configure-to-Order Services. Our systems
assembly, direct-order fulfillment and configure-to-order services allow our customers to reduce
product cost and risk of product obsolescence by reducing total work-in-process and finished
goods inventory. These services are available at all of our manufacturing locations.
• Offer Design Services. We offer a wide spectrum of value-add design services to achieve
improvements in performance, cost, time-to-market and manufacturability.
• Pursue Acquisition Opportunities Selectively. Traditionally, electronics manufacturing service
companies have acquired manufacturing capacity from their customers to drive growth, expand
their footprint and gain new customers. In recent years, our acquisition strategy has expanded to
include opportunities to acquire competitors who are focused on our key growth areas, which
include specialized manufacturing in key markets, materials technology and design operations, as
well as other acquisition opportunities complementary to our services offerings. The primary goals
of our acquisition strategy are to complement our current capabilities, diversify our business into
new industry sectors and with new customers and expand the scope of the services we can offer to
our customers.
Our Approach to Manufacturing
To achieve high levels of manufacturing performance, we have adopted the following approaches:
• Decentralized Business Unit Model. Most of our business units are dedicated to serve one
customer each and are empowered to formulate strategies tailored to individual customer’s needs.
Our business units generally have dedicated production lines consisting of equipment, production
workers, supervisors, buyers, planners and engineers. Under certain circumstances, a production
line may serve more than one business unit to maximize resource utilization. Business units have
direct responsibility for manufacturing results and time-to-volume production, thereby promoting
a sense of individual commitment and ownership. The business unit approach is modular and
enables us to grow incrementally without disrupting the operations of other business units.
Business unit management reviews the customer financial information to assess whether the
business units are meeting their designated responsibilities and to ensure that the daily execution
of manufacturing activities is being effectively managed. The business units aggregate into
operating segments based on the economic profiles of the services performed, including
manufacturing capabilities, market share strategy, margins, return on capital and risk profiles.
• Automated Continuous Flow. We use a highly automated, continuous flow approach to
manufacturing, whereby different pieces of equipment are joined directly or by conveyor to create
an in-line assembly process. This process contrasts with a batch approach, whereby individual
pieces of assembly equipment are operated as freestanding work-centers. The elimination of
waiting time prior to sequential operations results in faster manufacturing, which improves
production efficiencies and quality control, and reduces inventory work-in-process. We believe
continuous flow manufacturing provides cost reductions and quality improvement when applied
to high volumes of product.
• Computerized Control and Monitoring. We support all aspects of our manufacturing activities
with advanced computerized control and monitoring systems. Component inspection and vendor
quality are monitored electronically in real-time. Materials planning, purchasing, stockroom and
shop floor control systems are supported through a computerized manufacturing resource
planning system, which provides customers with the ability to continuously monitor material
availability and track work-in-process on a real-time basis. In addition, manufacturing processes
are supported by a computerized statistical process control system, whereby customers can
remotely access our computer systems to monitor real-time yields, inventory positions,
work-in-process status and vendor quality data.
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• Electronic Supply Chain Management. We make available to our customers and suppliers an
electronic commerce system/electronic data interchange and web-based tools to implement a
variety of supply chain management programs. Our customers use these tools to share demand
and product forecasts and deliver purchase orders, and we use these tools with our suppliers for
just-in-time delivery, supplier-managed inventory and consigned supplier-managed inventory.
Our Design Services
We offer a wide spectrum of value-add design services to enhance our relationships with current
customers and to help develop relationships with our new customers. Our teams are strategically staffed to
support Jabil customers for all development projects, including turnkey system design and design for
manufacturing activities. These design services include:
• Electronic Design. Our Electronic Design team provides electronic circuit design services,
including application-specific integrated circuit design, firmware development and rapid
prototyping services. These services have been used by our customers for a variety of products
including smart phones and accessory products, notebook and personal computers, servers, radio
frequency products, video set-top boxes, optical communications products, communication and
broadband products, and automotive and consumer appliance controls.
• Industrial Design. Our Industrial Design team designs the “look and feel” of the plastic and
metal enclosures that house the products’ electro-mechanics, including the printed circuit board
assemblies (“PCBA”).
• Mechanical Design. Our Mechanical Design team specializes in three-dimensional mechanical
design with the analysis of electronic, electro-mechanical and optical assemblies using state of the
art modeling and analytical tools. This team has extended Jabil’s product design offering
capabilities to include all aspects of industrial design, advance mechanism development and
tooling management.
• Computer-Assisted Design. Our Computer-Assisted Design (“CAD”) team provides PCBA
design services using advanced CAD engineering tools, PCBA design validation and verification
services, and other consulting services, which include generating a bill of materials, approved
vendor list and assembly equipment configuration for a particular PCBA design. We believe that
our CAD services result in PCBA designs that are optimized for manufacturability and cost
efficiencies and accelerate a product’s time-to-market and time-to-volume production.
• Product Validation. Our Product Validation team provides complete product and process
validation. This includes product system tests, product safety, regulatory compliance and
reliability tests.
• Manufacturing Test Solution Development. Our Manufacturing Test Solution Development team
provides integral support to the design teams to embed design with testability and to promote
efficient capital and resource investment in the manufacturing process. The use of software driven
instrumentation and test process design and management has enhanced our product quality and
reduced our operating costs relative to human dependent test processes. The full electronic test
data-log of customer products has allowed customer product test traceability and visibility
throughout the manufacturing test process.
Fabrication and Assembly
We offer systems assembly, test, direct-order fulfillment and configure-to-order services to our
customers. Our systems assembly services extend our range of assembly activities to include assembly of
higher-level sub-systems and systems incorporating multiple PCBAs. In addition, based on quality
assurance programs developed with our customers, we provide testing services for our PCBAs, sub-systems
and systems products. Our quality assurance programs include circuit testing under various environmental
conditions to ensure that our products meet or exceed required customer specifications. We also offer
direct-order fulfillment and configure-to-order services for delivery of final products.
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Technology and Research and Development
We believe that our manufacturing and testing technologies are among the most advanced in our
industry. To meet our customers’ increasingly sophisticated needs, we continuously engage in R&D
activities designed to create new and improved products and manufacturing solutions for our customers.
Through our R&D efforts, we intend to continue to offer our customers highly automated, continuous flow
manufacturing process technologies for precise and aesthetic mechanical components and system assembly.
These technologies and R&D activities include:
• Automation, including automated tooling
• Electronic interconnection
• Advanced polymer and metal material science
• Single/multi-shot injection molding, stamping and in-mold labeling
• Multi-axis computer numerical control
• Vacuum metallization
• Physical vapor deposition
• Digital printing
• Anodization
• Thermal-plastic composite formation
• Plastic with embedded electronics
• Metal and plastic covers with insert-molded or dies-casting features for assembly
• Display cover with integrated touch sensor
• Material processing research (including plastics, metal, glass and ceramic)
We engage in R&D activities for many products including mobile internet devices and associated
accessories, multi-media tablets, two-way radios, health care and life science products, server and storage
products, set-top and digital home products and printing products. The following table sets forth, for the
periods indicated, the amount expended on R&D activities:
Fiscal Year Ended August 31,
(dollars in millions) 2018 2017 2016
R&D activities ........................................ $38.5 $29.7 $32.0
Customers and Marketing
A key tenet of our strategy is to establish and maintain long-term relationships with leading companies
in expanding industries with the size and growth characteristics that can benefit from highly automated,
continuous flow manufacturing on a global scale. A small number of customers and signif icant industry
sectors have historically comprised a major portion of our net revenue. We also market our services and
solutions through our website and our Blue Sky Innovation Centers.
In fiscal year 2018, our five largest customers accounted for approximately 48% of our net revenue and
80 customers accounted for approximately 90% of our net revenue. The table below sets forth the respective
portion of net revenue attributable to the customers that accounted for approximately 10% or more of our
net revenue during the fiscal years ended August 31, 2018, 2017 and 2016:
Fiscal Year Ended August 31,
2018 2017 2016
Apple, Inc. ........................................... 28% 24% 24%
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Competition
Our business is highly competitive. We compete against numerous domestic and foreign electronic
manufacturing service providers and design providers, including Benchmark Electronics, Inc., Celestica
Inc., Flex Ltd., Hon-Hai Precision Industry Co., Ltd., Plexus Corp. and Sanmina Corporation. We also
compete against numerous domestic and foreign diversified manufacturing service providers, including
AptarGroup, Inc., Berry Plastics Group, Inc., Catcher Technology Co., Ltd., Gerresheimer AG, Quanta
Computer, Inc. and Zeniya Aluminum Engineering, Ltd. In addition, past consolidation in our industry has
resulted in larger and more geographically diverse competitors that have significant resources.
We also face competition from the manufacturing operations of our current and potential customers,
who are continually evaluating the merits of manufacturing products internally against the advantages of
outsourcing. In the past, some of our customers moved a portion of their manufacturing from us to more
fully utilize their excess internal manufacturing capacity.
Backlog
Our order backlog as of August 31, 2018 and 2017 was valued at approximately $6.8 billion and
$4.9 billion, respectively. Our order backlog is expected to be filled within the current fiscal year. Although
our backlog consists of firm purchase orders, the level of backlog at any particular time may not be
necessarily indicative of future sales. Given the nature of our relationships with our customers, and the fact
that we generally do not enter into long-term contracts or purchase commitments with our customers, we
frequently allow our customers to cancel or reschedule deliveries, and therefore, backlog is often not a
meaningful indicator of future financial results.
Seasonality
Production levels for a portion of the DMS segment are subject to seasonal influences. Historically, we
have realized greater net revenue during our first fiscal quarter, which ends on November 30, due to higher
demand for consumer-related products during the holiday selling season.
Components Procurement
We procure components from a broad group of suppliers, determined on an assembly-by-assembly
basis. Some of the products we manufacture contain one or more components that are only available from
a single source. Some of these components are allocated from time to time in response to supply shortages.
In some cases, supply shortages will substantially curtail production of all assemblies using a particular
component.
Proprietary Rights
We regard certain aspects of our design, production and product management services as proprietary
intellectual property. To protect our trade secrets, manufacturing know-how and other proprietary rights,
we rely largely upon a combination of intellectual property laws, non-disclosure agreements with our
customers, employees, and suppliers and our internal security systems, policies and procedures. We
currently have a relatively modest number of solely owned and/or jointly held patents for various
innovations. We believe that our research and design activities, along with developments relating thereto,
may result in growth of our patent portfolio and its importance to us, particularly as we expand our
business activities. Other factors significant to our proprietary rights include the knowledge and experience
of our management and personnel and our ability to develop, enhance and market manufacturing services.
We license some technology and intellectual property rights from third parties that we use in providing
some of our design, production and product management services to our customers. Generally, the license
agreements that govern such third-party technology and intellectual property rights grant us the right to use
the subject technology anywhere in the world and terminate upon a material breach by us.
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Employees
As of August 31, 2018, we employed approximately 199,000 people worldwide. None of our
U.S. domestic employees are represented by a labor union. In certain international locations, our employees
are represented by labor unions and by works councils. We have never experienced a significant work
stoppage or strike and we believe that our employee relations are good.
Geographic Information
The information regarding net revenue and long-lived assets set forth in Note 12 — “Concentration of
Risk and Segment Data” to the Consolidated Financial Statements is hereby incorporated by reference into
this Part I, Item 1. Each of our segments is dependent on foreign operations.
Environmental
We are subject to a variety of federal, state, local and foreign environmental, health and safety, product
stewardship and producer responsibility laws and regulations, including those relating to the use, storage,
discharge and disposal of hazardous chemicals used during our manufacturing process, those governing
worker health and safety, those requiring design changes, supply chain investigation or confor mity
assessments or those relating to the recycling or reuse of products we manufacture.
Executive Officers of the Registrant
Executive officers are appointed by the Board of Directors and serve at the discretion of the Board.
Except as otherwise noted below, each executive officer is a full-time employee of Jabil. There are no family
relationships among our executive officers and directors. There are no arrangements or understandings
between any of our executive officers and any other persons pursuant to which any of such executive
officers were selected. Below is a list of our executive officers:
Steven D. Borges (age 50) was named Executive Vice President, Chief Executive Officer, Healthcare in
September 2016. Mr. Borges joined Jabil in 1993 and has global experience in positions of increasing
responsibility in Operations, Business Development, Manufacturing Operations and Supply Chain
Management. He holds a Bachelor’s Degree in Business Administration and Management from Fitchburg
State University.
Sergio A. Cadavid (age 62) was named Senior Vice President, Treasurer in September 2013.
Mr. Cadavid joined Jabil in 2006 as Treasurer. Prior to joining Jabil, Mr. Cadavid was Corporate Assistant
Treasurer for Owens-Illinois, Inc. in Toledo, Ohio. He has also held various positions with The Quaker Oats
Company, Arthur Andersen & Co. and J.M. Family Enterprises, Inc. He holds an M.B.A. from the
University of Florida and a B.B.A. from Florida International University.
Brenda Chamulak (age 47) was named Senior Vice President, Chief Executive Officer, Jabil Packaging
Solutions in July 2018. Prior to joining Jabil, Ms. Chamulak was Vice President and General Manager of
the Personal Care & Home Care, a business unit of Aptar Inc., a global supplier of dispensing and sealing
solutions based in Crystal Lake, Illinois. Ms. Chamuluk served as the President, Global Market
Development for Aptar’s Beauty + Home, Personal Care Business Unit from 2016 to 2017 and served as the
General Manager, Aptar Midland from 2013 to 2016. She joined Aptar in 1992 and held positions of
increasing responsibility with Aptar. Ms. Chamulak has a B.A. in Marketing and International Business
from Carthage College and an MBA from Marquette University.
Michael Dastoor (age 52) was named Executive Vice President, Chief Financial Officer effective
September 2018. Mr. Dastoor joined Jabil in 2000 as Regional Controller — Asia Pacific and was named
Controller in June 2004 and Senior Vice President, Controller in July 2010. Prior to joining Jabil,
Mr. Dastoor was a Regional Financial Controller for Inchcape PLC. He holds a degree in Finance and
Accounting from the University of Bombay. Mr. Dastoor is a Chartered Accountant from the Institute of
Chartered Accountants in England and Wales.
Bruce A. Johnson (age 62) was named Senior Vice President, Chief Human Resources Officer in
January 2017. Mr. Johnson joined Jabil in 2015 as Vice President, Human Resources. Prior to joining Jabil,
Mr. Johnson was Chief Organizational Effectiveness Officer/Executive Vice President, Human Resources
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for C&S Wholesale Grocers, Inc., a wholesale distributor of food and grocery items with headquarters in
Keene, New Hampshire from 2007 to 2014. Mr. Johnson also served in senior roles at The Timberland
Company, a footwear and apparel designer, retailer and manufacturer in New Hampshire, and E.I. Du Pont
De Nemours and Company (Du Pont) in Delaware. He holds a Bachelor of Arts in History from
Middlebury College in Vermont.
Robert L. Katz (age 56) joined Jabil in March 2016 and was named Executive Vice President, General
Counsel and Corporate Secretary in September 2016. Mr. Katz transitioned the Corporate Secretary role to
a member of his staff in April 2017. Prior to joining Jabil, Mr. Katz served as Executive Vice President,
General Counsel and Secretary of SharkNinja, a vacuum and kitchen appliance manufacturer. He was
previously Senior Vice President and General Counsel of Ingersoll Rand plc, a diversified industrial
manufacturer, from 2010 to 2015. Mr. Katz served as Senior Vice President, General Counsel, Corporate
Secretary and Chief Compliance Officer of Federal-Mogul Corporation from 2007 to 2010. From 1999 to
2007 he was General Counsel — EMEA for Delphi Corporation in Paris, France. He began his career with
Milbank, Tweed, Hadley & McCloy working in the Mergers and Acquisitions and General Corporate
Group in New York and London. He earned a Bachelor of Laws (LL.B.) and a Bachelor of Civil Law
(B.C.L.) from McGill University. He is a member of the New York Bar.
Michael J. Loparco (age 47) was named Executive Vice President, Chief Executive Officer, Engineered
Solutions Group in January 2016. Previously, Mr. Loparco served as Executive Vice President, Chief
Executive Officer, Industrial and Energy, Senior Vice President, Global Business Units in Jabil’s High
Velocity business and held a variety of global management positions. Before joining Jabil in 1999,
Mr. Loparco was an attorney at Holland & Knight, LLP, practicing corporate and commercial litigation.
He holds a Juris Doctorate from Stetson University College of Law. He holds a Bachelor of Arts in
International Business, with minor degrees in Spanish and Business Management, from Eckerd College.
Mark Mondello (age 54) was named Chief Executive Officer in March 2013. Mr. Mondello joined Jabil
in 1992 as a manufacturing supervisor. Mr. Mondello was promoted to Project Manager in 1993, named
Vice President, Business Development in 1997, Senior Vice President, Business Development in 1999 and
served as Chief Operating Officer from 2002 to 2013. Prior to joining Jabil, Mr. Mondello was a
commercial and defense-related aerospace project manager for Moog, Inc. He holds a B.S. in Mechanical
Engineering from the University of South Florida.
Alessandro Parimbelli (age 50) was named Executive Vice President, Chief Executive Officer, Enterprise
and Infrastructure in July 2013. Mr. Parimbelli joined Jabil in 1998 as a Test Engineering Manager. At Jabil,
Mr. Parimbelli served in business management positions in Boise, Idaho and Paris, France before being
promoted to Vice President, Global Business Units in 2006. From 2010 through 2012, Mr. Parimbelli was
Senior Vice President, Global Business Units and was responsible for Jabil’s Enterprise and Infrastructure
business. Prior to joining Jabil, Mr. Parimbelli held various engineering positions within Hewlett-Packard
and other software engineering companies. He holds an MBA from Colorado State University and a
Software Engineering degree from Politecnico of Milan, Italy.
William E. Peters (age 55) was named President in March 2013. Mr. Peters served as Executive Vice
President, Human Development, Human Resources from 2010 to 2013. He joined Jabil in 1990 as a buyer
and has held positions of increasing responsibility in Operations, Supply Chain and Manufacturing
Operations. Prior to joining Jabil, Mr. Peters was a financial analyst for Electronic Data Systems. He holds
a B.A. in Economics from Michigan State University.
Courtney J. Ryan (age 48) was named Executive Vice President, Corporate Development/Chief of Staff
in July 2016. Mr. Ryan joined Jabil in 1993 as a Quality Engineer and worked his way through various
operations and business development management positions. He was named Senior Vice President, Global
Business Units in 2007. Mr. Ryan served as Executive Vice President, Chief Executive Officer, Nypro from
July 2013 to June 2016. Mr. Ryan holds an MBA with a concentration in Decision and Information Science
and a Bachelor of Arts in Economics, both from the University of Florida. He also serves on the University
of Florida’s MBA and Supply Chain Advisory Board.
Daryn Smith (age 48) was named Senior Vice President, Enterprise & Commercial Controller effective
September 2018. Mr. Smith served as Chief Financial Officer of EMS from June 2013 – June 2018.
Mr. Smith joined Jabil in 2002 and he has held various leadership roles in Risk and Assurance, Financial
8
Planning and Analysis, and Controllership for Jabil. Prior to joining Jabil, Mr. Smith was with the
Assurance and Advisory Services practice for Arthur Andersen (Andersen). He holds a Bachelor’s degree in
Accounting from the University of South Florida and an MBA from the University of Florida.
Kenneth S. Wilson (age 53) was named Executive Vice President and CEO of Jabil Green Point in 2017.
Prior to that, Mr. Wilson was Senior Vice President of the Telecommunications Infrastructure Sector within
Jabil’s Enterprise & Infrastructure group. He first joined Jabil in 2000 as a business unit manager; and has
held various leadership roles, including VP of Global Business Units, running businesses such as consumer
electronics and telecommunications. Prior to Jabil, he spent 8 years at Motorola, where he served as
Operations Director in their Handset Division. Kenny has a Bachelor’s degree in Manufacturing
Engineering and a MBA from Edinburgh Business School.
Additional Information
Our principal executive offices are located at 10560 Dr. Martin Luther King, Jr. Street North,
St. Petersburg, Florida 33716, and our telephone number is (727) 577-9749. We were incorporated in
Delaware in 1992. Our website is located at http://www.jabil.com. Through a link on the “Investors” section
of our website, we make available our Annual Report on Form 10-K, our Quarterly Reports on Form 10-Q,
our Current Reports on Form 8-K and any amendments to those reports, free of charge, as soon as
reasonably practicable after they are electronically filed with, or furnished to, the SEC. The “Investors”
section of our website contains a significant amount of information about our Company, including
financial and other information for investors. The information that we post on the “Investors” section of
our website could be deemed to be material information. We encourage investors, the media and others
interested in Jabil to visit our website. Information on our website, however, is not a part of this report.
9
Item 1A. Risk Factors
Our operating results may f luctuate due to a number of factors, many of which are beyond our control.
Our annual and quarterly operating results are affected by a number of factors, including:
• adverse changes in current macro-economic conditions, both in the U.S. and internationally;
• how well we execute on our strategy and operating plans, and the impact of changes in our
business model;
• the volume and timing of orders placed by our customers;
• the level of capacity utilization of our manufacturing facilities and associated fixed costs;
• the composition of the costs of revenue among materials, labor and manufacturing overhead;
• price competition;
• changes in demand for our products or services, as well as the volatility of these changes;
• changes in demand in our customers’ end markets, as well as the volatility of these changes;
• our exposure to financially-troubled customers;
• any potential future termination, or substantial winding down, of significant customer
relationships;
• our level of experience in manufacturing particular products;
• the degree of automation used in our assembly process;
• the efficiencies achieved in managing inventories and property, plant and equipment;
• significant costs incurred in acquisitions and other transactions;
• fluctuations in the cost and availability of materials;
• adverse changes in political conditions, both in the U.S. and internationally, including among
other things, adverse changes in tax laws and rates (and government interpretations thereof),
adverse changes in trade policies and adverse changes in fiscal and monetary policies;
• seasonality in customers’ product demand;
• the timing of expenditures in anticipation of increased sales, customer product delivery
requirements and shortages of components or labor;
• changes in stock-based compensation expense due to changes in the expected vesting of
performance-based equity awards comprising a portion of such stock-based compensation
expense; and
• failure to comply with foreign laws, which could result in increased costs and/or taxes.
Any one or a combination of these factors could adversely affect our annual and quarterly results of
operations in the future. See “Management’s Discussion and Analysis of Financial Condition and Results
of Operations — Results of Operations.”
If we do not manage our growth effectively, our profitability could decline.
Our business at times experiences periods of rapid growth which can place considerable demands upon
our management team and our operational, financial and management information systems. Our ability to
manage growth effectively requires us to continue to implement and improve these systems; avoid cost
overruns; maintain customer, supplier and other favorable business relationships during transition periods;
efficiently and effectively dedicate resources to existing customers; acquire or construct additional facilities;
occasionally transfer operations to different facilities; acquire equipment in anticipation of demand;
continue to develop the management skills of our managers and supervisors; adapt relatively quickly to new
markets or technologies and continue to train, motivate and manage our employees. Our failure to
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effectively manage growth, as well as our failure to realize the anticipated benefits of the actions we take to
try to manage our growth, could have a material adverse effect on our results of operations. See
“Management’s Discussion and Analysis of Financial Condition and Results of Operations.”
Because we depend on a limited number of customers, a reduction in sales to any one of those customers could
cause a significant decline in our revenue.
We currently depend, and expect to continue to depend for the foreseeable future, upon a relatively
small number of customers for a significant percentage of our net revenue and upon their growth, viability
and financial stability. See “Business — The Company.” In some instances, particular manufacturing
services we provide for a customer represent a significant portion of the overall revenue we receive from that
customer. As a result of this concentration, a reduction in business from one or more of our largest
customers could have a material adverse effect on our results of operations. In addition, if one or more of
our significant customers were to become insolvent or otherwise become unable to pay us on a timely basis,
or at all, our operating results and financial condition could be adversely affected.
Consolidation among our customers exposes us to increased risks, including reduced revenue and
dependence on a smaller number of customers. Increasing consolidation in industries that utilize our
services may occur as companies combine to achieve further economies of scale and other synergies, which
could result in an increase in excess manufacturing capacity as companies seek to divest manufacturing
operations or eliminate duplicative product lines. Excess manufacturing capacity may increase pricing and
competitive pressures for our industry as a whole and for us in particular. If one of our customers is
acquired by another company that does not rely on us to provide services and has its own production
facilities or relies on another provider of similar services, we may lose that customer’s business. Such
consolidation among our customers may further reduce the number of customers that generate a
significant percentage of our net revenue and expose us to increased risks relating to dependence on a small
number of customers.
Our customers face numerous competitive challenges, which may materially adversely affect their business and
ours.
Factors adversely affecting our customers may also adversely affect us. These factors include:
• recessionary periods in our customers’ markets;
• the inability of our customers to adapt to rapidly changing technology and evolving industry
standards, which may contribute to short product life cycles or shifts in our customers’ strategies;
• the inability of our customers to develop, market or gain commercial acceptance of their products,
some of which are new and untested;
• the potential that our customers’ products become commoditized or obsolete;
• loss of business or a reduction in pricing power experienced by our customers;
• the emergence of new business models or more popular products and shifting patterns of demand;
and
• a highly-competitive consumer products industry, which is often subject to shorter product
lifecycles, shifting end-user preferences and higher revenue volatility.
If our customers are unsuccessful in addressing these competitive challenges, their businesses may be
materially adversely affected, reducing the demand for our services, decreasing our revenues or altering our
production cycles and inventory management, each of which could adversely affect our ability to cover
fixed costs and our gross profit margins and results of operations.
Most of our customers do not commit to long-term production schedules, and they may cancel their orders,
change production quantities, delay production or change their sourcing strategy, which makes it difficult for us
to schedule production and manage capital expenditures and to maximize the efficiency of our manufacturing
capacity.
Most of our customers do not commit to firm production schedules for more than one quarter. We
make significant decisions, including determining the levels of business that we will seek and accept,
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production schedules, component procurement commitments, personnel needs and other resource
requirements, based on our estimate of customer requirements. Our inability to forecast the level of
customer orders with certainty makes it difficult to schedule production and maximize utilization of our
manufacturing capacity. In the past, we have been required to increase staffing and other expenses in order
to meet the anticipated demand. On occasion, customers may require rapid increases in production for one
or more of their products or request that we relocate our manufacturing operations or transfer
manufacturing from one facility to another, which can stress our resources and reduce operating margins.
Customers have canceled their orders, changed production quantities, delayed production, changed
their sourcing strategy and terminated their relationships with us. We cannot assure you that present or
future customers will not terminate their service arrangements with us or significantly change, reduce or
delay the amount of services ordered. Such changes, delays and cancellations have led to, and may lead in
the future to a decline in our production and our possession of excess or obsolete inventory that we may
not be able to sell to customers or third parties. This may result in write downs of inventories, a reduction in
the number of products that we sell, delays in payment for inventory that we purchased, and reductions in
the use of our manufacturing facilities. As many of our costs and operating expenses are relatively fixed, a
reduction in customer demand, particularly a reduction in demand for a product that represents a
significant amount of our revenue, can harm our gross profit margins and results of operations.
In addition, we sometimes experience difficulty forecasting the timing of our receipt of revenue and
earnings from customers. The necessary process to begin manufacturing can be lengthy. Because we make
capital expenditures during this ramping-up process and do not receive revenue until after we produce and
ship the customer’s products, any delays or unanticipated costs in the ramping-up process may have a
significant adverse effect on our cash flows and our results of operations. Servicing our largest customers
may also require us to increase our capital expenditures.
Customer relationships with emerging companies may present more risks than with established companies.
Customer relationships with emerging companies present special risks because we do not have an
extensive product or customer relationship history. There is less demonstration of market acceptance of
their products making it harder for us to anticipate requirements than with established customers. Our
credit risk on these customers, especially in trade accounts receivable and inventories, and the risk that these
customers will be unable to fulfill indemnification obligations to us are potentially increased. We sometimes
offer these customers extended payment terms, loans and other support and financial accommodations
which may increase our financial exposure.
Exposure to financially troubled customers or suppliers may adversely affect our financial results.
We provide manufacturing services to companies and industries that have in the past, and may in the
future, experience financial difficulty. If our customers experience financial difficulty, we could have
difficulty recovering amounts owed to us from these customers, or demand for our products from these
customers could decline. Additionally, if our suppliers experience financial difficulty, we could have
difficulty sourcing supplies necessary to fulfill production requirements. If one or more of our customers
were to become insolvent or otherwise were unable to pay for the services provided by us on a timely basis,
or at all, our operating results and financial condition could be adversely affected. Such adverse effects
could include one or more of the following: an increase in our provision for doubtful accounts, a charge for
inventory writeoffs, a reduction in revenue, and an increase in our working capital requirements due to
higher inventory levels and increases in days our accounts receivable are outstanding. In addition, because
we securitize certain of our accounts receivable, our securitization programs could be negatively affected by
customer financial difficulty affecting the recovery of a significant amount of receivables.
The success of our business is dependent on our ability to keep pace with technological changes and competitive
conditions in our industry, and our ability to effectively adapt our services as our customers react to
technological changes and competitive conditions in their respective industries.
If we are unable to offer technologically advanced, cost effective, quick response manufacturing
services that are differentiated from our competition and adapt those services as our customers’
requirements change, demand for our services will decline.
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Introducing new business models or programs requiring implementation of new competencies, such as new
process technologies and our development of new products or services for customers, could affect our
operations and financial results.
The introduction of new business models or programs requiring implementation or development of
new competencies, such as new process technology within our operations and our independent development
of new products or services for customers, presents challenges in addition to opportunities. The success of
new business models or programs depends on a number of factors including, but not limited to, a sufficient
understanding of the new business or markets, timely and successful product development (by us and/or
our customer), market acceptance, our ability to manage the risks associated with new product production
ramp-up, the effective management of purchase commitments and inventory levels in line with anticipated
product demand, our development or acquisition of appropriate intellectual property, the availability of
supplies in adequate quantities and at appropriate costs to meet anticipated demand, and the risk that new
products may have quality or other defects in the early stages of introduction. Accordingly, we cannot
determine in advance the ultimate result of new business models or programs.
As a result, we must make long-ter m investments, develop or obtain appropriate intellectual property
and commit significant resources before knowing whether our assumptions will accurately reflect customer
demand for our services. After the development of a new business model or program, we must be able to
manufacture appropriate volumes quickly and at low cost. To accomplish this, we endeavor to accurately
forecast volumes, mixes of products and configurations that meet customer requirements; however, we may
not succeed at doing so.
We compete with numerous other diversified manufacturing service providers, electronic manufacturing
services and design providers and others.
Our business is highly competitive and our manufacturing processes are generally not subject to
significant proprietary protection. We compete against numerous domestic and foreign electronic
manufacturers, manufacturing service providers and design providers. Past consolidation in our industry
has resulted in larger and more geographically diverse competitors who have significant combined
resources. The significant purchasing power and market power of these large companies could increase
pricing and competitive pressures for us. Most of our competitors have international operations and
significant financial resources and some have substantially greater manufacturing, research and
development (R&D) and marketing resources. These competitors may:
• respond more quickly to new or emerging technologies or changes in customer requirements;
• have technological expertise, engineering capabilities and/or manufacturing resources that are
greater than ours;
• have greater name recognition, critical mass and geographic market presence;
• be better able to take advantage of acquisition opportunities;
• devote greater resources to the development, promotion and sale of their services and execution of
their strategy;
• be better positioned to compete on price for their services;
• have excess capacity, and be better able to utilize such excess capacity;
• have greater direct buying power from component suppliers, distributors and raw material
suppliers;
• have lower cost structures as a result of their geographic location or the services they provide;
• be willing or able to make sales or provide services at lower margins than we do;
• have increased vertical capabilities providing them greater cost savings.
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We also face competition from the manufacturing operations of our current and potential customers,
who are continually evaluating the merits of manufacturing products internally against the advantages of
outsourcing. In the past, some of our customers moved a portion of their manufacturing from us in order
to more fully utilize their excess internal manufacturing capacity.
The actions of competitors and current and potential customers could cause a decline in our sales
and/or compression of our profits.
Our business could be adversely affected by any delays, or increased costs, resulting from common carrier or
transportation issues.
We rely on a variety of common carriers to transport our materials from our suppliers and to our
customers. Problems suffered by any of these common carriers, including natural disaster, labor problems,
increased energy prices, or criminal activity, could result in shipping delays for products or materials,
increased costs or other supply chain disruptions, and could therefore have a negative impact on our ability
to receive products from suppliers and deliver products to customers, resulting in a material adverse effect
on our operations.
We may not be able to maintain our engineering, technological and manufacturing expertise.
Many of the markets for our manufacturing and engineering services are characterized by rapidly
changing technology and evolving process development. The continued success of our business will depend
upon our ability to:
• hire, retain and expand our pool of qualified engineering and technical personnel;
• maintain and continually improve our technological expertise;
• develop and market manufacturing services that meet changing customer needs; and
• anticipate and respond to technological changes in manufacturing processes on a cost-effective
and timely basis.
Although we use the assembly and testing technologies, equipment and processes that are currently
required by our customers, we cannot be certain that we will be able to maintain or develop the capabilities
required by our customers in the future. The emergence of new technology, industry standards or customer
requirements may render our equipment, inventory or processes obsolete or noncompetitive. The
acquisition and implementation of new technologies and equipment and the offering of new or additional
services to our customers may require significant expense or capital investment, which could reduce our
operating margins and our operating results. In facilities that we newly establish or acquire, we may not be
able to insert or maintain our engineering, technological and manufacturing process expertise. Our failure
to anticipate and adapt to our customers’ changing technological needs and requirements or to hire
sufficient personnel to maintain our engineering, technological and manufacturing expertise could have a
material adverse effect on our results of operations.
We depend on attracting and retaining officers, managers and skilled personnel.
Our success depends to a large extent upon the continued services of our officers, managers and skilled
personnel. These employees are not generally bound by employment or non-competition agreements, and
we cannot assure you that we will retain them. To aid in managing our growth and strengthening our pool
of management and skilled personnel, we will need to internally develop, recruit and retain skilled
management personnel. If we are not able to do so, our business and our ability to continue to grow could
be harmed.
We depend on a limited number of suppliers for components that are critical to our manufacturing processes. A
shortage of these components or an increase in their price could interrupt our operations and reduce our profit,
increase our inventory carrying costs, increase our risk of exposure to inventory obsolescence and cause us to
purchase components of a lesser quality.
Most of our significant long-term customer contracts permit quarterly or other periodic adjustments
to pricing based on decreases and increases in component prices and other factors; however, we typically
bear the risk of component price increases that occur between any such re-pricings or, if such re-pricing is
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not permitted, during the balance of the term of the particular customer contract. Accordingly, certain
component price increases could adversely affect our gross profit margins and results of operations.
Some of the products we manufacture require one or more components that are only available from a
single source. Some of these components are subject to supply shortages from time to time. In some cases,
supply shortages will substantially curtail production of all assemblies using a particular component. A
supply shortage can also increase our cost of goods sold if we have to pay higher prices for components in
limited supply, or cause us to have to redesign or reconfigure products to accommodate a substitute
component. In the past there have been industry wide conditions, natural disasters and global events that
have caused material shortages. Our production of a customer’s product could be negatively impacted by
any quality, reliability or availability issues with any of our component suppliers. The financial condition of
our suppliers could affect their ability to supply us with components and their ability to satisfy any
warranty obligations they may have, which could have a material adverse effect on our results of operations.
If a component shortage is threatened or anticipated, we may purchase such components early to avoid
a delay or interruption in our operations. Purchasing components early may cause us to incur additional
inventory carrying costs and may cause us to experience inventory obsolescence, both of which may not be
recoverable from our customers and could adversely affect our gross profit margins and net income. A
component shortage may also require us to look to second tier vendors or to procure components through
brokers with whom we are not familiar. These components may be of lesser quality than those we have
historically purchased and could cause us to incur costs to bring such components up to our quality levels
or to replace defective ones. See “Management’s Discussion and Analysis of Financial Condition and
Results of Operations” and “Business — Components Procurement.”
We derive a substantial majority of our revenues from our international operations, which may be subject to a
number of different risks and often require more management time and expense than our domestic operations.
Our international operations are subject to a number of risks, including:
• difficulties in staffing and managing foreign operations and attempting to ensure compliance with
our policies, procedures, and applicable local laws;
• less flexible employee relationships that can be difficult and expensive to terminate due to, among
other things, labor laws and regulations;
• rising labor costs (including the introduction or expansion of certain social programs), in
particular within the lower-cost regions in which we operate, due to, among other things,
demographic changes and economic development in those regions;
• labor unrest and dissatisfaction, including potential labor strikes or claims;
• increased scrutiny by the media and other third parties of labor practices within our industry
(including working conditions, compliance with employment and labor laws and compensation)
which may result in allegations of violations, more stringent and burdensome labor laws and
regulations, higher labor costs and/or loss of revenues if our customers become dissatisfied with
our labor practices and diminish or terminate their relationship with us;
• burdens of complying with a wide variety of foreign laws, including those relating to export and
import duties, domestic and foreign import and export controls, trade barriers (including tariffs
and quotas), environmental policies and privacy issues, and local statutory corporate governance
rules;
• risk of non-compliance with the U.S. Foreign Corrupt Practices Act (the “FCPA”) or similar
regulations in other jurisdictions;
• less favorable, or relatively undefined, intellectual property laws;
• lack of sufficient or available locations from which to operate or inability to renew leases on terms
that are acceptable to us or at all;
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• unexpected changes in regulatory requirements and laws or government or judicial interpretations
of such regulatory requirements and laws and adverse trade policies, and adverse changes to any
of the policies of either the U.S. or any of the foreign jurisdictions in which we operate;
• adverse changes in tax rates or accounting rules and the manner in which the U.S. and other
countries tax multinational companies or interpret their tax laws or accounting rules or
restrictions on the transfer of funds to us from our operations outside the U.S.;
• limitations on imports or exports of components or products, or other trade sanctions;
• political and economic instability and unsafe working conditions;
• risk of governmental expropriation of our property;
• inadequate infrastructure for our operations (e.g., lack of adequate power, water, transportation
and raw materials);
• legal or political constraints on our ability to maintain or increase prices;
• health concerns and related government actions;
• increased travel costs and difficulty in coordinating our communications and logistics across
geographic distances and multiple time zones;
• longer customer payment cycles and difficulty collecting trade accounts receivable;
• fluctuations in currency exchange rates; and
• economies that are emerging or developing or that may be subject to greater currency volatility,
negative growth, high inflation, limited availability of foreign exchange and other risks.
In particular, a significant portion of our manufacturing, design, support and storage operations are
conducted in our facilities in China, and revenues associated with our China operations are important to
our success. Therefore, our business, financial condition and results of operations may be materially
adversely affected by economic, political, legal, regulatory, competitive and other factors in China.
International trade disputes with China could result in tariffs and other measures that could adversely affect
the Company’s business. The Chinese economy differs from the economies of most developed countries in
many respects, including the level of government involvement and control over economic growth. In
addition, our operations in China are governed by Chinese laws, rules and regulations, some of which are
relatively new. The Chinese legal system continues to rapidly evolve, which may result in uncertainties with
respect to the interpretation and enforcement of Chinese laws, rules and regulations that could have a
material adverse effect on our business. China experiences high turnover of direct labor in the
manufacturing sector due to the intensely competitive and fluid market for labor, and the retention of
adequate labor is a challenge. If our labor turnover rates are higher than we expect, or we otherwise fail to
adequately manage our labor needs, then our business and results of operations could be adversely affected.
We are also subject to risks associated with our subsidiaries organized in China. For example, regulatory
and registration requirements and government approvals affect the financing that we can provide to our
subsidiaries. If we fail to receive required registrations and approvals to fund our subsidiaries organized in
China, or if our ability to remit currency out of China is limited, then our business and liquidity could be
adversely affected.
These factors may harm our results of operations. Also, any measures that we may implement to
reduce risks of our international operations may not be effective, may increase our expenses and may
require significant management time and effort. Entry into new international markets requires considerable
management time as well as start-up expenses related to market, personnel and facilities development before
any significant revenue is generated. As a result, initial operations in a new market may operate at low
margins or may be unprofitable.
Although we have implemented policies and procedures designed to cause compliance with the FCPA
and similar laws, there can be no assurance that all of our employees and agents, as well as those companies
to which we outsource certain of our business operations, will not take actions in violation of our policies
which could have a material adverse effect on our operations.
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We have on occasion not achieved, and may not in the future achieve, expected profitability from our
acquisitions.
We have in the past and will continue to seek and complete acquisitions. We cannot assure you that we
will be able to successfully integrate the operations and management of our recent acquisitions. Similarly,
we cannot assure you that we will be able to identify future strategic acquisitions and adequately conduct
due diligence, consummate these potential acquisitions on favorable terms, if at all, or if consummated,
successfully integrate the operations and management of future acquisitions. Acquisitions involve
significant risks, which could have a material adverse effect on us including:
• Financial risks, such as: (1) overpayment; (2) an increase in our expenses and working capital
requirements; (3) exposure to liabilities of the acquired businesses, with contractually-based time
and monetary limitations on a seller’s obligation to indemnify us; (4) integration costs or failure to
achieve synergy targets; (5) incurrence of additional debt; (6) valuation of goodwill and other
intangible assets; (7) possible adverse tax and accounting effects; (8) the risk that we acquire
manufacturing facilities and assume significant contractual and other obligations with no
guaranteed levels of revenue; (9) the risk that, in the future, we may have to close or sell acquired
facilities at our cost, which may include substantial employee severance costs and asset write-offs,
which have resulted, and may result, in our incurring significant losses; and (10) costs associated
with environmental risks including f ines, remediation and clean-up.
• Operating risks, such as: (1) the diversion of management’s attention and resources to the
integration of the acquired businesses and their employees and to the management of expanding
operations; (2) the risk that the acquired businesses will fail to maintain the quality of services that
we have historically provided; (3) the need to implement financial and other systems and add
management resources; (4) the need to maintain customer, supplier or other favorable business
relationships of acquired operations and restructure or terminate unfavorable relationships; (5) the
potential for deficiencies in internal controls of the acquired operations; (6) the inability to attract
and retain the employees necessary to support the acquired businesses; (7) potential inexperience
in a line of business that is either new to us or that has become materially more significant to us as
a result of the transaction; (8) unforeseen difficulties (including any unanticipated liabilities) in the
acquired operations; (9) the impact on us of any unionized work force we may acquire or any
labor disruptions that might occur; (10) the possibility that the acquired business’s past
transactions or practices before our acquisition may lead to future commercial or regulatory risks;
(11) the difficulty of presenting a unified corporate image; (12) the possibility that we will have
unutilized capacity due to our acquisition activity; (13) when acquiring an operation from a
customer and continuing or entering into a supply arrangement, our inability to meet the
expectations of the customer as to volume, product quality, timeliness and cost reductions.
Although we conduct what we believe to be a prudent level of due diligence regarding the businesses
we purchase, in light of the circumstances of each transaction, an unavoidable level of risk remains
regarding the actual condition of these businesses. Until we actually assume operating control of such
businesses and their assets and operations, we may not be able to ascertain the actual value or understand
the potential liabilities of the acquired entities and their operations.
Most of our acquisitions involve operations outside of the U.S., which are subject to various risks
including those described in “Risk Factors — We derive a substantial majority of our revenue from our
international operations, which may be subject to a number of risks and often require more management
time and expense than our domestic operations.”
We have acquired and may continue to pursue the acquisition of manufacturing and supply chain
management operations from our customers (or potential customers). In these acquisitions, the divesting
company will typically enter into a supply arrangement with the acquirer. Therefore, our competitors often
also pursue these acquisitions. In addition, certain divesting companies may choose not to offer to sell their
operations to us because of our current supply arrangements with other companies or may require terms
and conditions that may impact our profitability. If we are unable to attract and consummate some of these
acquisition opportunities at favorable terms, our growth and profitability could be adversely impacted.
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We have expanded the primary scope of our acquisitions strategy beyond focusing on acquisition
opportunities presented by companies divesting internal manufacturing operations. As we continue to
pursue acquisitions that diversify our business into new industry sectors with new customers and services,
the amount and scope of the risks associated may extend beyond those that we have traditionally faced in
making acquisitions. These risks include greater uncertainties in the financial benefits and potential
liabilities associated with this expanded base of acquisitions.
We face risks arising from the restructuring of our operations.
Over the past several years, we have undertaken initiatives to restructure our business operations with
the intention of improving utilization and realizing cost savings. These initiatives have included changing
the number and location of our production facilities, largely to align our capacity and infrastructure with
current and anticipated customer demand. The process of restructuring entails, among other activities,
moving production between facilities, transferring programs from higher cost geographies to lower cost
geographies, closing facilities, reducing the level of staff, realigning our business processes and reorganizing
our management.
Restructurings could adversely affect us, including a decrease in employee morale, delays encountered
in finalizing the scope of, and implementing, the restructurings, failure to achieve targeted cost savings, and
failure to meet operational targets and customer requirements due to the restructuring process. These risks
are further complicated by our extensive international operations, which subject us to different legal and
regulatory requirements that govern the extent and speed of our ability to reduce our manufacturing
capacity and workforce.
When financial markets experience significant turmoil, the financial arrangements we may need to enter into,
refinance or repay and our customers may be adversely affected.
Credit market turmoil could negatively impact the counterparties and lenders to our forward foreign
exchange contracts, trade accounts receivable securitization and sale programs, unsecured credit and term
loan facilities, various foreign subsidiary credit facilities and other debt facilities. These potential negative
impacts could limit our ability to borrow under these financing agreements, contracts, facilities and
programs or renew or obtain future additional financing. Credit market turmoil could also negatively
impact certain of our customers and certain of their respective customers, which could cause them to
reduce or cancel their orders and have a negative effect on our results of operations.
We can offer no assurance under the uncommitted trade accounts receivable sales programs that if we
attempt to sell receivables through such programs in the future that we will receive funding from the
associated banks, which would require us to utilize other available sources of liquidity, including our
revolving credit facilities.
We are subject to extensive government regulations and industry standards and the terms of complex contracts;
a failure to comply with current and future regulations and standards, or the terms of our contractual
arrangements, could have an adverse effect on our business, customer relationships, reputation and
profitability.
We are subject to extensive government regulation and industry standards relating to the products we
design and manufacture as well as how we conduct our business, including regulations and standards
relating to labor and employment practices, workplace health and safety, the environment, sourcing and
import/export practices, the market sectors we support, privacy and data protection, the regulations that
apply to government contracts, and many other facets of our operations. The regulatory climate in the U.S.
and other countries has become increasingly complex and fragmented, and regulatory activity has increased
in recent periods. Failure or noncompliance with such regulations or standards could have an adverse effect
on our reputation, customer relationships, profitability and results of operations. In addition, we annually
enter into a large number of complex contractual arrangements as well as operate pursuant to the terms of
a significant number of ongoing intricate contractual arrangements. Our failure to comply with the terms of
such arrangements could have an adverse effect on our reputation, customer relationships, profitability and
results of operations.
18
If we manufacture products containing design or manufacturing defects, demand for our services may decline,
our reputation may be damaged and we may be subject to liability claims.
Our customers’ products and the manufacturing processes and design services that we use to produce
them often are highly complex. Defects in the products we manufacture or design, whether caused by a
design, manufacturing or component failure or error, or deficiencies in our manufacturing processes, may
result in delayed shipments to customers or reduced or canceled customer orders. If these defects or
deficiencies are significant, our business reputation may also be damaged. The failure of the products that
we manufacture or of our manufacturing processes or facilities may subject us to regulatory enforcement,
fines or penalties and, in some cases, require us to shut down, temporarily halt operations or incur
considerable expense to correct a manufacturing process or facility. In addition, these defects may result in
liability claims against us, expose us to liability to pay for the recall or remanufacture of a product or
adversely affect product sales or our reputation. Even if our customers are responsible for the defects or
defective specifications, they may not, or may not have resources to, assume responsibility for any costs or
liabilities arising from these defects, which could expose us to additional liability claims. Any of these
actions could increase our expenses, reduce our revenue or damage our reputation as a supplier to these
customers.
We may face heightened liability risks specific to our medical device business as a result of additional
healthcare regulatory related compliance requirements and the potential severe consequences (e.g., death or
serious injury) that could result from manufacturing defects or malfunctions of the medical devices we
manufacture or design.
As a service provider engaged in the business of designing and manufacturing medical devices for our
customers, we have compliance requirements in addition to those relating to other industries we serve
within our business. We are required to register with the U.S. Food and Drug Administration (“FDA”) and
are subject to periodic inspection by the FDA for compliance with the FDA’s Quality System Regulation
(“QSR”), including current Good Manufacturing Practices (cGMPs). This regulation establishes
requirements for manufacturers of medical devices to implement design and process manufacturing
controls, quality control, labeling, handling and documentation procedures. The FDA, through periodic
inspections and post-market surveillance, continuously and rigorously monitors compliance with these QSR
requirements and other applicable regulatory requirements. If any FDA inspection reveals noncompliance,
and we do not address the FDA’s concerns to its satisfaction, the FDA may elect to take enforcement action
against us, including issuing inspection observations or a notice of violation or a warning letter, imposing
fines, bringing an action against the Company and its officers, requiring a recall of the products we
manufactured, issuing an import detention on products entering the U.S. from an offshore facility or
temporarily halting operations at or shutting down a manufacturing facility.
Beyond the FDA, our medical device business is also subject to applicable state and foreign regulatory
requirements. Within the European Union (“EU”), we are required to fulfill certain internationally
recognized standards and must undergo periodic inspections to obtain and maintain certifications to these
standards. Continued noncompliance to the EU regulations could stop the flow of products into the EU
from us or from our customers. In China, the Safe Food and Drug Administration controls and regulates
the manufacture and commerce of healthcare products. We must comply with the regulatory laws applicable
to medical device manufactures or our ability to manufacture products in China could be impacted. In
Japan, the Pharmaceutical Affairs Laws regulate the manufacture and commerce of healthcare products.
These regulations also require that subcontractors manufacturing products intended for sale in Japan
register with authorities and submit to regulatory audits. Other foreign countries where we operate have
similar laws regarding the regulation of medical device manufacturing. In the event of any noncompliance
with these requirements, interruption of our operations and/or ability to allow commerce in these markets
could occur, which in turn could cause our reputation and business to suffer.
Compliance or the failure to comply with current and future environmental, health and safety, product
stewardship and producer responsibility laws or regulations could cause us significant expense.
We are subject to a variety of federal, state, local and foreign environmental, health and safety, product
stewardship and producer responsibility laws and regulations, including those relating to the use,
generation, storage, discharge and disposal of hazardous chemicals used during our manufacturing process,
19
those governing worker health and safety, those requiring design changes, supply chain investigation or
conformity assessments and those relating to the recycling or reuse of products we manufacture. If we fail
to comply with any present or future regulations or timely obtain any needed permits, we could become
subject to liabilities, and we could face fines or penalties, the suspension of production, or prohibitions on
sales of products we manufacture. In addition, such regulations could restrict our ability to expand our
facilities or could require us to acquire costly equipment, or to incur other significant expenses, including
expenses associated with the recall of any non-compliant product or with changes in our operational,
procurement and inventory management activities.
Certain environmental laws impose liability for the costs of investigation, removal and remediation of
hazardous or toxic substances on an owner, occupier or operator of real estate, or on parties who arranged
for hazardous substance treatment or disposal, even if such person or company was unaware of, or not
responsible for, contamination at the affected site. Soil and groundwater contamination may have occurred
at or near, or may have arisen from, some of our facilities. From time to time we investigate, remediate and
monitor soil and groundwater contamination at certain of our operating sites. In certain instances where
contamination existed prior to our ownership or occupation of a site, landlords or former owners have
retained some contractual responsibility for contamination and remediation. However, failure of such
persons to perform those obligations could result in us being required to address such contamination. As a
result, we may incur clean-up costs in such potential removal or remediation efforts. In other instances, we
may be responsible for clean-up costs and other liabilities, including the possibility of claims due to health
risks by both employees and non-employees, as well as other third-party claims in connection with
contaminated sites.
In addition, there is an increasing governmental focus around the world on global warming and
environmental impact issues, which may result in new environmental, health and safety regulations that may
affect us, our suppliers and our customers. This could cause us to incur additional direct costs for
compliance, as well as increased indirect costs resulting from our customers, suppliers or both incurring
additional compliance costs that get passed on to us. These costs may adversely impact our operations and
financial condition.
We have limited insurance coverage for potential environmental liabilities associated with current
operations and we do not anticipate increasing such coverage in the future.
Our manufacturing, production and design processes and services may result in exposure to intellectual
property infringement and other claims.
Providing manufacturing services can expose us to potential claims that products, designs or
manufacturing processes we use infringe third party intellectual property rights. Even though many of our
manufacturing services contracts require our customers to indemnify us for infringement claims relating to
their products, including associated product specifications and designs, a particular customer may not, or
may not have the resources to, assume responsibility for such claims. In addition, we may be responsible for
claims that our manufacturing processes or components used in manufacturing infringe third party
intellectual property rights. Providing turnkey design solutions, and design and other services can expose us
to different or greater potential liabilities than those we face providing just manufacturing services,
including an increase in exposure to potential claims that products we design or supply, or materials or
components we use, infringe third party property rights. Infringement claims could subject us to significant
liability for damages, potential injunctive action, or hamper our normal operations such as by interfering
with the availability of components. Regardless of merits of any such claim, it could be time-consuming
and expensive to resolve, and have a material adverse effect on our results of operations and financial
position. In the event of such a claim, we may spend significant amounts of money and effort to develop
non-infringing alternatives or obtain and maintain licenses. We may not be successful in developing such
alternatives or obtaining and maintaining such licenses on reasonable terms or at all. Our customers may be
required to or decide to discontinue products that are alleged to be infringing rather than face continued
costs of defending infringement claims, and such discontinuance may result in a significant decrease in our
business and/or could have a material adverse effect on our results of operations and financial position.
These risks may be heightened in connection with our customer relationships with emerging companies.
Components we purchase, products we design and/or manufacture and/or services we provide may
infringe the intellectual property rights of third parties, some of whom may hold key intellectual property
20
rights in areas in which we operate. Our customers or suppliers could also become subject to infringement
claims. Patent clearance or licensing activities, if any, may be inadequate to anticipate and avoid third party
claims. Additionally, customers for our services in which we have signif icant technology contributions,
typically require that we indemnify them against the risk of intellectual property infringement. If any claims
are brought against our customers, our suppliers or us for such infringement, regardless of their merits, we
could be required to expend significant resources in the defense or settlement of such claims, or in the
defense or settlement of related indemnification claims. In the event of a claim, we may be required to
spend significant amounts of money and effort to develop non-infringing alternatives or obtain and
maintain licenses. We may not be successful in developing such alternatives or obtaining or maintaining
such licenses on reasonable terms or at all. We, our suppliers or our customers may be required to or decide
to discontinue products which are alleged to be infringing rather than face continued costs of defending the
infringement claims, and such discontinuance may result in a significant decrease in our business, and could
have a material adverse effect on our results of operations and financial position.
The success of certain aspects of our business depends in part on our ability to obtain, protect and leverage
intellectual property rights.
In certain circumstances, we strive to obtain and protect certain intellectual property rights related to
solutions, designs, processes and products that we create. We believe that obtaining a significant level of
protected proprietary technology may give us a competitive advantage. In addition to selectively relying on
patent rights, we rely on unpatented proprietary know-how and trade secrets, and employ various methods,
including non-disclosure agreements with our customers, employees and suppliers and our internal security
systems, policies and procedures to protect our know-how and trade secrets. However, we cannot be certain
the measures we employ will result in protected intellectual property rights or will result in the prevention of
unauthorized use of our technology. If we are unable to obtain and protect intellectual property rights
embodied within our solutions, designs, processes and products, this could reduce or eliminate competitive
advantages of our proprietary technology, which would harm our business and could have a material
adverse effect on our results of operations and financial position.
Even if we take steps to protect certain intellectual property rights, these mechanisms may not afford
complete or sufficient protection, and misappropriation may still occur. Further, there can be no assurance
that we will be able to acquire or enforce our patent or other rights, if any, and that others will not
independently develop similar know-how and trade secrets, or develop better production methods than us.
We have not historically sought patent protection for many of our proprietary processes, designs or other
patentable intellectual property. Further, we may not be able to prevent current and former employees,
contractors and other parties from breaching non-disclosure agreements and misappropriating proprietary
information. If any of the foregoing occur, it could impair our ability to compete with others in our
industry, result in a significant decrease in our business and/or could have material adverse effect on our
results of operations and financial position.
Any delay in the implementation of our information systems could disrupt our operations and cause
unanticipated increases in our costs.
We are currently in the process of completing the installation of an enterprise resource planning system
in certain of our manufacturing facilities, which will replace the existing planning and financial information
systems. Any delay in the implementation of these information systems could result in material adverse
consequences, including disruption of operations, loss of information and unanticipated increases in costs.
Disruptions to our information systems, including security breaches, losses of data or outages, and other
security issues, could adversely affect our operations.
We rely on information systems, some of which are owned and operated by third parties, to store,
process and transmit confidential information, including financial reporting, inventory management,
procurement, invoicing and electronic communications, belonging to our customers, our suppliers, our
employees and/or us. We attempt to monitor and mitigate our exposure and modify our systems when
warranted and we have implemented certain business continuity items including data backups at alternative
sites. Nevertheless, these systems are vulnerable to, and at times have suffered from, among other things,
21
damage from power loss or natural disasters, computer system and network failures, loss of
telecommunication services, physical and electronic loss of data, terrorist attacks, security breaches and
computer viruses. We regularly face attempts by others to access our information systems in an
unauthorized manner, to introduce malicious software to such systems or both. The increased use of mobile
technologies can heighten these and other operational risks. If we, or the third parties who own and operate
certain of our information systems, are unable to prevent such breaches, losses of data and outages, our
operations could be disrupted. Also, the time and funds spent on monitoring and mitigating our exposure
and responding to breaches, including the training of employees, the purchase of protective technologies
and the hiring of additional employees and consultants to assist in these efforts could adversely affect our
financial results. The increasing sophistication of cyberattacks requires us to continually evaluate new
technologies and processes intended to detect and prevent these attacks. There can be no assurance that the
security measures we choose to implement will be sufficient to protect the data we manage. Finally, any
theft or misuse of information resulting from a security breach could result in, among other things, loss of
significant and/or sensitive information, litigation by affected parties, financial obligations resulting from
such theft or misuse, higher insurance premiums, governmental investigations, negative reactions from
current and potential future customers (including potential negative financial ramifications under certain
customer contract provisions) and poor publicity and any of these could adversely affect our financial
results.
We are subject to the risk of increased taxes.
We base our tax position upon the anticipated nature and conduct of our business and upon our
understanding of the tax laws of the various countries in which we have assets or conduct activities. Our tax
position, however, is subject to review and possible challenge by taxing authorities and to possible changes
in law (including adverse changes to the manner in which the U.S. and other countries tax multinational
companies or interpret their tax laws). We cannot determine in advance the extent to which some
jurisdictions may assess additional tax or interest and penalties on such additional taxes. In addition, our
effective tax rate may be increased by the generation of higher income in countries with higher tax rates,
changes in the valuation of deferred tax assets and liabilities, changes in our cash management strategies,
changes in local tax rates or countries adopting more aggressive interpretations of tax laws.
In the United States, comprehensive tax legislation commonly referred to as the Tax Cuts and Jobs Act
of 2017 (“Tax Act”) was enacted on December 22, 2017. The Tax Act contains a broad range of tax reform
provisions that reduced the corporate tax rate, limited or eliminated certain tax deductions, and changed the
taxation of foreign earnings of U.S. multinational companies. The Tax Act requires complex calculations to
be performed that were not previously required in U.S. tax law, significant judgments, estimates in
calculations, and the preparation and analysis of information not previously relevant or regularly produced.
The U.S. Treasury Department, the Internal Revenue Service, and other standard-setting bodies could
interpret or issue guidance on how provisions of the Tax Act will be applied or otherwise administered that
are different from our interpretation. In response to the Tax Act, foreign governments may enact new tax
laws or new interpretations of the existing tax laws. The full extent of the impact remains uncertain at this
time and could adversely impact our effective tax rate and operating results.
Refer to Note 4 — “Income Taxes” to the Consolidated Financial Statements for details of the field
examinations completed by the Internal Revenue Service (“IRS”) of our tax returns for the fiscal years 2012
through 2014 and fiscal years 2009 through 2011 which resulted in proposed adjustments. While we
currently believe that the resolution of these issues will not have a material adverse effect on our financial
position, results of operations or cash flows, an unfavorable resolution could have a material adverse effect
on our operating results and financial condition.
Several countries in which we are located allow for tax incentives to attract and retain business. We
have obtained incentives where available and practicable. Our taxes could increase if certain tax incentives
are retracted, which could occur if we are unable to satisfy the conditions on which such incentives are
based, if they are not renewed upon expiration, or if tax rates applicable to us in such jurisdictions
otherwise increase. It is not anticipated that any material tax incentives will expire within the next year.
However, due to the possibility of changes in existing tax law and our operations, we are unable to predict
how any expirations will impact us in the future. In addition, acquisitions may cause our effective tax rate to
increase, depending on the jurisdictions in which the acquired operations are located.
22
Certain of our subsidiaries provide financing, products and services to, and may undertake certain
significant transactions with, other subsidiaries in different jurisdictions. Several jurisdictions in which we
operate have tax laws with detailed transfer pricing rules that require that all transactions with non-resident
related parties be priced using arm’s length pricing principles, and that contemporaneous documentation
must exist to support such pricing. There is a risk that the taxing authorities may not deem our transfer
pricing documentation acceptable. In addition, the Organization for Economic Cooperation and
Development continues to issue guidelines and proposals related to Base Erosion and Profit Shifting which
may result in legislative changes that could reshape international tax rules in numerous countries and
negatively impact our effective tax rate.
Our credit rating may be downgraded.
Our credit is and certain of our financial instruments are rated by credit rating agencies. Any potential
future negative change in our credit ratings may make it more expensive for us to raise additional capital on
terms that are acceptable to us, if at all; negatively impact the price of our common stock; increase our
interest payments under existing debt agreements; and have other negative implications on our business,
many of which are beyond our control. In addition, the interest rate payable under the 2017 Credit Facility
(as such terms are defined in Note 8 — “Notes Payable and Long-Term Debt” to the Consolidated
Financial Statements) is subject to adjustment from time to time if our credit ratings change. Thus, any
potential future negative change in our credit rating may increase the interest rate payable on the 2017
Credit Facility and certain of our other borrowings.
Our amount of debt could significantly increase in the future.
The Company has a number of debt facilities. Refer to “Management’s Discussion and Analysis of
Financial Condition and Results of Operations — Liquidity and Capital Resources” and Note 8 — “Notes
Payable and Long-Term Debt” to the Consolidated Financial Statements for further details.
Should we desire to consummate significant additional acquisition opportunities, undertake significant
additional expansion activities, or make substantial investments in our infrastructure or in support of
customer opportunities, our capital needs would increase and could 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. An increase in the level of our indebtedness, among other things, could:
• make it difficult for us to obtain any necessary financing in the future for other acquisitions,
working capital, capital expenditures, debt service requirements or other purposes;
• limit our flexibility in planning for, or reacting to changes in, our business;
• make us more vulnerable in the event of a downturn in our business; and
• impact certain financial covenants that we are subject to in connection with our debt and
asset-backed securitization programs.
There can be no assurance that we will be able to meet future debt service obligations.
An adverse change in the interest rates for our borrowings could adversely affect our financial condition.
We pay interest on outstanding borrowings under our revolving credit facilities and certain other long
term debt obligations at interest rates that fluctuate based upon changes in various base interest rates. An
adverse change in the base rates upon which our interest rates are determined could have a material adverse
effect on our financial position, results of operations and cash flows. If certain economic or fiscal issues
occur, interest rates could rise, which would increase our interest costs and reduce our net income. Also,
increased interest rates could make any future fixed interest rate debt obligations more expensive.
We are subject to risks of currency fluctuations and related hedging operations.
Although a significant number of our operations are located outside the United States, the majority of
our business is conducted in U.S. dollars. Changes in exchange rates will affect our net revenue, cost of
sales, operating margins and net income. We cannot predict the impact of future exchange rate fluctuations.
23
We use financial instruments, primarily forward contracts, to hedge our exposure to exchange rate
fluctuations. We believe that our hedging activities enable us to largely protect ourselves from future
exchange rate fluctuations. If, however, these hedging activities are not successful, if the counterparties to
these hedging activities default on their obligations to us or if we change or reduce these hedging activities
in the future, we may experience significant unexpected expenses from fluctuations in exchange rates. In
addition, certain countries in which we operate have adopted, or may adopt, currency controls requiring
that local transactions be settled only in local currency. Such controls could require us to hedge larger
amounts of local currency than we have in the past.
Changes in financial accounting standards or policies have affected, and in the future may affect, our reported
financial condition or results of operations.
We prepare our financial statements in conformity with U.S. GAAP. These principles are subject to
interpretation by the Financial Accounting Standards Board (FASB), the American Institute of Certified
Public Accountants, the SEC and various bodies formed to interpret and create appropriate accounting
policies. A change in these policies can have a significant effect on our reported results and may affect our
reporting of transactions that are completed before a change is announced. Changes to those rules or
questions as to how we interpret or implement them may have a material adverse effect on our reported
financial results or on the way we conduct business. For example, significant changes to revenue recognition
rules have been adopted and will begin to apply to us in fiscal year 2019.
Energy price increases may negatively impact our results of operations.
Certain of the components that we use in our manufacturing activities are petroleum-based. In
addition, we, along with our suppliers and customers, rely on various energy sources (including oil) in our
facilities and transportation activities. An increase in energy prices, which have been volatile historically,
could cause an increase in our raw material costs and transportation costs. In addition, increased
transportation costs of certain of our suppliers and customers could be passed along to us. We may not be
able to increase our product prices enough to offset these increased costs. In addition, any increase in our
product prices may reduce our future customer orders and profitability.
We are subject to risks associated with natural disasters, climate change and global events.
Our operations and those of our customers and suppliers may be subject to natural disasters, climate
change-related events, or other business disruptions, which could seriously harm our results of operation
and increase our costs and expenses. We are susceptible to losses and interruptions caused by hurricanes
(including in Florida, where our headquarters are located), earthquakes, power shortages,
telecommunications failures, water or other natural resource shortages, tsunamis, floods, typhoons,
drought, fire, extreme weather conditions, rising sea level, geopolitical events such as direct or indirect
terrorist acts or acts of war, other natural or manmade disasters, boycotts and sanctions or widespread
criminal activities. Such events could make it difficult or impossible to manufacture or to deliver products to
our customers, receive production materials from our suppliers, or perform critical functions, which could
adversely affect our business globally or in certain regions. While we maintain similar manufacturing
capacities at different locations and coordinate multi-source supplier programs on many of our materials,
which we believe better enables us to respond to these types of events, we cannot be sure that our plans will
fully protect us from all such disruptions. Our insurance coverage with respect to natural disasters is limited
and is subject to deductibles and coverage limits. Such coverage may not be adequate, or may not continue
to be available at commercially reasonable rates and terms.
While we manufacture our products in a large number of diversified facilities and maintain insurance
covering our facilities, including business interruption insurance, a catastrophic loss of the use of all or a
portion of one of our key manufacturing facilities due to accident, labor issues, weather conditions, natural
disaster or otherwise, whether short- or long-term, could have a material adverse effect on us.
Item 1B. Unresolved Staff Comments
There are no unresolved written comments from the SEC staff regarding our periodic or current
reports.
24
Item 2. Properties
We own or lease facilities located in the countries listed below. We believe that our properties are
generally in good condition, are well maintained and are generally suitable and adequate to carry out our
business at expected capacity for the foreseeable future.
The table below lists the approximate square footage for our facilities as of August 31, 2018:
Location
Approximate
Square Footage Description of Use
Austria ................... 97,000 Design, Manufacturing
Belgium .................. 66,000 Design
Brazil
(2)
.................. 314,000 Manufacturing
Canada .................. 13,000 Design
China
(2)(3)
................. 22,729,000 Design, Manufacturing, Prototype Manufacturing,
Storage, Support
Finland .................. 12,000 Design
France
(1)
.................. 80,000 Manufacturing, Support
Germany ................. 225,000 Design, Manufacturing, Support
Hungary .................. 1,451,000 Manufacturing, Storage
India
(1)
................... 646,000 Manufacturing, Storage, Support
Indonesia ................. 210,000 Manufacturing
Ireland
(2)
................. 354,000 Manufacturing
Israel .................... 212,000 Design, Manufacturing, Support
Italy
(2)
................... 308,000 Manufacturing, Storage
Japan .................... 49,000 Manufacturing, Support
Malaysia .................. 1,413,000 Manufacturing, Storage, Support
Mexico
(2)
................. 3,671,000 Manufacturing, Storage, Support
The Netherlands ............ 420,000 Manufacturing
Poland
(2)
.................. 705,000 Manufacturing, Storage
Russia
(2)
.................. 64,000 Manufacturing
Scotland
(2)
................ 143,000 Manufacturing, Support
Singapore ................. 353,000 Design, Manufacturing, Storage, Support
South Africa
(2)
............. 30,000 Support
Spain .................... 788,000 Design, Manufacturing, Storage, Support
Sweden ................... 1,000 Support
Taiwan................... 1,210,000 Design, Manufacturing, Support
Ukraine .................. 259,000 Manufacturing
United States
(2)
............. 8,497,000 Design, Manufacturing, Prototype Manufacturing,
Prototype Design, Support, Storage
Vietnam .................. 293,000 Manufacturing
Total as of August 31, 2018 ..... 44,613,000
(1) The facilities located in Chartes, France and Chennai, India are no longer used in our business
operations.
(2) A portion of the facilities located in Valinhos, Brazil; Chengdu, Wuhan and Yantai, China;
St. Petersburg, Florida; Hanover Park, Illinois; Waterford, Ireland; Marcianise, Italy; Guadalajara,
Mexico; Kwidzyn, Poland; Tver, Russia; Livingston, Scotland; Johannesburg, South Africa; and
Memphis, Tennessee are not currently used in business operations.
25
(3) The properties in China include approximately 5.9 million square feet of leased property in Chengdu,
approximately 4.2 million square feet of property in Huangpu (of which approximately 2.6 million is
owned and approximately 1.6 million is leased) and approximately 6.0 million square feet of property
in Wuxi (of which approximately 5.2 million is leased and 0.8 million is owned).
As of August 31, 2018, our facilities consist of 18,821,000 square feet in facilities that we own, with the
remaining 25,792,000 square feet in leased facilities. The majority of the square footage in the table above is
active manufacturing space. The properties listed in the table above are reported in both the EMS and DMS
operating segments, as both segments use these properties. Our manufacturing facilities are ISO certified to
ISO 9001:2008 standards and most are also certified to ISO-14001:2004 environmental standards.
Item 3. 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 4. Mine Safety Disclosures
Not applicable.
26
PART I I
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of
Equity Securities
Market Information and Dividends
Our common stock trades on the New York Stock Exchange under the symbol “JBL.” The following
table sets forth the high and low intraday sales prices per share for our common stock as reported on the
New York Stock Exchange and the cash dividends declared per share for the fiscal periods indicated:
Sales Price per Share
Fiscal Year 2018 Fiscal Year 2017 Dividends per Share
(1)
High Low High Low Fiscal Year 2018 Fiscal Year 2017
First Quarter ................. $31.60 $27.29 $23.85 $20.32 $0.08 $0.08
Second Quarter ................ $29.03 $23.70 $26.34 $20.43 $0.08 $0.08
Third Quarter ................. $31.77 $26.16 $30.00 $25.69 $0.08 $0.08
Fourth Quarter ................ $29.92 $26.39 $31.70 $28.27 $0.08 $0.08
(1) See further discussion of our cash dividends declared to common shareholders in Note 11 —
“Stockholders’ Equity” to the Consolidated Financial Statements.
We expect to continue to declare and pay 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.
On October 9, 2018, the closing sales price for our common stock as reported on the New York Stock
Exchange was $24.71. As of October 9, 2018, there were 1,380 holders of record of our common stock. A
substantially greater number of holders of our common stock are “street name” or beneficial holders,
whose shares are held of record by banks, brokers, and other financial institutions.
Information regarding equity compensation plans is incorporated by reference to the information set
forth in Item 12 of Part III of this report.
Stock Performance Graph
The performance graph and table show a comparison of cumulative total stockholder return, assuming
the reinvestment of dividends, from a $100 investment in the common stock of Jabil over the five-year
period ending August 31, 2018, with the cumulative stockholder return of the (1) S&P MidCap 400 Index
and (2) peer group which includes Celestica Inc., Catcher Technology Co., Ltd, Flex Ltd., Hon-Hai
Precision Industry Co. Ltd, Plexus Corp., and Sanmina Corp.
27
Comparison of 5 Year Cumulative Total Return
Jabil Inc. S&P 400 Index - Total Return Peer Group
0.00
50.00
100.00
150.00
200.00
250.00
201820172016201520142013
August 31 2013 2014 2015 2016 2017 2018
Jabil Inc. ................................. $100 $96 $88 $97 $146 $139
S&P MidCap 400 Index – Total Returns ........... 100 123 123 138 156 187
PeerGroup............................... 100 157 138 143 228 172
Issuer Purchases of Equity Securities
The following table provides information relating to our repurchase of common stock during the
three months ended August 31, 2018:
Period
Total Number
of Shares
Purchased
(1)
Average Price
Paid per Share
Total Number of
Shares Purchased
as Part of Publicly
Announced Program
(2)(3)
Approximate
Dollar Value of
Shares that May
Yet Be Purchased
Under the Program
(in thousands)
June 1, 2018 – June 30, 2018 ....... 1,330,709 $27.66 1,330,128 $447,037
July 1, 2018 – July 31, 2018 ........ 1,629,279 $28.42 1,627,406 $400,795
August 1, 2018 – August 31, 2018 .... 1,791,201 $28.36 1,791,201 $350,000
Total ...................... 4,751,189 $28.18 4,748,735
(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 July 2017, our Board of Directors authorized the repurchase of up to $450.0 million of our
common stock as publicly announced in a press release issued on July 20, 2017 (the “2017 Share
Repurchase Program”). The 2017 Share Repurchase Program expired on August 31, 2018. No
authorization remains under the 2017 Share Repurchase Program.
(3) In June 2018, our Board of Directors authorized the repurchase of up to $350.0 million of our
common stock as publicly announced in a press release on June 14, 2018 (the “2018 Share Repurchase
Program”). The 2018 Share Repurchase Program expires on August 31, 2019.
Issuer Sale of Unregistered Securities
On August 16, 2018, as part of a commercial transaction with a third party, the Company issued a cash
settled restricted stock appreciation right. The instrument has a ten-year term and will vest biannually,
subject to the satisfaction of performance conditions. Assuming full vesting and exercise at the end of the
term, the aggregate amount to be paid by the Company would not in any case exceed $26.0 million. The
instrument was issued pursuant to the private placement exemption in Section 4(a)(2) of the Securities Act
of 1933, as amended.
28
Item 6. Selected Financial Data
The following selected data is derived from our Consolidated Financial Statements. This data should
be read in conjunction with the Consolidated Financial Statements and notes thereto incorporated into
Item 8, “Financial Statements and Supplementary Data” and with Item 7, “Management’s Discussion and
Analysis of Financial Condition and Results of Operations.”
Fiscal Year Ended August 31,
2018 2017 2016 2015 2014
(in thousands, except for per share data)
Consolidated Statement of Operations
Data:
Netrevenue .................... $22,095,416 $19,063,121 $18,353,086 $17,899,196 $15,762,146
Operating income ................ 542,153 410,230 522,833 555,411 204,074
Income from continuing operations before
tax......................... 373,401 256,233 387,045 431,646 72,123
Income (loss) from continuing operations,
netoftax .................... 87,541 127,167 254,896 294,185 (1,588)
Discontinued operations, net of tax
(1)
. . . — — — (8,573) 243,853
Net income ..................... 87,541 127,167 254,896 285,612 242,265
Net income attributable to Jabil Inc. .... $ 86,330 $ 129,090 $ 254,095 $ 284,019 $ 241,313
Earnings per share attributable to the
stockholders of Jabil Inc.:
Basic:
Income (loss) from continuing
operations, net of tax ......... $ 0.50 $ 0.71 $ 1.33 $ 1.51 $ (0.01)
Discontinued operations, net of
tax
(1)
.................... $ — $ — $ — $ (0.04) $ 1.20
Net income ................. $ 0.50 $ 0.71 $ 1.33 $ 1.47 $ 1.19
Diluted:
Income (loss) from continuing
operations, net of tax ......... $ 0.49 $ 0.69 $ 1.32 $ 1.49 $ (0.01)
Discontinued operations, net of
tax
(1)
.................... $ — $ — $ — $ (0.04) $ 1.20
Net income ................. $ 0.49 $ 0.69 $ 1.32 $ 1.45 $ 1.19
Cash dividends declared per common
share ....................... $ 0.32 $ 0.32 $ 0.32 $ 0.32 $ 0.32
29
August 31,
2018 2017 2016 2015 2014
(in thousands)
Consolidated Balance Sheets Data:
Working capital
(2)
................ $ 319,050 $ (243,910) $ 280,325 $ 191,168 $1,037,920
Total assets ..................... $12,045,641 $11,095,995 $10,322,677 $9,591,600 $8,479,746
Current installments of notes payable and
long-term debt ................. $ 25,197 $ 444,255 $ 44,689 $ 321,964 $ 11,750
Notes payable and long-term debt, less
current installments .............. $ 2,493,502 $ 1,606,017 $ 2,046,655 $1,308,663 $1,639,916
Total Jabil Inc. stockholders’ equity ..... $ 1,950,257 $ 2,353,514 $ 2,438,171 $2,314,856 $2,241,828
Common stock shares outstanding ..... 164,588 177,728 186,998 192,068 194,114
Fiscal Year Ended August 31,
2018 2017 2016 2015 2014
(in thousands)
Consolidated Cash Flow Data:
Net cash provided by operating activities. . $ 933,850 $1,256,643 $ 916,207 $1,240,528 $ 499,639
Investing activities:
Acquisition of property, plant and
equipment .................. $(1,036,651) $ (716,485) $(924,239) $ (963,145) $(624,060)
Proceeds and advances from sale of
property, plant and equipment ..... $ 350,291 $ 175,000 $ 26,031 $ 15,784 $ 161,138
Financing activities:
Payments to acquire treasury stock . . . $ (450,319) $ (306,640) $(148,340) $ (85,576) $(260,274)
(1) During f iscal year 2014, we sold our Aftermarket Services business for consideration of $725.0 million.
(2) Working capital is defined as current assets minus current liabilities.
30
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Overview
We are one of the leading providers of worldwide manufacturing services and solutions. We provide
comprehensive electronics design, production and product management services to companies in various
industries and end markets. We derive substantially all of our revenue from production and product
management services (collectively referred to as “manufacturing services”), which encompass the act of
producing tangible components that are built to customer specifications and are then provided to the
customer.
We have two reporting segments: Electronics Manufacturing Services (“EMS”) and Diversified
Manufacturing Services (“DMS”), which are organized based on the economic profiles of the services
performed, including manufacturing capabilities, market strategy, margins, return on capital and risk
prof iles. Our EMS segment is focused around leveraging IT, supply chain design and engineering,
technologies largely centered on core electronics, utilizing our large scale manufacturing infrastructure and
our ability to serve a broad range of end markets. Our EMS segment is typically a lower-margin but high
volume business that produces product at a quicker rate (i.e. cycle time) and in larger quantities and
includes customers primarily in the automotive and transportation, capital equipment, computing and
storage, defense and aerospace, digital home, industrial and energy, networking and telecommunications,
point of sale and printing industries. Our DMS segment is focused on providing engineering solutions, with
an emphasis on material sciences and technologies. Our DMS segment is typically a higher-margin business
and includes customers primarily in the consumer wearables, healthcare, mobility and packaging industries.
Our cost of revenue includes the cost of electronic components and other materials that comprise the
products we manufacture; the cost of labor and manufacturing overhead; and adjustments for excess and
obsolete inventory. As a provider of turnkey manufacturing services, we are responsible for procuring
components and other materials. This requires us to commit significant working capital to our operations
and to manage the purchasing, receiving, inspecting and stocking of materials. Although we bear the risk
of fluctuations in the cost of materials and excess scrap, we periodically negotiate cost of materials
adjustments with our customers. Net revenue from each product that we manufacture consists of
an element based on the costs of materials in that product and an element based on the labor and
manufacturing overhead costs allocated to that product. Our gross margin for any product depends on
the mix between the cost of materials in the product and the cost of labor and manufacturing overhead
allocated to the product.
Our operating results are impacted by the level of capacity utilization of manufacturing facilities;
indirect labor costs; and selling, general and administrative expenses. Operating income margins have
generally improved during periods of high production volume and high capacity utilization. During periods
of low production volume, we generally have reduced operating income margins.
We monitor the current economic environment and its potential impact on both the customers 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 change.
We have consistently utilized advanced circuit design, production design and manufacturing
technologies to meet the needs of our customers. To support this effort, our engineering staff focuses on
developing and refining design and manufacturing technologies to meet specific needs of specific
customers. Most of the expenses associated with these customer-specific efforts are reflected in our cost of
revenue. In addition, our engineers engage in research and development (“R&D”) of new technologies that
apply generally to our operations. The expenses of these R&D activities are reflected in the research and
development line item within our Consolidated Statement of Operations.
An important element of our strategy is the expansion of our global production facilities. The majority
of our revenue and materials costs worldwide are denominated in U.S. dollars, while our labor and utility
costs in operations outside the U.S. are denominated in local currencies. We economically hedge certain of
these local currency costs, based on our evaluation of the potential exposure as compared to the cost of the
hedge, through the purchase of foreign currency exchange contracts. Changes in the fair market value of
such hedging instruments are reflected within the Consolidated Statement of Operations and the
Consolidated Statement of Comprehensive Income.
31
See Note 12 — “Concentration of Risk and Segment Data” to the Consolidated Financial Statements.
In September 2017, our operations in Cayey, Puerto Rico received significant hurricane damage.
During the fiscal year ended August 31, 2018, we recognized $11.3 million of expenses related to such
damages, net of insurance proceeds of $24.9 million. We also expect that the majority of these costs less
insurance deductions will ultimately be offset by insurance coverage.
Summary of Results
The following table sets forth, for the fiscal years ended August 31, 2018, 2017 and 2016, certain key
operating results and other financial information (in thousands, except per share data):
Fiscal Year Ended August 31,
2018 2017 2016
Netrevenue ............................. $22,095,416 $19,063,121 $18,353,086
Grossprofit ............................. $ 1,706,792 $ 1,545,643 $ 1,527,704
Operating income ......................... $ 542,153 $ 410,230 $ 522,833
Net income attributable to Jabil Inc. ............ $ 86,330 $ 129,090 $ 254,095
Earnings per share – basic ................... $ 0.50 $ 0.71 $ 1.33
Earnings per share – diluted .................. $ 0.49 $ 0.69 $ 1.32
Key Performance Indicators
Management regularly reviews f inancial and non-financial performance indicators to assess the
Company’s operating results. The following table sets forth, for the quarterly periods indicated, certain of
management’s key financial performance indicators:
Three Months Ended
August 31,
2018
May 31,
2018
February 28,
2018
November 30,
2017
Sales cycle
(1)
................................. 1day 9days 3days (2)days
Inventory turns (annualized) ...................... 6turns 6 turns 6 turns 6 turns
Days in accounts receivable ...................... 26days 26days 26days 25days
Days in inventory
(3)
............................ 58days 60days 62days 58days
Days in accounts payable
(4)
....................... 83days 77days 85days 85days
Three Months Ended
August 31,
2017
May 31,
2017
February 28,
2017
November 30,
2016
Sales cycle
(1)
................................. 0days 9days 11days 1day
Inventory turns (annualized) ...................... 6turns 6 turns 7 turns 7 turns
Days in accounts receivable
(2)
..................... 25days 29days 29days 27days
Days in inventory
(3)
............................ 58days 59days 55days 48days
Days in accounts payable
(4)
....................... 83days 79days 73days 74days
(1) The sales cycle is calculated as the sum of days in accounts receivable and days in inventory, less the
days in accounts payable; accordingly, the variance in the sales cycle quarter over quarter is a direct
result of changes in these indicators.
(2) During the three months ended August 31, 2017, the decrease in days in accounts receivable from the
prior sequential quarter was primarily due to the timing of sales and collections activity.
(3) During each of the three months ended August 31, 2018 and May 31, 2018, the decrease in days in
inventory from the prior sequential quarter was primarily due to increased sales activity during the
quarter. During the three months ended February 28, 2018, the increase in days in inventory from the
32
prior sequential quarter was primarily due to the increase in inventories to support expected sales levels
in the third quarter of fiscal year 2018 along with overall increased demand. During the three months
ended May 31, 2017, days in inventory increased four 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 February 28, 2017, days in inventory increased as compared to the prior sequential quarter:
(i) as a result of lower production in the DMS segment due to reduced consumer demand in the
mobility business and (ii) to support expected revenue levels in the third quarter of fiscal year 2017.
(4) During the three months ended August 31, 2018, the increase in days in accounts payable from the
prior sequential quarter was primarily due to higher materials purchases during the quarter and the
timing of purchases and cash payments for purchases during the quarter. During the three months
ended May 31, 2018, the decrease in days in accounts payable from the prior sequential quarter was
primarily due to the timing of purchases and cash payments for purchases during the quarter. During
the three months ended November 30, 2017 and August 31, 2017, the increase in days in accounts
payable from the prior sequential quarter was primarily due to higher materials purchases during the
quarter due to increased demand in the mobility business as well as the timing of purchases and cash
payments from purchases during the quarter. During the three months ended May 31, 2017, the
increase in days in accounts payable from the prior sequential quarter was primarily due to the timing
of purchases and cash payments for purchases during the quarter.
Critical Accounting Policies and Estimates
The preparation of our 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. We have identified the
following critical accounting policies that affect the more significant judgments and estimates used in the
preparation of our Consolidated Financial Statements. For further discussion of our significant accounting
policies, refer to Note 1 — “Description of Business and Summary of Significant Accounting Policies” to
the Consolidated Financial Statements.
Revenue Recognition
We derive substantially all of our revenue from production and product management services
(collectively referred to as “manufacturing services”), which encompasses the act of producing tangible
components that are built to customer specifications, which are then provided to the customer. We
recognize manufacturing services revenue when such tangible components are shipped to or the goods are
received by the customer, title and risk of ownership have passed, the price to the buyer is fixed or
determinable and collectability is reasonably assured (net of estimated returns). We also derive revenue to a
lesser extent from electronic design services to certain customers. Revenue from electronic design services is
generally recognized upon completion and acceptance by the respective customer. Upfront payments from
customers are recorded upon receipt as deferred income and are recognized as revenue as the related
manufacturing services are provided.
Effective September 1, 2018, our revenue recognition accounting policies changed in conjunction with
the adoption of the new revenue recognition standard. Upon adoption, we recognize revenue over time as
manufacturing services are completed for the majority of our contracts with customers, which results in
revenue being recognized earlier than under the current guidance. Revenue for all other contracts with
customers will be recognized at a point in time, upon transfer of control of the product to the customer,
which is effectively no change to our historical current accounting. For further discussion of the new
revenue recognition standard, refer to Note 16 — “New Accounting Guidance” to the Consolidated
Financial Statements.
Allowance for Doubtful Accounts
We maintain an allowance for doubtful accounts related to receivables not expected to be collected
from our customers. This allowance is based on management’s assessment of specific customer balances
33
after considering the age of receivables and financial stability of the customer. If there is an adverse change
in the financial condition and circumstances of our customers, or if actual defaults are higher than
provided for, an addition to the allowance may be necessary.
Inventory Valuation
We purchase inventory based on forecasted demand and record inventory at the lower of cost and net
realizable value. Management regularly assesses inventory valuation based on current and forecasted usage,
customer inventory-related contractual obligations and other lower of cost and net realizable value
considerations. If actual market conditions or our customers’ product demands are less favorable than those
projected, additional valuation adjustments may be necessary.
Long-Lived Assets
We review property, plant and equipment and amortizable intangible assets for impairment whenever
events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.
Recoverability of property, plant and equipment is measured by comparing its carrying value to the
undiscounted projected cash flows that the asset(s) or asset group(s) are expected to generate. If the
carrying amount of an asset or an asset group is not recoverable, we recognize an impairment loss based on
the excess of the carrying amount of the long-lived asset or asset group over its respective fair value, which
is generally determined as either the present value of estimated future cash flows or the appraised value. The
impairment analysis is based on significant assumptions of future results made by management, including
revenue and cash flow projections. Circumstances that may lead to impairment of property, plant and
equipment include unforeseen decreases in future performance or industry demand and the restructuring of
our operations resulting from a change in our business strategy or adverse economic conditions.
We have recorded intangible assets, including goodwill, in connection with business acquisitions.
Estimated useful lives of amortizable intangible assets are determined by management based on an
assessment of the period over which the asset is expected to contribute to future cash flows. The fair value
of acquired amortizable intangible assets impacts the amounts recorded as goodwill.
We perform a goodwill impairment analysis using the two-step method on an annual basis and
whenever events or changes in circumstances indicate that the carrying value may not be recoverable. The
recoverability of goodwill is measured at the reporting unit level by comparing the reporting unit’s carrying
amount, including goodwill, to the fair value of the reporting unit. We determine the fair value of our
reporting units based on an average weighting of both projected discounted future results and the use of
comparative market multiples. If the carrying amount of the reporting unit exceeds its fair value, goodwill is
considered impaired and a second test is performed to measure the amount of loss, if any.
We perform an indefinite-lived intangible asset impairment analysis on an annual basis and whenever
ev ents or changes in circumstances indicate that the carrying value may not be reco verable. The recoverability
of indefinite-lived intangible assets is measured by comparing the carrying amount to the fair value. We
determine the fair value of our indefinite-liv ed intangible assets principa lly based on a variation of the income
approach, kno wn as the relief from r oyalty method. If the carrying amount of the indefinite-lived intangible
asset exceeds its fair value, the indefinite-lived intangible asset is considered impaired.
We completed our annual impairment test for goodwill and indefinite-lived intangible assets during the
fourth quarter of fiscal year 2018 and determined that the fair values of our reporting units and the
indefinite-lived intangible assets are substantially in excess of the carrying values and that no impairment
existed as of the date of the impairment test. Significant judgments inherent in this analysis included
assumptions regarding appropriate revenue growth rates, discount rates and royalty rates.
Income Taxes
We estimate our income tax provision in each of the jurisdictions in which we operate, a process that
includes estimating exposures related to examinations by taxing authorities. We must also make judgments
regarding the ability to realize deferred tax assets. The carrying value of our net deferred tax assets is based
on our belief that it is more likely than not that we will generate sufficient future taxable income in certain
jurisdictions to realize these deferred tax assets. A valuation allowance has been established for deferred tax
34
assets that we do not believe meet the “more likely than not” criteria. We assess whether an uncertain tax
position taken or expected to be taken in a tax return meets the threshold for recognition and measurement
in the Consolidated Financial Statements. Our judgments regarding future taxable income as well as tax
positions taken or expected to be taken in a tax return may change due to changes in market conditions,
changes in tax laws or other factors. If our assumptions and consequently our estimates change in the
future, the valuation allowances and/or tax reserves established may be increased or decreased, resulting in a
respective increase or decrease in income tax expense.
On December 22, 2017, the U.S. government enacted comprehensive tax legislation commonly referred
to as the Tax Cuts and Jobs Act of 2017 (“Tax Act”). The Tax Act reduced the corporate tax rate, limited
or eliminated certain tax deductions, and changed the taxation of foreign earnings of U.S. multinational
companies. The enacted changes include a mandatory income inclusion of the historically untaxed foreign
earnings of a U.S. company’s foreign subsidiaries and will effectively tax such income at reduced tax rates
(“transition tax”). During fiscal year 2018, we made reasonable estimates related to certain impacts of the
Tax Act and, in accordance with the Securities and Exchange Commission (“SEC”) Staff Accounting
Bulletin No. 118, Income Tax Accounting Implications of the Tax Cut and Jobs Act (“SAB 118”), recorded a
net provisional income tax expense of $142.3 million for the fiscal year ended August 31, 2018. This net
provisional expense is mainly comprised of $65.9 million related to the one-time transition tax inclusive of
unrecognized tax benefits, $(10.5) million related to the re-measurement of our U.S. deferred tax attributes,
and $85.0 million related to the foreign tax impact of a change in indefinite reinvestment assertion on
certain earnings from our foreign subsidiaries. As we finalize the accounting for the tax effects of the
enactment of the Tax Act during the measurement period, we will reflect adjustments to the provisional
amounts recorded and record additional tax effects in the periods such adjustments are identified.
The Internal Revenue Service (“IRS”) completed its f ield examination of our tax returns for
fiscal years 2009 through 2011 and issued a Revenue Agent’s Report (“RAR”) on May 27, 2015, which was
updated on June 22, 2016. The IRS completed its field examination of our tax returns for fiscal years 2012
through 2014 and issued an RAR on April 19, 2017. The proposed adjustments in the RAR from both
examination periods relate primarily to U.S. taxation of certain intercompany transactions. If the IRS
ultimately prevails in its positions, our income tax payments 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.
We disagree with the proposed adjustments and intend 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, we continue 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 that are significantly higher than the amounts accrued for these matters, management currently
believes that the resolution will not have a material adverse effect on our financial position, results of
operations or cash flows. However, there can be no assurance that management’s beliefs will be realized. For
further discussion related to our income taxes, refer to Note 4 — “Income Taxes” to the Consolidated
Financial Statements.
Recent Accounting Pronouncements
See Note 16 — “New Accounting Guidance” to the Consolidated Financial Statements for a
discussion of recent accounting guidance.
Results of Operations
Net Revenue
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 separately
report 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.
35
The distribution of revenue across our segments has fluctuated, and will continue to fluctuate, as a
result of numerous factors, including the following: fluctuations in customer demand; efforts to diversify
certain portions of our business; seasonality in our business; business growth from new and existing
customers; specific product perfor mance; and any potential termination, or substantial winding down, of
significant customer relationships.
Fiscal Year Ended August 31, Change
(dollars in millions) 2018 2017 2016 2018 vs. 2017 2017 vs. 2016
Netrevenue ...................... $22,095.4 $19,063.1 $18,353.1 15.9% 3.9%
2018 vs. 2017
Net revenue increased during the fiscal year ended August 31, 2018 compared to the fiscal year ended
August 31, 2017. Specifically, the DMS segment revenues increased 23% due to (i) a 19% increase in
revenues from customers within our mobility business as a result of increased end user product demand,
(ii) a 3% increase in revenues due to new business from existing customers in our healthcare business and
(iii) a 1% increase in revenues spread across a variety of industries in the DMS segment. EMS segment
revenues increased 11% primarily due to (i) a 3% increase in revenues from a new customer and existing
customers within our industrial and energy business, (ii) a 3% increase in revenues from customers within
our digital home business, (iii) a 3% increase in revenues from existing customers within our capital
equipment business and (iv) a 2% increase in revenues spread across a variety of industries in the EMS
segment.
2017 vs. 2016
Net revenue increased during the fiscal year ended August 31, 2017 compared to the fiscal year ended
August 31, 2016. The DMS segment revenues increased 9% as a result of (i) a 4% increase in revenues due
to new business from existing customers in our consumer lifestyles and wearable technologies business, (ii) a
3% increase in revenues due to new business from existing customers in our healthcare business and (iii) a
2% increase in revenues from existing customers within our mobility business. 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.
The following table sets forth, for the periods indicated, revenue by segment expressed as a percentage
of net revenue:
Fiscal Year Ended August 31,
2018 2017 2016
EMS ............................................... 56% 58% 60%
DMS............................................... 44% 42% 40%
Total ............................................... 100% 100% 100%
The following table sets forth, for the periods indicated, foreign source revenue expressed as
a percentage of net revenue:
Fiscal Year Ended August 31,
2018 2017 2016
Foreign source revenue .................................. 91.7% 91.4% 90.7%
Gross Profit
Fiscal Year Ended August 31,
(dollars in millions) 2018 2017 2016
Grossprofit..................................... $1,706.8 $1,545.6 $1,527.7
Percent of net revenue .............................. 7.7% 8.1% 8.3%
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2018 vs. 2017
Gross profit decreased as a percent of net revenue during the fiscal year ended August 31, 2018
compared to the fiscal year ended August 31, 2017, primarily due to (i) increased materials costs due to the
constrained components market, (ii) increased direct labor costs and (iii) charges related to certain
distressed customers in the networking and consumer wearables sectors.
2017 vs. 2016
Gross profit remained relatively consistent as a percent of net revenue during the fiscal year ended
August 31, 2017 compared to the fiscal year ended August 31, 2016.
Selling, General and Administrative
Fiscal Year Ended August 31, Change
(dollars in millions) 2018 2017 2016 2018 vs. 2017 2017 vs. 2016
Selling, general and administrative ........... $1,050.7 $907.7 $924.4 $143.0 $(16.7)
2018 vs. 2017
Selling, general and administrative expenses increased during the fiscal year ended August 31, 2018
compared to the fiscal year ended August 31, 2017. During fiscal year 2018, we recogniz ed an additional
$32.4 million of stock-based compensation expense due to the modification of certain performance-based
restricted stock awards and a one-time cash-settled award while fiscal year 2017 included a $21.0 million
reversal of stock-based compensation expense due to decreased expectations for the vesting of certain
performance-based restricted stock awards. The remaining increase is primarily driven by an increase in
salary and salary related expenses and other costs to support new business growth and development.
2017 vs. 2016
Selling, general and administrative expenses decreased during the fiscal year ended August 31, 2017
compared to the fiscal year ended August 31, 2016. The decrease resulted primarily from a $21.0 million
reversal of stock-based compensation expense during fiscal year 2017 due to decreased expectations for the
vesting of certain performance-based restricted stock awards. The decrease was partially offset by an
increase in salary and salary-related expenses and other costs.
Research and Development
Fiscal Year Ended August 31,
(dollars in millions) 2018 2017 2016
Research and development ................................ $38.5 $29.7 $32.0
Percent of net revenue ................................... 0.2% 0.2% 0.2%
2018 vs. 2017
Research and development expenses remained relatively consistent as a percent of net revenue during
the fiscal year ended August 31, 2018 compared to the fiscal year ended August 31, 2017.
2017 vs. 2016
Research and development expenses remained relatively consistent as a percent of net revenue during
the fiscal year ended August 31, 2017 compared to the fiscal year ended August 31, 2016.
Amortization of Intangibles
Fiscal Year Ended August 31, Change
(dollars in millions) 2018 2017 2016 2018 vs. 2017 2017 vs. 2016
Amortization of intangibles ................... $38.5 $35.5 $37.1 $3.0 $(1.6)
37
2018 vs. 2017
Amortization of intangibles increased during the fiscal year ended August 31, 2018 compared to the
fiscal year ended August 31, 2017 primarily due to the incremental additional amortization associated with
intangible assets related to the acquisition of True-Tech Corporation (“True-Tech”) that occurred in the
first quarter of fiscal year 2018.
2017 vs. 2016
Amortization of intangibles decreased during the fiscal year ended August 31, 2017 compared to the
fiscal year ended August 31, 2016 primarily due to certain intangible assets associated with the Plasticos
and Shemer acquisitions that were fully amortized during fiscal year 2016.
Restructuring and Related Charges
Following is a summary of our restructuring and related charges:
Fiscal Year Ended August 31,
(dollars in millions) 2018
(2)
2017
(2)
2016
(3)
Employee severance and benefit costs ........................ $16.3 $ 56.8 $ 8.8
Lease costs ........................................... 1.6 4.0 —
Asset write-off costs .................................... 16.2 94.3 1.2
Other related costs ..................................... 2.8 5.3 1.4
Total restructuring and related charges
(1)
.................... $36.9 $160.4 $11.4
(1) Includes $16.3 million, $51.3 million and $10.7 million recorded in the EMS segment, $16.6 million,
$82.4 million and $0.8 million recorded in the DMS segment and $4.0 million, $26.7 million and
$(0.1) million of non-allocated charges for the f iscal years ended August 31, 2018, 2017 and 2016,
respectively. Except for asset write-off costs, all restructuring and related charges are cash settled.
(2) Primarily relates to the 2017 Restructuring Plan.
(3) Costs relate to the 2013 Restructuring Plan, which was substantially complete during fiscal year 2017.
2017 Restructuring Plan
On September 15, 2016, our Board of Directors formally approved a restructuring plan to better align
our global capacity and administrative support infrastructure to further optimize organizational
effectiveness. This action includes headcount reductions across our selling, general and administrative cost
base and capacity realignment in higher cost locations (the “2017 Restructuring Plan”).
Upon completion of the 2017 Restructuring Plan, we expect to recognize approximately $195.0 million
in restructuring and related costs. We incurred $186.4 million of costs-to-date as of August 31, 2018. The
remaining costs for employee severance and benefits costs, asset write-off costs and other related costs are
anticipated to be incurred through the first half of fiscal year 2019.
The 2017 Restructuring Plan, once complete, is expected to yield annualized cost savings beginning in
fiscal year 2019 of approximately $90.0 million. During f iscal year 2018, we realized costs savings of
approximately $80.0 million. 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.
See Note 14 — “Restructuring and Related Charges” to the Consolidated Financial Statements for
further discussion of restructuring and related charges for the 2017 Restructuring Plan.
Other Expense
Fiscal Year Ended August 31, Change
(dollars in millions) 2018 2017 2016 2018 vs. 2017 2017 vs. 2016
Other expense ............................ $37.6 $28.4 $8.4 $9.2 $20.0
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2018 vs. 2017
Other expense increased during the fiscal year ended August 31, 2018 compared to the fiscal year
ended August 31, 2017, primarily due to an increase in fees associated with the utilization of the
asset-backed securitization programs and the new trade accounts receivable sale programs of $16.3 million,
costs incurred of $2.6 million in connection with a “make-whole” premium and related expenses for the
early redemption of the 8.250% Senior Notes due 2018 and $1.2 million for an other than temporary
impairment on a cost method investment. The increase was partially offset by an $11.5 million other than
temporary impairment on available for sale securities during the third quarter of fiscal year 2017.
2017 vs. 2016
Other expense increased during the fiscal year ended August 31, 2017 compared to the fiscal year
ended August 31, 2016, 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 $6.6 million
and a $1.5 million loss associated with a cost method investment.
Interest Income
Fiscal Year Ended August 31, Change
(dollars in millions) 2018 2017 2016 2018 vs. 2017 2017 vs. 2016
Interest income ............................ $17.8 $12.5 $9.1 $5.3 $3.4
2018 vs. 2017
Interest income increased during the fiscal year ended August 31, 2018 compared to the fiscal year
ended August 31, 2017 due to increased cash equivalents (investments that are readily convertible to cash
with maturity dates of 90 days or less) and higher interest rates.
2017 vs. 2016
Interest income increased during the fiscal year ended August 31, 2017 compared to the fiscal year
ended August 31, 2016 due to increased cash equivalents (investments that are readily convertible to cash
with maturity dates of 90 days or less).
Interest Expense
Fiscal Year Ended August 31, Change
(dollars in millions) 2018 2017 2016 2018 vs. 2017 2017 vs. 2016
Interest expense .......................... $149.0 $138.1 $136.5 $10.9 $1.6
2018 vs. 2017
Interest expense increased during the fiscal year ended August 31, 2018 compared to the fiscal year
ended August 31, 2017 due to additional borrowings on the 2017 Revolving Credit Facility and higher
interest rates.
2017 vs. 2016
Interest expense remained relatively consistent during the fiscal year ended August 31, 2017 compared
to the fiscal year ended August 31, 2016.
Income Tax Expense
Fiscal Year Ended August 31, Change
2018 2017 2016 2018 vs. 2017 2017 vs. 2016
Effective tax rate ........................... 76.6% 50.4% 34.1% 26.2% 16.3%
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2018 vs. 2017
The increase in the effective tax rate during the fiscal year ended August 31, 2018 compared to the
fiscal year ended August 31, 2017 was primarily due to $142.3 million of provisional tax expense associated
with the Tax Act impacts of the one-time transition tax, re-measurement of our U.S. deferred tax attributes,
and a change in the indefinite reinvestment assertion on certain earnings from our foreign subsidiaries. The
increase was also driven by the f iscal year 2017 valuation allowance reversals of $27.5 million related to
non-U.S. jurisdictions that did not recur in fiscal year 2018. The increase was partially offset by
$16.1 million of tax benefits from the lapse of statute in a non-U.S. jurisdiction and $14.8 million related to
the release of stranded tax effects previously classified as accumulated other comprehensive income (“A OCI”).
During fiscal year 2018, we made reasonable estimates of the impact related to certain aspects of the
Tax Act and, in accordance with the SEC’s SAB118, recorded a provisional income tax expense of
approximately $142.3 million. As of August 31, 2018, we believe this is a reasonable estimate related to the
Tax Act based on analyses, interpretations, and guidance available at this time. The final impact of the Tax
Act may differ from our estimate due to, among other items, additional regulatory guidance that may be
issued, changes in interpretations and assumptions and finalization of calculations of the impact of the Tax
Act, including the on-going analysis of U.S. tax attributes, re-measurement of the U.S. deferred tax
attributes, analysis of our indefinite reinvestment assertion, and the computation of earnings and profits of
our foreign subsidiaries, applicable foreign tax credits and relevant limitations. As we finalize the accounting
for the tax effects of the enactment of the Tax Act during the measurement period, we will reflect
adjustments to the provisional amounts recorded and record additional tax effects in the periods such
adjustments are identified.
2017 vs. 2016
The increase in the effective tax rate during the fiscal year ended August 31, 2017 compared to the
fiscal year ended August 31, 2016 was primarily due to decreased income in jurisdictions with low tax rates
and increased losses in jurisdictions with existing valuation allowances, which was partially due to an
increase in restructuring expense, and increased income in jurisdictions with high tax rates. This effective tax
rate increase was partially offset by an income tax benefit of $27.5 million for the reversal of valuation
allowances related to non-U.S. jurisdictions.
Non-GAAP (Core) Financial Measures
The following discussion and analysis of our financial condition and results of operations include
certain non-GAAP financial measures as identified in the reconciliation below. The non-GAAP financial
measures disclosed herein do not have standard meaning and may vary from the non-GAAP financial
measures used by other companies or how we may calculate those measures in other instances from time to
time. Non-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 that are
excluded from our “core” financial measures.
Management believes that the non-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 and integration charges, loss on disposal of subsidiaries, settlement of
receivables and related charges, impairment of notes receivable and related charges, goodwill impairment
charges, business interruption and impairment charges, net, 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-GAAP “core” financial measures to make operating decisions, assess business performance and as
a factor in determining certain employee performance when evaluating 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,
40
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, “core” earnings and “core” return on invested capital 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 make 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 consider these matters
when evaluating the utility of these non-GAAP financial measures.
Included in the tables below are a reconciliation of the non-GAAP financial measures to the most
directly comparable U.S. GAAP financial measures as provided in our Consolidated Financial Statements
(in thousands, except for per share data):
Fiscal Year Ended August 31,
2018 2017 2016
Operating income (U.S. GAAP) ...................... $542,153 $410,230 $522,833
Amortization of intangibles ........................ 38,490 35,524 37,121
Stock-based compensation expense and related charges ..... 98,511 48,544 58,997
Restructuring and related charges . . .................. 36,902 160,395 11,369
Acquisition and integration charges
(1)
................. 8,082 — —
Distressed customer charges
(2)
....................... 32,710 10,198 —
Loss on disposal of subsidiaries ...................... — 2,112 —
Business interruption and impairment charges, net
(3)
....... 11,299 — —
Adjustments to operating income ..................... 225,994 256,773 107,487
Core operating income (Non-GAAP) ................... $768,147 $667,003 $630,320
Net income attributable to Jabil Inc. (U.S. GAAP) ......... $ 86,330 $129,090 $254,095
Adjustments to operating income ..................... 225,994 256,773 107,487
Other than temporary impairment on securities
(4)
......... — 11,539 —
Adjustment for taxes
(5)
............................ 146,206 (4,726) (2,483)
Core earnings (Non-GAAP) ......................... $458,530 $392,676 $359,099
Earnings per share (U.S. GAAP):
Basic ........................................ $ 0.50 $ 0.71 $ 1.33
Diluted ....................................... $ 0.49 $ 0.69 $ 1.32
Core earnings per share (Non-GAAP):
Basic ........................................ $ 2.66 $ 2.16 $ 1.89
Diluted ....................................... $ 2.62 $ 2.11 $ 1.86
Weighted average shares outstanding used in the calculations of
earnings per share (U.S. GAAP and Non-GAAP):
Basic ........................................ 172,237 181,902 190,413
Diluted ....................................... 175,044 185,838 192,750
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(1) Charges related to our strategic collaboration with a healthcare company.
(2) Charges during fiscal year 2018 relate to inventory and other assets charges for certain distressed
customers in the networking and consumer wearables sectors. Charges during fiscal year 2017 relate to
inventory and other assets charges for the disengagement with an energy customer.
(3) Charges, net of insurance proceeds of $24.9 million, for the fiscal year ended August 31, 2018 relate to
business interruption and asset impairment costs associated with damage from Hurricane Maria,
which impacted our operations in Cayey, Puerto Rico.
(4) Relates to an other than temporary impairment on available for sale securities during fiscal year 2017.
(5) Includes a $142.3 million provisional estimate to account for the effects of the Tax Act for the fiscal
year ended August 31, 2018.
Fiscal Year Ended
August 31, 2018 August 31, 2017 August 31, 2016
Numerator:
Operating income (U.S. GAAP) ..................... $ 542,153 $ 410,230 $ 522,833
Tax effect
(1)
................................... (300,979) (137,087) (131,893)
After-tax operating income ........................ 241,174 273,143 390,940
x1 x1 x1
Annualized after-tax operating income ................ $ 241,174 $ 273,143 $ 390,940
Core operating income (Non-GAAP) .................. $ 768,147 $ 667,003 $ 630,320
Tax effect
(2)
................................... (144,261) (134,930) (134,426)
After-tax core operating income .................... 623,886 532,073 495,894
x1 x1 x1
Annualized after-tax core operating income ............. $ 623,886 $ 532,073 $ 495,894
Denominator:
Average total Jabil Inc. stockholders’ equity
(3)
........... $2,151,886 $ 2,395,843 $2,376,513
Average notes payable and long-term debt, less current
installments
(3)
............................... 2,063,047 1,853,302 1,704,915
Average current installments of notes payable and long-term
debt
(3)
..................................... 235,348 245,654 184,388
Average cash and cash equivalents
(3)
................. (1,223,934) (1,050,989) (913,011)
Net invested capital base .......................... $3,226,347 $ 3,443,810 $3,352,805
Return on Invested Capital (U.S. GAAP) ............... 7.5% 7.9% 11.7%
Adjustments noted above .......................... 11.8% 7.6% 3.1%
Core Return on Invested Capital (Non-GAAP) ........... 19.3% 15.5% 14.8%
(1) This amount is calculated by adding the amount of income taxes attributable to its operating income
(U.S. GAAP) and its interest expense.
(2) This amount is calculated by adding the amount of income taxes attributable to its core operating
income (Non-GAAP) and its interest expense.
(3) The average is based on the addition of the account balance at the end of the most recently-ended
fiscal year to the account balance at the end of the prior fiscal year for the fiscal years ended
August 31, 2018, 2017 and 2016, respectively, and dividing by two.
Quarterly Results (Unaudited)
The following table sets forth certain unaudited quarterly financial information for the 2018 and 2017
fiscal years. In the opinion of management, this information has been presented on the same basis as the
audited consolidated financial statements appearing elsewhere, and all necessary adjustments (consisting
42
primarily of normal recurring accruals) have been included in the amounts stated below to present fairly the
unaudited quarterly results when read in conjunction with the audited consolidated financial statements
and related notes thereto. The operating results for any quarter are not necessarily indicative of results for
any future period.
Fiscal Year 2018
Three Months Ended
(in thousands, except for per share data)
August 31,
2018
May 31,
2018
February 28,
2018
November 30,
2017
Netrevenue ............................. $5,771,831 $5,436,952 $5,301,101 $5,585,532
Gross profit
(1)
........................... 442,147 398,227 397,133 469,285
Operating income
(1)(2)
...................... 153,896 112,971 129,532 145,754
Net (loss) income
(1)(2)(3)
..................... (56,608) 42,702 37,528 63,919
Net (loss) income attributable to Jabil Inc.
(1)(2)(3)
. . . $ (57,314) $ 42,541 $ 37,308 $ 63,795
(Loss) earnings per share attributable to the
stockholders of Jabil Inc.
Basic ................................ $ (0.34) $ 0.25 $ 0.21 $ 0.36
Diluted .............................. $ (0.34) $ 0.25 $ 0.21 $ 0.35
Fiscal Year 2017
Three Months Ended
(in thousands, except for per share data)
August 31,
2017
May 31,
2017
February 28,
2017
November 30,
2016
Netrevenue ............................. $5,023,029 $4,489,557 $4,445,637 $5,104,898
Gross profit
(1)
........................... 425,818 326,415 361,904 431,506
Operating income
(1)
....................... 118,057 43,383 83,183 165,607
Net income (loss)
(1)
....................... 46,041 (25,699) 20,124 86,701
Net income (loss) attributable to Jabil Inc.
(1)
...... $ 45,679 $ (25,281) $ 20,665 $ 88,027
Earnings (loss) per share attributable to the
stockholders of Jabil Inc.
Basic ................................ $ 0.26 $ (0.14) $ 0.11 $ 0.48
Diluted .............................. $ 0.25 $ (0.14) $ 0.11 $ 0.47
(1) Includes a distressed customer charge of $18.0 million, $14.7 million and $10.2 million during the
three months ended August 31, 2018, February 28, 2018 and May 31, 2017, respectively.
(2) Includes $32.4 million of stock-based compensation expense for the modification of certain
performance-based restricted stock awards and a one-time cash settled award during the three months
ended November 30, 2017.
(3) Includes $111.4 million and $30.9 million for the three months ended August 31, 2018 and
February 28, 2018, respectively, related to the Tax Act.
Acquisitions and Expansion
As discussed in Note 15 — “Business Acquisitions” to the Consolidated Financial Statements, we
completed one acquisition during the fiscal year ended August 31, 2018 and one acquisition during the
fiscal year ended August 31, 2017. Acquisitions are accounted for as business combinations using the
acquisition method of accounting. Our Consolidated Financial Statements include the operating results of
each business from the date of acquisition.
43
On July 18, 2018 we submitted a binding offer to form a strategic collaboration with Johnson &
Johnson Medical Devices Companies that would significantly expand our medical device manufacturing
portfolio, diversification and capabilities. The offer has been accepted with respect to the North American
sites and is pending applicable consultative processes for sites in Switzerland and Germany.
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 which ends on November 30, due to higher demand for
consumer-related products during the holiday selling season.
Liquidity and Capital Resources
We believe that our level of liquidity sources, which includes available borrowings under our revolving
credit facilities, additional proceeds available under our asset-backed securitization programs and under our
uncommitted trade accounts receivable sale programs, cash on hand, funds provided by operations and the
access to the capital markets, will be adequate to fund our capital expenditures, the payment of any declared
quarterly dividends, share repurchases, any potential acquisitions and our working capital requirements for
the next 12 months. We continue to assess our capital structure and evaluate the merits of redeploying
available cash to reduce existing debt or repurchase common stock.
Cash and Cash Equivalents
As of August 31, 2018, we had approximately $1.3 billion 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.
As a result of the Tax Act and after the one-time transition tax on our historically untaxed foreign
earnings, the cash and cash equivalents held by our foreign subsidiaries will no longer be subject to U.S.
federal income tax consequences upon subsequent repatriation to the United States. As a result, most of
our cash and cash equivalents as of August 31, 2018 could be repatriated to the United States without
potential tax consequences.
Notes Payable and Credit Facilities
Following is summary of principal debt payments and debt issuance for our notes payable and credit
facilities:
(in thousands)
8.250%
Senior
Notes
(1)
5.625%
Senior
Notes
4.700%
Senior
Notes
4.900%
Senior
Notes
3.950%
Senior
Notes
(1)
Borrowings
under
revolving
credit
facilities
(2)(3)
Borrowings
under
loans
(2)(3)
Total
notes
payable
and
credit
facilities
Balance as of August 31, 2016 . . $ 398,552 $396,212 $496,041 $298,329 $ — $ — $502,210 $ 2,091,344
Borrowings ............. —————7,434,107 — 7,434,107
Payments .............. —————(7,434,107) (43,922) (7,478,029)
Other ................ 954 892 655 242 — — 107 2,850
Balance as of August 31, 2017 . . 399,506 397,104 496,696 298,571 — — 458,395 2,050,272
Borrowings ............. ————498,659 8,778,855 400,000 9,677,514
Payments .............. (400,000) ————(8,778,855) (25,907) (9,204,762)
Other ................ 494 891 654 243 (4,451) — (2,156) (4,325)
Balance as of August 31, 2018 . . $ — $397,995 $497,350 $298,814 $494,208 $ — $830,332 $ 2,518,699
Maturity Date ...........
Mar 15,
2018
Dec 15,
2020
Sep 15,
2022
Jul 14,
2023
Jan 12,
2028
Nov 8,
2022 and
Aug 24,
2020
(2)(3)
Nov 8,
2022 and
Aug 24,
2020
(2)(3)
Original Facility/
Maximum Capacity ......
$400.0
million
$400.0
million
$500.0
million
$300.0
million
$500.0
million
$2.3
billion
(2)(3)
$851.8
million
(2)(3)
44
(1) During the three months ended February 28, 2018, we issued $500.0 million of publicly registered
3.950% Senior Notes due 2028 (the “3.950% Senior Notes”). The net proceeds from the offering were
used for general corporate purposes, including to redeem $400.0 million of our outstanding 8.250%
Senior Notes due 2018 and pay related costs and a “make-whole” premium.
(2) On November 8, 2017, we entered into an amended and restated senior unsecured five-year credit
agreement for additional working capital to support the continued growth of the business. The credit
agreement provides for: (i) a Revolving Credit Facility in the initial amount of $1.8 billion, which may,
subject to the lenders’ discretion, be increased to $2.3 billion (“the 2017 Revolving Credit Facility”)
and (ii) a $500.0 million Term Loan Facility (“the 2017 Term Loan Facility”), collectively “the 2017
Credit Facility.” The 2017 Credit Facility expires on November 8, 2022. The 2017 Revolving Credit
Facility is subject to two whole or partial one-year extensions, at the lenders’ discretion. Interest and
fees on the 2017 Credit Facility advances are based on the Company’s non-credit enhanced long-term
senior unsecured debt rating as determined by Standard & Poor’s Ratings Service, Moody’s Investors
Service and Fitch Ratings.
(3) On August 24, 2018, the Company entered into a senior unsecured two-year credit agreement for
additional working capital to support the continued growth of the business. The credit agreement
provides for: (i) a Revolving Credit Facility in the initial amount of $150.0 million (“the 2018
Revolving Credit Facility”) and (ii) a $350.0 million Ter m Loan Facility (“the 2018 Term Loan
Facility”), collectively “the 2018 Credit Facility.” The 2018 Credit Facility expires on August 24, 2020.
During the fiscal year ended August 31, 2018, no draws were made on the 2018 Revolving Credit
Facility and $350.0 million was borrowed against the 2018 Term Loan Facility. The interest rates on
the 2017 Revolving Credit Facility borrowings ranged from 2.4% to 5.2% and the 2017 Term Loan
Facility ranged from 2.6% to 3.5% during the fiscal year ended August 31, 2018. The interest rate on
the 2018 Term Loan Facility was 3.1% during the fiscal year ended August 31, 2018.
Additionally, our foreign subsidiaries have various additional credit facilities that finance their future
growth and any corresponding working capital needs.
We have a shelf registration statement with the SEC registering the potential sale of an indeterminate
amount of debt and equity securities in the future to augment our liquidity and capital resources.
Our Senior Notes and our 2017 and 2018 Credit Facilities contain various financial and nonfinancial
covenants. A violation of these covenants could negatively impact our liquidity by restricting our ability to
borrow under the notes payable and credit facilities and potentially causing acceleration of amounts due
under these notes payable and credit facilities. As of August 31, 2018 and 2017, we were in compliance with
all covenants under our Senior Notes and the 2017 and 2018 Credit Facilities. Refer to Note 8 — “Notes
Payable and Long-Term Debt” to the Consolidated Financial Statements for further details.
Asset-Backed Securitization and Trade Accounts Receivable Sale Programs
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: (i) conduits administered by unaffiliated financial institutions and (ii) an unaffiliated financial
institution. Any portion of the purchase price for the receivables not paid in cash upon the sale occurring is
recorded as a deferred purchase price receivable, which is paid from available cash as payments on the
underlying receivables are collected.
Following is a summary of our asset-backed securitization programs and key terms:
Maximum Amount of
Net Cash Proceeds (in millions)
(1)
Expiration Date
North American ................... $200.0 October 20, 2020
(2)
Foreign .......................... $400.0 September 30, 2021
(3)
45
(1) Maximum amount available at any one time.
(2) On October 9, 2018, the North American asset-backed securitization program was terminated and we
repurchased the outstanding receivables.
(3) On September 21, 2018, the foreign asset-backed securitization program terms were amended and the
program was extended to September 30, 2021. Under the terms of the amended agreement, we
continuously sell designated pools of trade accounts receivable to a special purpose entity, which in
turn sells a portion of the receivables to an unaffiliated f inancial institution and a conduit administered
by an unaffiliated financial institution. In connection with this amendment, there is no longer a
deferred purchase price receivable for the foreign asset-backed securitization program.
In connection with our asset-backed securitization programs, during the fiscal year ended August 31,
2018, we sold $8.4 billion eligible trade accounts receivable and we received cash proceeds of $7.8 billion.
As of August 31, 2018, we recorded a deferred purchase price receivable of $533.1 million and had up to
$16.1 million in available liquidity under our asset-backed securitization programs.
Our asset-backed securitization programs contain various financial and nonfinancial covenants. As of
August 31, 2018 and 2017, we were in compliance with all covenants under our asset-backed securitization
programs. Refer to Note 2 — “Trade Accounts Receivable Securitization and Sale Programs” to the
Consolidated Financial Statements for further details on the programs.
Trade Accounts Receivable Sale Programs
Following is a summary of the nine trade accounts receivable sale programs with unaffiliated financial
institutions. Under the programs we may elect to sell receivables and the unaffiliated financial institutions
may elect to purchase, at a discount, on an ongoing basis:
Program
Maximum Amount
(in millions)
(1)
Type of Facility Expiration Date
A............. $875.0 Uncommitted August 31, 2022
(2)(3)
B ............. $150.0 Uncommitted November 30, 2018
(4)
C............. 800.0 CNY Uncommitted February 13, 2019
D............. $100.0 Uncommitted May 4, 2023
(5)
E ............. $50.0 Uncommitted August 25, 2019
F ............. $150.0 Uncommitted January 25, 2019
(6)
G............. $50.0 Uncommitted February 23, 2023
(3)
H............. $100.0 Uncommitted August 10, 2019
(7)
I ............. $100.0 Uncommitted July 21, 2019
(8)
(1) Maximum amount available at any one time.
(2) The maximum amount under the program will reduce to $650.0 million on February 1, 2019.
(3) Any party may elect to terminate the agreement upon 15 days prior notice.
(4) The program will automatically extend for one year at each expiration date unless either party provides
10 days notice of termination.
(5) Any party may elect to terminate the agreement upon 30 days prior notice.
(6) The program will be automatically extended through January 25, 2023 unless either party provides
30 days notice of termination.
(7) The program will be automatically extended through August 10, 2023 unless either party provides
30 days notice of termination.
46
(8) The program will be automatically extended through August 21, 2023 unless either party provides
30 days notice of termination.
During the fiscal year ended August 31, 2018, we sold $5.5 billion of trade accounts receivable under
these programs and we received cash proceeds of $5.5 billion. As of August 31, 2018, we had up to
$606.0 million in available liquidity under our trade accounts receivable sale programs.
Capital Expenditures
For fiscal year 2019, we anticipate our net capital expenditures will be approximately $800.0 million.
Our capital expenditures will support investments in new markets and ongoing maintenance in our DMS
and EMS segments. The amount of actual capital expenditures may be affected by general economic,
financial, competitive, legislative and regulatory factors, among other things.
Cash Flows
The following table sets forth selected consolidated cash flow information (in thousands):
Fiscal Year Ended August 31,
2018 2017 2016
Net cash provided by operating activities ............ $933,850 $1,256,643 $ 916,207
Net cash used in investing activities ................ (798,384) (579,465) (1,179,981)
Net cash (used in) provided by financing activities . . . . . (47,044) (404,546) 253,512
Effect of exchange rate changes on cash and cash
equivalents ............................... (20,392) 5,228 8,358
Net increase (decrease) in cash and cash equivalents .... $ 68,030 $ 277,860 $ (1,904)
Operating Activities
Net cash provided by operating activities during the fiscal year ended August 31, 2018 was primarily
due to non-cash expenses and increased inventories, accounts receivable and prepaid expenses and other
current assets, partially offset by increased accounts payable, accrued expenses and other liabilities. The
increase in inventories is largely due to increased demand and supports expected sales levels in the first
quarter of fiscal year 2019. The increase in accounts receivable is primarily driven by the timing of sales and
cash collections activity as well as increased sales levels. The increase in prepaid expense and other current
assets is primarily due to an increase in value added tax receivables, partially offset by a decrease in deferred
purchase price receivables due to a decrease in receivables sold and the timing of cash collections. The
increase in accounts payable, accrued expenses and other liabilities was primarily due to an increase in
materials purchases due to increased demand in the mobility business and the timing of purchases and cash
payments.
Investing Activities
Net cash used in investing activities during the fiscal year ended August 31, 2018 consisted primarily
of: (i) capital expenditures principally to support ongoing business in the DMS and EMS segments and
(ii) cash paid for the acquisition of True-Tech, which were partially offset by proceeds and advances from
the sale of property, plant and equipment.
Financing Activities
Net cash used in financing activities during the fiscal year ended August 31, 2018, was primarily due
to: (i) payments for debt agreements including the 8.250% Senior Notes, (ii) the repurchase of our common
stock, (iii) dividend payments and (iv) treasury stock minimum tax withholding related to vesting of
restricted stock. Net cash used in financing activities was partially offset by: (i) borrowings under debt
agreements including the 3.950% Senior Notes and the 2018 Credit Facility and (ii) net proceeds from the
exercise of stock options and issuance of common stock under the employee stock purchase plan.
47
Dividends and Share Repurchases
Following is a summary of the dividends and share repurchases for the fiscal years ended August 31,
2018, 2017 and 2016 (in thousands):
Dividends
Paid
(1)
Share
Repurchases
(2)
Total
Fiscal year 2016 .............................. $ 62,436 $148,185 $ 210,621
Fiscal year 2017 .............................. $ 59,959 $306,397 $ 366,356
Fiscal year 2018 .............................. $ 57,833 $450,000 $ 507,833
Total ..................................... $180,228 $904,582 $1,084,810
(1) The difference between dividends declared and dividends paid is due to dividend equivalents for
unvested restricted stock units that are paid at the time the awards vest.
(2) Excludes commissions.
We currently expect to continue to 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 (the “Board”) each quarter following its review of
our financial performance.
During fiscal years 2017 and 2016, our Board authorized the repurchase of $450.0 million and
$400.0 million, respectively, of our common stock under share repurchase programs, which were
repurchased during fiscal years 2016, 2017 and 2018.
In June 2018, the Board authorized the repurchase of up to $350.0 million of our common stock (the
“2018 Share Repurchase Program”). This authorization expires on August 31, 2019. As of August 31, 2018,
no shares had yet been repurchased under this authorization and $350.0 million remained available under
the 2018 Share Repurchase Program.
Contractual Obligations
Our contractual obligations as of August 31, 2018 are summarized below. As disclosed below, while 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 3 – 5 years
After
5 years
Notes payable and long-term debt ...... $2,518,699 $ 25,197 $ 815,949 $1,183,159 $494,394
Future interest on notes payable and
long-term debt
(1)
................. 516,046 112,359 197,964 112,316 93,407
Operating lease obligations ........... 562,911 126,038 179,075 115,709 142,089
Capital lease obligations ............. 26,468 1,326 3,002 2,814 19,326
Non-cancelable purchase order
obligations
(2)
................... 288,281 271,613 12,632 4,036 —
Pension and postretirement contributions
and payments
(3)
................. 6,802 799 1,076 1,322 3,605
Other
(4)
......................... 73,999 18,161 31,913 10,493 13,432
Total contractual obligations
(5)
......... $3,993,206 $555,493 $1,241,611 $1,429,849 $766,253
(1) Consists of interest on notes payable and long-term debt outstanding as of August 31, 2018. Certain of
our notes payable and long-term debt pay interest at variable rates. We have applied estimated interest
rates to determine the value of these expected future interest payments.
48
(2) Consists of purchase commitments entered into as of August 31, 2018 for property, plant and
equipment pursuant to legally enforceable and binding agreements.
(3) Includes the estimated company contributions to funded pension plans during fiscal year 2019 and the
expected benefit payments for unfunded pension and postretirement plans from fiscal years 2019
through 2028. These future payments are not recorded on the Consolidated Balance Sheets but will be
recorded as incurred.
(4) Includes (i) a $35.7 million capital commitment, (ii) a $19.5 million obligation related to a new human
resource system and (iii) an $18.8 million provisional estimate of the one-time transition tax as a result
of the Tax Act, in accordance with SAB 118, that will be paid over eight years.
(5) As of August 31, 2018, we have $6.2 million and $130.6 million recorded as a current and a long-term
liability, respectively, 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.
49
Item 7A. 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 or trading purposes. All derivative instruments are recorded on our Consolidated Balance Sheets
at their respective fair values.
The forward contracts (both those that are designated and not designated as accounting hedging
instruments) will generally expire in less than three months, with nine months being the maximum term of
the contracts outstanding as of August 31, 2018. The change in fair value related to contracts designated as
accounting hedging instruments is initially reported as a component of AOCI and subsequently reclassified
to the revenue or expense line in which the underlying transaction occurs within our 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 Consolidated Statements of Operations.
The forward contracts are primarily denominated in Chinese yuan renminbi, Euros, Indian rupees and
Mexican pesos.
Based on our overall currency rate exposures as of August 31, 2018, 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 Consolidated Financial Statements. See Note 13 — “Derivative Financial Instruments and Hedging
Activities” to the Consolidated Financial Statements for additional information.
Interest Rate Risk
Our exposure to market risk includes changes in interest rates that could affect the Consolidated
Balance Sheet, Consolidated Statement of Operations, and the Consolidated Statement of Cash Flows.
We are exposed to interest rate risk primarily on variable rate borrowings under the 2017 Credit Facility and
2018 Credit Facility. There were $829.3 million in borrowings outstanding under debt facilities with variable
interest rates as of August 31, 2018. See “Management’s Discussion and Analysis of Financial Condition
and Results of Operations — Liquidity and Capital Resources” and Note 8 — “Notes Payable and
Long-Term Debt” to the Consolidated Financial Statements for additional information regarding our
outstanding debt obligations.
To manage our exposure to market risk, we use derivative financial instruments when deemed
appropriate. In connection with our variable interest rate debt, we have interest rate swaps with aggregate
notional amounts of $200.0 million and $350.0 million, which expire on June 30, 2019 and August 24, 2020,
respectively. See Note 13 — “Derivative Financial Instruments and Hedging Activities” to the Consolidated
Financial Statements for additional information regarding our interest rate swap transactions. We do not,
and do not intend to, use derivative financial instruments for speculative or trading purposes.
We utilize valuation models to estimate the effects of sudden interest rate changes. The impact of a
hypothetical change of 10.0% in variable interest rates would result in an increase or decrease in interest
expense of approximately $3.3 million for fiscal year 2019.
Item 8. Financial Statements and Supplementary Data
Certain information required by this item is included in Item 7 of Part II of this Report under the
heading “Quarterly Results” and is incorporated into this item by reference. All other information required
by this item is included in Item 15 of Part IV of this Report and is incorporated into this item by reference.
Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure
There have been no changes in or disagreements with our accountants on accounting and financial
disclosure.
50
Item 9A. Controls and Procedures
(a) 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 as of August 31, 2018. 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.
(b) Management’s Report on Inter nal Control over Financial Reporting
We assessed the effectiveness of our internal control over financial reporting as of August 31, 2018.
Management’s report on internal control over financial reporting as of August 31, 2018 is incorporated
herein at Item 15. Ernst & Young LLP, our independent registered public accounting firm, issued an audit
report on the effectiveness of our internal control over financial reporting as of August 31, 2018, which is
incorporated herein at Item 15.
Our management, including our CEO and CFO, does not expect that our 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 reached the
conclusions set forth in Management’s report on internal control over financial reporting as of August 31,
2018.
(c) Changes in Internal Control over Financial Reporting
For our fiscal quarter ended August 31, 2018, 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.
Item 9B. Other Information
None.
51
PART III
Item 10. Directors, Executive Officers and Corporate Governance
Information regarding our executive officers is included in Item 1 of Part I of this Report under the
heading “Executive Officers of the Registrant”.
The other information required by this item is incorporated by reference to the infor mation set forth
under the captions “Election of Directors”, “Benef icial Ownership — Section 16(a) Beneficial Ownership
Reporting Compliance” and “Corporate Governance and Board of Directors Matters” in our Proxy
Statement for the Annual Meeting of Stockholders to be filed with the SEC within 120 days after the end of
our fiscal year ended August 31, 2018 (“Proxy Statement”).
Item 11. Executive Compensation
The information required by this item is incorporated by reference to the information set forth under
the captions “Compensation Matters — Compensation Discussion and Analysis”, “Corporate Governance
and Board of Directors Matters — Director Compensation”, “Corporate Governance and Board of
Directors Matters — Compensation Committee Interlocks and Insider Participation” in our Proxy
Statement.
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder
Matters
The information required by this item is incorporated by reference to the information set forth under
the captions “Beneficial Ownership — Share Ownership by Principal Stockholders and Management” and
“Compensation Matters — Equity Compensation Plan Information” in our Proxy Statement.
Item 13. Certain Relationships and Related Transactions, and Director Independence
The information required by this item is incorporated by reference to the information set forth
under the captions “Corporate Governance and Board of Directors Matters”, “Related Party
Transactions — Certain Related Party Transactions”, “Determinations of Director Independence” in
our Proxy Statement.
Item 14. Principal Accounting Fees and Services
The information required by this item is incorporated by reference to the information set forth under
the captions “Ratification of Appointment of Independent Registered Public Accounting Firm — Principal
Accounting Fees and Services” and “— Policy on Audit Committee Pre-Approval of Audit, Audit-Related
and Permissible Non-Audit Services” in our Proxy Statement.
52
PART I V
Item 15. Exhibits and Financial Statement Schedules
(a) The following documents are filed as part of this Report:
1 Financial Statements. Our consolidated financial statements, and related notes thereto, with the
independent registered public accounting firm reports thereon are included in Part IV of this
report on the pages indicated by the Index to Consolidated Financial Statements and Schedule.
2 Financial Statement Schedule. Our financial statement schedule is included in Part IV of this
report on the page indicated by the Index to Consolidated Financial Statements and Schedule.
This financial statement schedule should be read in conjunction with our consolidated financial
statements, and related notes thereto.
Schedules not listed in the Index to Consolidated Financial Statements and Schedule have been
omitted because they are not applicable, not required, or the information required to be set forth therein is
included in the consolidated financial statements or notes thereto.
3 Exhibits. See Item 15(b) below.
(b) Exhibits. The following exhibits are included as part of, or incorporated by reference into, this
Report.
EXHIBIT INDEX
Exhibit No. Description
Incorporated by Reference Herein
Form Exhibit
Filing Date/
Period End
1.1 Underwriting Agreement, dated as of January 9, 2018, between the
Company and BNP Paribas Securities Corp., Citigroup Global
Markets Inc., J.P. Morgan Securities LLC and Mizuho Securities
USA LLC, as representatives of the several underwriters listed
therein.
8-K 1.1 1/17/2018
3.1 Registrant’s Certificate of Incorporation, as amended. 10-Q 3.1 5/31/2017
3.2 Registrant’s Bylaws, as amended. 10-Q 3.2 5/31/2017
4.1 Form of Certificate for Shares of the Registrant’s Common Stock. (P) S-1 1 3/17/1993
4.2 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.
8-K 4.2 1/17/2008
4.3 Form of 8.250% Registered Senior Notes issued on July 18, 2008. 10-K 4.12 8/31/2008
4.4 Form of 7.750% Registered Senior Notes issued on August 11, 2009. 8-K 4.1 8/12/09
4.5 Form of 5.625% Registered Senior Notes issued on November 2,
2010.
8-K 4.1 11/2/2010
4.6 Form of 4.700% Registered Senior Notes issued on August 3, 2012. 8-K 4.1 8/6/2012
4.7 Officers’ Certificate of the Registrant pursuant to the Indenture,
dated August 11, 2009.
8-K 4.3 8/12/2009
4.8 Officers’ Certificate of the Registrant pursuant to the Indenture,
dated November 2, 2010.
8-K 4.3 11/2/2010
4.9 Officers’ Certificate of the Registrant pursuant to the Indenture,
dated August 3, 2012.
8-K 4.3 8/6/2012
4.10 Officers’ Certificate, dated as of January 17, 2018, establishing the
3.950% Senior Notes due 2028.
8-K 4.1 1/17/2018
10.1† 1992 Stock Option Plan and forms of agreement used thereunder, as
amended.
S-8 4.1 10/10/1997
10.2† Restated cash or deferred profit sharing plan under section 401(k). (P) S-1 3/3/1993
10.3† Form of Indemnification Agreement between the Registrant and its
Officers and Directors. (P)
S-1 3/3/1993
53
Exhibit No. Description
Incorporated by Reference Herein
Form Exhibit
Filing Date/
Period End
10.4† Jabil 2002 Stock Incentive Plan. 10-K 10.5 8/31/2010
10.4a For m of Jabil Circuit, Inc. 2002 Stock Incentive Plan Stock Option
Agreement (prior form).
10-K 10.6.1 8/31/2004
10.4b Form of Jabil Circuit, Inc. 2002 Stock Incentive Plan-French Subplan
Stock Option Agreement (prior form).
10-K 10.6.2 8/31/2004
10.4c Form of Jabil Circuit, Inc. 2002 Stock Incentive Plan-UK Subplan
CSOP Option Certificate (prior form).
10-K 10.6.3 8/31/2004
10.4d Form of Jabil Circuit, Inc. 2002 Stock Incentive Plan-UK Subplan
Stock Option Agreement (prior form).
10-K 10.6.4 8/31/2004
10.4e Form of Jabil Circuit, Inc. Restricted Stock Award Agreement (prior
form).
10-K 10.5f 8/31/2009
10.4f Form of Jabil Circuit, Inc. Time-Based Restricted Stock Award
Agreement (prior form).
10-K 10.5f 8/31/2010
10.4g For m of Jabil Circuit, Inc. Performance-Based Restricted Stock
Award Agreement (prior form).
10-K 10.5g 8/31/2010
10.4h Form of Stock Appreciation Right Agreement (prior for m). 10-K 10.6.6 8/31/2005
10.4i† Addendum to the Terms and Conditions of the Jabil Circuit, Inc.
2002 Stock Incentive Plan for Grantees Resident in France.
S-8 4.2 6/13/2003
10.4j† Schedule to the Jabil Circuit, Inc. 2002 Stock Incentive Plan for
Grantees Resident in the United Kingdom.
S-8 4.1 8/16/2002
10.5† Jabil 2011 Employee Stock Purchase Plan, as amended. 14A B 12/9/2016
10.6† Jabil 2011 Stock Award and Incentive Plan, as Amended and
Restated.
14A A 12/9/2016
10.6a For m of Performance-Based Restricted Stock Unit Award Agreement
(PBRSU EPS NON).
10-Q 10.1 5/31/2011
10.6b Form of Performance-Based Restricted Stock Unit Award Agreement
(PBRSU EPS OEU).
10-Q 10.2 5/31/2011
10.6c Form of Performance-Based Restricted Stock Unit Award Agreement
(PBRSU EPS ONEU).
10-Q 10.3 5/31/2011
10.6d Form of Performance-Based Restricted Stock Unit Award Agreement
(PBRSU EPS Officer — EU2).
10-Q 10.1 11/30/2013
10.6e Form of Performance-Based Restricted Stock Unit Award Agreement
(PBRSU EPS Officer — Non-EU2).
10-Q 10.2 11/30/2013
10.6f Form of Perfor mance-Based Restricted Stock Unit Award Agreement
(PBRSU EPS Non-Officer2).
10-Q 10.3 11/30/2013
10.6g For m of Performance-Based Restricted Stock Unit Award Agreement
(PBRSU EPS Officer — EU3).
10-K 10.7g 8/31/2014
10.6h Form of Performance-Based Restricted Stock Unit Award Agreement
(PBRSU EPS Officer — Non-EU3).
10-K 10.7h 8/31/2014
10.6i Form of Performance-Based Restricted Stock Unit Award Agreement
(PBRSU EPS-Non-Officer3).
10-K 10.7i 8/31/2014
10.6j Form of Performance-Based Restricted Stock Unit Award Agreement
(PBRSU EPS-Officer — EU4).
10-K 10.6j 8/31/2015
10.6k Form of Performance-Based Restricted Stock Unit Award Agreement
(PBRSU EPS-Officer — Non-EU4).
10-K 10.6k 8/31/2015
10.6l Form of Performance-Based Restricted Stock Unit Award Agreement
(PBRSU EPS Non-Officer4).
10-K 10.6l 8/31/2015
10.6m Form of Performance-Based Restricted Stock Unit Award Agreement
(PBRSU EPS Officer — EU5).
10-K 10.6m 8/31/2016
10.6n Form of Performance-Based Restricted Stock Unit Award Agreement
(PBRSU EPS Officer — Non-EU5).
10-K 10.6n 8/31/2016
54
Exhibit No. Description
Incorporated by Reference Herein
Form Exhibit
Filing Date/
Period End
10.6o Form of Performance-Based Restricted Stock Unit Award Agreement
(PBRSU EPS Non-Officer5).
10-K 10.6o 8/31/2016
10.6p Form of Performance-Based Restricted Stock Unit Award Agreement
(PBRSU TSR Officer — EU).
10-K 10.6m 8/31/2015
10.6q Form of Performance-Based Restricted Stock Unit Award Agreement
(PBRSU TSR Officer — Non-EU).
10-K 10.6n 8/31/2015
10.6r Form of Time-Based Restricted Stock Unit Award Agreement
(TBRSU DIR).
10-Q 10.4 5/31/2011
10.6s Form of Time-Based Restricted Stock Unit Award Agreement
(TBRSU NON).
10-Q 10.5 5/31/2011
10.6t Form of Time-Based Restricted Stock Unit Award Agreement
(TBRSU OEU).
10-Q 10.6 5/31/2011
10.6u Form of Time-Based Restricted Stock Unit Award Agreement
(TBRSU ONEU).
10-Q 10.7 5/31/2011
10.6v Form of Time-Based Restricted Stock Unit Award Agreement (ACQ
TBRSU).
10-Q 10.1 5/31/2015
10.6w Form of Cash Bonus Award Agreement. 10-Q 10.1 11/30/2012
10.6x Form of Cash Bonus Award Agreement (Officer — EU). 10-Q 10.1 2/28/2013
10.6y Form of Cash Bonus Award Agreement (Officer — Non EU). 10-Q 10.2 2/28/2013
10.6z Form of Stock Appreciation Right Award Agreement (SAR
Officer — Non EU).
10-K 10.7q 8/31/2014
10.7† Executive Deferred Compensation Plan. S-8 4.1 2/25/2011
10.8† Form of Jabil Inc. Restricted Stock Unit Award Agreement (TBRSU
Non-Employee Director).
10-Q 10.2 11/30/2017
10.8a† Form of Jabil Inc. Restricted Stock Unit Award Agreement (TBRSU
ONEU).
10-Q 10.3 11/30/2017
10.8b† Form of Jabil Inc. Restricted Stock Unit Award Agreement (PBRSU
TSR ONEU)
10-Q 10.4 11/30/2017
10.8c† Form of Jabil Inc. Restricted Stock Unit Award Agreement (PBRSU
EPS — Executive — Non-EU)
10-Q 10.5 11/30/2017
10.9† Agreement and General Release dated as of June 12, 2017, between
Jabil Inc. and William D. Muir, Jr.
8-K 10.1 6/12/2017
10.10 Amended and Restated Five Year Credit Agreement dated as of
November 8, 2017 among Jabil Inc.; the initial lenders named therein;
Citibank, N.A., as administrative agent; JPMorgan Chase Bank, N.A.
and Bank of America, N.A., as co-syndication agents; BNP Paribas,
Mizuho Bank, Ltd., The Bank of Tokyo-Mitsubishi UFJ, Ltd. and
Sumitomo Mitsui Banking Corporation, as documentation agents;
and Citigroup Global Markets Inc., JPMorgan Chase Bank, N.A.,
Merrill Lynch, Pierce, Fenner & Smith Incorporated, BNP Paribas
Securities Corp., Mizuho Bank, Ltd., The Bank of Tokyo-Mitsubishi
UFJ, Ltd., and Sumitomo Mitsui Banking Corporation, as joint lead
arrangers and joint bookrunners.
8-K 10.1 11/14/2017
10.11 Credit Agreement dated as of August 24, 2018 among Jabil Inc.; the
initial lenders named in the Agreement; Mizuho Bank, Ltd., as
administrative agent; and Mizuho Bank, Ltd., MUFG Bank, Ltd.
and Sumitomo Mitsui Banking Corporation, as joint lead arrangers
and joint bookrunners.
8-K 10.1 8/27/2018
21.1* List of Subsidiaries.
23.1* Consent of Independent Registered Public Accounting Firm.
24.1* Power of Attorney (See Signature page).
31.1* Rule 13a-14(a)/15d-14(a) Certification by the Chief Executive Officer
of the Registrant.
55
Exhibit No. Description
Incorporated by Reference Herein
Form Exhibit
Filing Date/
Period End
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** Interactive data files pursuant to Rule 405 of Regulation S-T:
(i) Consolidated Balance Sheets as of August 31, 2018 and August 31,
2017; (ii) Consolidated Statement of Operations for the fiscal years
ended August 31, 2018, 2017 and 2016; (iii) Consolidated Statements
of Comprehensive Income for the f iscal years ended August 31, 2018,
2017 and 2016; (iv) Consolidated Statements of Comprehensive
Stockholders’ Equity for the fiscal years ended August 31, 2018, 2017
and 2016; (v) Consolidated Statements of Cash Flows for the
fiscal years ended August 31, 2018, 2017 and 2016; and (vi) Notes to
Consolidated Financial Statements.
† Indicates management compensatory plan, contract of arrangement.
* Filed or furnished herewith.
** XBRL (Extensible Business Reporting Language) Filed Electronically with this report.
Certain instruments with respect to long-term debt of the Company and its consolidated subsidiaries
are not filed herewith pursuant to Item 601(b)(4)(iii) of Regulation S-K since the total amount of securities
authorized under each such instrument does not exceed 10% of the total assets of the Company and its
subsidiaries on a consolidated basis. The Company agrees to furnish a copy of any such instrument to the
SEC upon request.
(c) Financial Statement Schedules. See Item 15(a) above.
56
JABIL INC. AND SUBSIDIARIES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULE
Management’s Report on Internal Control over Financial Reporting . . . . . . ............... 58
Reports of Independent Registered Public Accounting Firm (Ernst & Young LLP) . . . . . . . . . . 59
Consolidated Financial Statements:
Consolidated Balance Sheets — August 31, 2018 and 2017 .......................... 61
Consolidated Statements of Operations — Fiscal years ended August 31, 2018, 2017,
and 2016 ........................................................... 62
Consolidated Statements of Comprehensive Income — Fiscal years ended August 31, 2018,
2017, and 2016 ....................................................... 63
Consolidated Statements of Stockholders’ Equity — Fiscal years ended August 31, 2018, 2017,
and 2016 ........................................................... 64
Consolidated Statements of Cash Flows — Fiscal years ended August 31, 2018, 2017
and 2016 ........................................................... 65
Notes to Consolidated Financial Statements . . . ................................. 66
Financial Statement Schedule:
Schedule II — Valuation and Qualifying Accounts ............................... 104
57
MANAGEMENT’S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING
Management of Jabil Inc. (the “Company”) is responsible for establishing and maintaining adequate
internal control over financial reporting as defined in Rule13a-15(f) of the Securities Exchange Act of 1934,
as amended.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect
misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk
that controls may become inadequate because of changes in conditions, or that the degree of compliance
with the policies or procedures may deteriorate.
Under the supervision of and with the participation of the Chief Executive Officer and the Chief
Financial Officer, the Company’s management conducted an assessment of the effectiveness of the
Company’s internal control over financial reporting as of August 31, 2018. Management based this
assessment on the framework as established in Internal Control — Integrated Framework (2013) issued by
the Committee of Sponsoring Organizations of the Treadway Commission. Management’s assessment
included an evaluation of the design of the Company’s internal control over financial reporting and testing
of the effectiveness of its internal control over financial reporting.
Based on this assessment, management has concluded that, as of August 31, 2018, the Company
maintained effective internal control over financial reporting.
Ernst & Young LLP, the Company’s independent registered public accounting firm, issued an audit
report on the effectiveness of the Company’s internal control over financial reporting which follows this
report.
October 19, 2018
58
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders of
Jabil Inc.
Opinion on Internal Control over Financial Reporting
We have audited Jabil Inc. and subsidiaries’ internal control over financial reporting as of August 31,
2018, based on criteria established in Internal Control — Integrated Framework issued by the Committee
of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria). In our
opinion, Jabil Inc. and subsidiaries (the Company) maintained, in all material respects, effective internal
control over financial reporting as of August 31, 2018, based on the COSO criteria.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight
Board (United States) (PCAOB), the consolidated balance sheets of the Company as of August 31, 2018
and 2017, and the related consolidated statements of operations, comprehensive income, stockholders’
equity and cash f lows for each of the three years in the period ended August 31, 2018, and the related notes
and financial statement schedule listed in the Index at Item 15(a), and our report dated October 19, 2018
expressed an unqualified opinion thereon.
Basis for Opinion
The Compan y’s management is responsible for maintaining ef fecti ve interna l control o ver financia l
reporting and f or its assessment of the effectiveness of internal contr ol ov er financia l reporting included in the
accompanying Management’s Report on Internal Control over Financia l R eporting. Our responsibility is to
expr ess an opinion on the Company’s internal control ov er financia l reporting based on our audit. We are a
public accounting firm registered with the PCAOB and are required to be independent with respect to the
Company in accordance with the U.S . federa l securities laws and the applicable rules and regulations of the
Securities and Exchange Commission and the PCAOB. We conducted our audit in accordance with the
standards of the PCAOB. Those standards requir e that we plan and perf orm the audit to obtain reasonable
assurance about whether effecti ve interna l control o ver financia l reporting was maintained in a ll material
respects. Our audit included obtaining an understanding of internal control ov er financia l reporting, assessing
the risk tha t a material weakness exists, testing and ev aluating the design and opera ting effectiveness of
internal control based on the assessed risk, and performing such other procedur es as we considered necessary
in the circumstances. We believ e that our audit pr ovides a reasonable basis f or our opinion.
Definition and Limitations of Internal Control over Financial Reporting
A company’s internal control over financial reporting is a process designed 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. A company’s internal
control over financial reporting includes those policies and procedures that (1) pertain to the maintenance
of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the
assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to
permit preparation of financial statements in accordance with generally accepted accounting principles, and
that receipts and expenditures of the company are being made only in accordance with authorizations of
management and directors of the company; and (3) provide reasonable assurance regarding prevention or
timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a
material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect
misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk
that controls may become inadequate because of changes in conditions, or that the degree of compliance
with the policies or procedures may deteriorate.
/s/ ERNST & YOUNG LLP
Tampa, Florida
October 19, 2018
59
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders of
Jabil Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Jabil Inc. and subsidiaries (the
Company) as of August 31, 2018 and 2017, and the related consolidated statements of operations,
comprehensive income, stockholders’ equity and cash flows for each of the three years in the period ended
August 31, 2018, and the related notes and financial statement schedule listed in the Index at Item 15(a)
(collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated
financial statements present fairly, in all material respects, the financial position of the Company at
August 31, 2018 and 2017, and the results of its operations and its cash flows for each of the three years in
the period ended August 31, 2018, in conformity with US generally accepted accounting principles.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight
Board (United States) (PCAOB), the Company’s internal control over financial reporting as of August 31,
2018, based on criteria established in Internal Control-Integrated Framework issued by the Committee of
Sponsoring Organizations of the Treadway Commission (2013 framework), and our report dated
October 19, 2018 expressed an unqualified opinion thereon.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is
to express an opinion on the Company’s financial statements based on our audits. We are a public
accounting firm registered with the PCAOB and are required to be independent with respect to the
Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the
Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require
that we plan and perform the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement, whether due to error or fraud. Our audits included performing
procedures to assess the risks of material misstatement of the financial statements, whether due to error or
fraud, and performing procedures that respond to those risks. Such procedures included examining, on a
test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also
included evaluating the accounting principles used and significant estimates made by management, as well
as evaluating the overall presentation of the financial statements. We believe that our audits provide a
reasonable basis for our opinion.
/s/ ERNST & YOUNG LLP
We have served as the Company’s auditor since 2010.
Tampa, Florida
October 19, 2018
60
JABIL INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands, except for share data)
August 31,
2018 2017
ASSETS
Current assets:
Cash and cash equivalents ................................... $ 1,257,949 $ 1,189,919
Accounts receivable, net of allowance for doubtful accounts . . ......... 1,693,268 1,397,424
Inventories, net of reserve for excess and obsolete inventory ........... 3,457,706 2,942,083
Prepaid expenses and other current assets ........................ 1,141,000 1,097,257
Total current assets ...................................... 7,549,923 6,626,683
Property, plant and equipment, net of accumulated depreciation .......... 3,198,016 3,228,678
Goodwill ................................................ 627,745 608,184
Intangible assets, net of accumulated amortization ................... 279,131 284,596
Deferred income taxes ....................................... 218,252 205,722
Other assets .............................................. 172,574 142,132
Total assets ........................................... $12,045,641 $11,095,995
LIABILITIES AND EQUITY
Current liabilities:
Current installments of notes payable and long-term debt . . . .......... $ 25,197 $ 444,255
Accounts payable ......................................... 4,942,932 4,257,623
Accrued expenses ......................................... 2,262,744 2,168,715
Total current liabilities .................................... 7,230,873 6,870,593
Notes payable and long-term debt, less current installments . . ........... 2,493,502 1,606,017
Other liabilities ............................................ 94,617 100,812
Income tax liabilities ........................................ 148,884 100,902
Deferred income taxes ....................................... 114,385 49,327
Total liabilities ......................................... 10,082,261 8,727,651
Commitments and contingencies
Equity:
Jabil Inc. stockholders’ equity:
Preferred stock, $0.001 par value, authorized 10,000,000 shares; no shares
issued and outstanding ................................... — —
Common stock, $0.001 par value, authorized 500,000,000 shares;
257,130,145 and 253,266,684 shares issued and 164,588,172 and
177,727,653 shares outstanding at August 31, 2018 and August 31, 2017,
respectively ........................................... 257 253
Additional paid-in capital ................................... 2,218,673 2,104,203
Retained earnings ........................................ 1,760,097 1,730,893
Accumulated other comprehensive (loss) income ................... (19,399) 54,620
Treasury stock at cost, 92,541,973 and 75,539,031 shares as of August 31,
2018 and August 31, 2017, respectively . . ...................... (2,009,371) (1,536,455)
Total Jabil Inc. stockholders’ equity . . ........................ 1,950,257 2,353,514
Noncontrolling interests .................................... 13,123 14,830
Total equity ........................................... 1,963,380 2,368,344
Total liabilities and equity ................................. $12,045,641 $11,095,995
See accompanying notes to Consolidated Financial Statements.
61
JABIL INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except for per share data)
Fiscal Year Ended August 31,
2018 2017 2016
Netrevenue .................................... $22,095,416 $19,063,121 $18,353,086
Cost of revenue ................................. 20,388,624 17,517,478 16,825,382
Grossprofit .................................... 1,706,792 1,545,643 1,527,704
Operating expenses:
Selling, general and administrative ................... 1,050,716 907,702 924,427
Research and development ........................ 38,531 29,680 31,954
Amortization of intangibles ....................... 38,490 35,524 37,121
Restructuring and related charges ................... 36,902 160,395 11,369
Loss on disposal of subsidiaries .................... — 2,112 —
Operating income ................................ 542,153 410,230 522,833
Other expense .................................. 37,563 28,448 8,380
Interest income ................................. (17,813) (12,525) (9,128)
Interest expense ................................. 149,002 138,074 136,536
Income before income tax .......................... 373,401 256,233 387,045
Income tax expense ............................... 285,860 129,066 132,149
Net income .................................... 87,541 127,167 254,896
Net income (loss) attributable to noncontrolling interests, net
oftax ...................................... 1,211 (1,923) 801
Net income attributable to Jabil Inc. ................... $ 86,330 $ 129,090 $ 254,095
Earnings per share attributable to the stockholders of
Jabil Inc.:
Basic ....................................... $ 0.50 $ 0.71 $ 1.33
Diluted ..................................... $ 0.49 $ 0.69 $ 1.32
Weighted average shares outstanding:
Basic ....................................... 172,237 181,902 190,413
Diluted ..................................... 175,044 185,838 192,750
Cash dividends declared per common share .............. $ 0.32 $ 0.32 $ 0.32
See accompanying notes to Consolidated Financial Statements.
62
JABIL INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(in thousands)
Fiscal Year Ended August 31,
2018 2017 2016
Net income ........................................... $87,541 $127,167 $254,896
Other comprehensive (loss) income:
Foreign currency translation adjustment ..................... (50,151) 41,244 9,672
Derivative instruments ................................. (21,851) 22,183 19,817
Available for sale securities ............................... (8,679) 20,750 (5,436)
Actuarial gain (loss) ................................... 8,194 10,372 (12,963)
Prior service cost ..................................... (1,532) (52) (113)
Total other comprehensive (loss) income ....................... (74,019) 94,497 10,977
Comprehensive income ................................... $13,522 $221,664 $265,873
Comprehensive income (loss) attributable to noncontrolling interests . . . 1,211 (1,923) 801
Comprehensive income attributable to Jabil Inc. ................. $12,311 $223,587 $265,072
See accompanying notes to Consolidated Financial Statements.
63
JABIL INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(in thousands, except for share data)
Jabil Inc. Stockholders’ Equity
Common Stock
Additional
Paid-in
Capital
Retained
Earnings
Accumulated
Other
Comprehensive
(Loss) Income
Treasury
Stock
Noncontrolling
Interests
Total
Equity
Shares
Outstanding
Par
Value
Balance as of August 31, 2015 ..............192,068,068 $247 $1,955,104 $1,468,910 $(50,854) $(1,058,551) $20,155 $2,335,011
Shares issued upon exercise of stock options ..... 19,109 — — — — — — —
Shares issued under employee stock purchase plan . . 1,246,947 1 20,910 — — — — 20,911
Vesting of restricted stock awards ........... 1,817,635 2 (2) — — — — —
Purchases of treasury stock under employee stock
plans ........................... (462,900) — — — — (10,656) — (10,656)
Treasury shares purchased ................ (7,690,387) — — — — (148,340) — (148,340)
Recognition of stock-based compensation ...... — — 58,997 — — — — 58,997
Declared dividends .................... — — — (62,185) — — — (62,185)
Comprehensive income .................. — — — 254,095 10,977 — 801 265,873
Declared dividends to noncontrolling interests .... — — — — — — (1,500) (1,500)
Purchase of noncontrolling interests .......... — — (484) — — — (116) (600)
Foreign currency adjustments attributable to
noncontrolling interests ................ — — — — — — (14) (14)
Balance as of 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 ..... 172,620 — — — — — — —
Shares issued under employee stock purchase plan . . 1,228,316 1 21,791 — — — — 21,792
Vesting of restricted stock awards ........... 2,102,049 2 (2) — — — — —
Purchases of treasury stock under employee stock
plans ........................... (550,096) — — — — (12,268) — (12,268)
Treasury shares purchased ................ (12,223,708) — — — — (306,640) — (306,640)
Recognition of stock-based compensation ...... — — 47,889 — — — — 47,889
Declared dividends .................... — — — (59,017) — — — (59,017)
Comprehensive income .................. — — — 129,090 94,497 — (1,923) 221,664
Declared dividends to noncontrolling interests .... — — — — — — (2,293) (2,293)
Purchase of noncontrolling interests .......... — — — — — — (134) (134)
Foreign currency adjustments attributable to
noncontrolling interests ................ — — — — — — (146) (146)
Balance as of August 31, 2017 ..............177,727,653 $253 $2,104,203 $1,730,893 $ 54,620 $(1,536,455) $14,830 $2,368,344
Shares issued upon exercise of stock options ..... 30,832 — — — — — — —
Shares issued under employee stock purchase plan . . 1,105,400 1 24,865 — — — — 24,866
Vesting of restricted stock awards ........... 2,727,229 3 (3) — — — — —
Purchases of treasury stock under employee stock
plans ........................... (793,052) — — — — (22,597) — (22,597)
Treasury shares purchased ................ (16,209,890) — — — — (450,319) — (450,319)
Recognition of stock-based compensation ...... — — 89,608 — — — — 89,608
Declared dividends .................... — — — (57,126) — — — (57,126)
Comprehensive income .................. — — — 86,330 (74,019) — 1,211 13,522
Declared dividends to noncontrolling interests .... — — — — — — (2,920) (2,920)
Foreign currency adjustments attributable to
noncontrolling interests ................ — — — — — — 2 2
Balance as of August 31, 2018 ..............164,588,172 $257 $2,218,673 $1,760,097 $(19,399) $(2,009,371) $13,123 $1,963,380
See accompanying notes to Consolidated Financial Statements.
64
JABIL INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
Fiscal Year Ended August 31,
2018 2017 2016
Cash flows from operating activities:
Net income ....................................... $ 87,541 $ 127,167 $ 254,896
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation and amortization ......................... 773,704 760,405 696,752
Restructuring and related charges ....................... 16,264 94,346 1,170
Provision for allowance for doubtful accounts ............... 38,030 10,112 919
Recognition of stock-based compensation expense and related
charges ...................................... 90,664 48,544 58,997
Deferred income taxes .............................. 52,705 (63,001) (23,155)
Other, net ...................................... (13,600) 22,109 21,369
Change in operating assets and liabilities, exclusive of net assets
acquired:
Accounts receivable ................................ (316,262) (31,353) 122,115
Inventories ..................................... (499,105) (445,089) 67,966
Prepaid expenses and other current assets .................. (76,602) 19,346 (194,337)
Other assets ..................................... (34,747) (30,413) (4,425)
Accounts payable, accrued expenses and other liabilities ......... 815,258 744,470 (86,060)
Net cash provided by operating activities .................... 933,850 1,256,643 916,207
Cash flows used in investing activities:
Acquisition of property, plant and equipment ................. (1,036,651) (716,485) (924,239)
Proceeds and advances from sale of property, plant and equipment .... 350,291 175,000 26,031
Cash paid for business and intangible asset acquisitions, net of cash . . . (109,664) (36,620) (242,143)
Issuance of notes receivable ............................ (6,500) — (29,380)
Other, net ........................................ 4,140 (1,360) (10,250)
Net cash used in investing activities ........................ (798,384) (579,465) (1,179,981)
Cash flows (used in) provided by financing activities:
Borrowings under debt agreements ........................ 9,677,424 7,434,107 6,904,215
Payments toward debt agreements ........................ (9,206,016) (7,479,150) (6,445,922)
Payments to acquire treasury stock ........................ (450,319) (306,640) (148,340)
Dividends paid to stockholders .......................... (57,833) (59,959) (62,436)
Net proceeds from exercise of stock options and issuance of common
stock under employee stock purchase plan .................. 24,865 21,791 20,910
Treasury stock minimum tax withholding related to vesting of restricted
stock ......................................... (22,597) (12,268) (10,656)
Other, net ........................................ (12,568) (2,427) (4,259)
Net cash (used in) provided by financing activities .............. (47,044) (404,546) 253,512
Effect of exchange rate changes on cash and cash equivalents ......... (20,392) 5,228 8,358
Net increase (decrease) in cash and cash equivalents ............... 68,030 277,860 (1,904)
Cash and cash equivalents at beginning of period ................. 1,189,919 912,059 913,963
Cash and cash equivalents at end of period ..................... $1,257,949 $ 1,189,919 $ 912,059
Supplemental disclosure information:
Interest paid, net of capitalized interest ..................... $ 167,278 $ 130,635 $ 128,013
Income taxes paid, net of refunds received ................... $ 180,423 $ 187,871 $ 140,704
See accompanying notes to Consolidated Financial Statements.
65
JABIL INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Description of Business and Summary of Significant Accounting Policies
Jabil Inc. (together with its subsidiaries, herein referred to as the “Company”) is one of the leading
providers of manufacturing services and solutions. The Company provides comprehensive electronics
design, production and product management services to companies in various industries and end markets.
The Company’s services combine a highly automated, continuous flow manufacturing approach with
advanced electronic design and design for manufacturability technologies. The Company is headquartered
in St. Petersburg, Florida and has manufacturing operations in the Americas, Europe, Asia and Africa.
Significant accounting policies followed by the Company are as follows:
Principles of Consolidation and Basis of Presentation
The consolidated financial statements include the accounts and operations of the Company, and its
wholly-owned and majority-owned subsidiaries. All significant intercompany balances and transactions
have been eliminated in preparing the consolidated financial statements. The Company has made certain
reclassification adjustments to conform prior periods’ Consolidated Financial Statements and Notes to the
Consolidated Financial Statements to the current presentation.
Use of Accounting Estimates
Management is required to make estimates and assumptions during the preparation of the
consolidated financial statements and accompanying notes in conformity with U.S. generally accepted
accounting principles (“U.S. GAAP”). These estimates and assumptions affect the reported amounts of
assets and liabilities and the disclosure of contingent assets and liabilities at the dates of the consolidated
financial statements and the reported amounts of revenues and expenses during the reporting period.
Actual results could differ materially from these estimates and assumptions.
Cash and Cash Equivalents
Cash equivalents consist of investments that are readily convertible to cash with original maturities of
90 days or less. As of August 31, 2018 and 2017, there were $21.4 million and $71.5 million of cash
equivalents, respectively.
Accounts Receivable
Accounts receivable consist of trade receivables and other miscellaneous receivables. The Company
maintains an allowance for doubtful accounts for estimated losses resulting from the inability of its
customers to make required payments. Bad debts are charged to this allowance after all attempts to collect
the balance are exhausted. Allowances of $15.2 million and $14.1 million were recorded as of August 31,
2018 and 2017, respectively. As the financial condition and circumstances of the Company’s customers
change, adjustments to the allowance for doubtful accounts are made as necessary.
Inventories
Inventories are stated at the lower of cost (on a first in, first out (FIFO) basis) and net realizable value.
Inventory is valued based on current and forecasted usage, customer inventory-related contractual
obligations and other lower of cost and net realizable value considerations. If actual market conditions or
customer product demands are less favorable than those projected, additional valuation adjustments may be
necessary.
66
Property, Plant and Equipment, net
Property, plant and equipment is capitalized at cost and depreciated using the straight-line depreciation
method over the estimated useful lives of the respective assets. Estimated useful lives for major classes of
depreciable assets are as follows:
Asset Class Estimated Useful Life
Buildings Up to 35 years
Leasehold improvements Shorter of lease term or useful life of the improvement
Machinery and equipment 2 to 10 years
Furniture, fixtures and office equipment 5 years
Computer hardware and software 3 to 7 years
Transportation equipment 3 years
Certain equipment held under capital leases is classified as property, plant and equipment and the
related obligation is recorded as accrued expenses and other liabilities on the Consolidated Balance Sheets.
Amortization of assets held under capital leases is included in depreciation expense in the Consolidated
Statements of Operations. Maintenance and repairs are expensed as incurred. The cost and related
accumulated depreciation of assets sold or retired is removed from the accounts and any resulting gain or
loss is reflected in the Consolidated Statements of Operations as a component of operating income.
Goodwill and Other Intangible Assets
The Company accounts for goodwill in a business combination as the excess of the cost over the fair
value of net assets acquired and is assigned to the reporting unit in which the acquired business will operate.
The Company tests goodwill and indefinite-lived intangible assets for impairment during the fourth quarter
of each fiscal year or whenever events or changes in circumstances indicate the carrying amount may not be
recovera ble.
The recoverability of goodwill is measured at the reporting unit level by comparing the reporting unit’s
carrying amount, including goodwill, to the fair value of the reporting unit. The Company determines the
fair value of its reporting units based on an average weighting of both projected discounted future results
and the use of comparative market multiples. If the carrying amount of the reporting unit exceeds its fair
value, goodwill is considered impaired and a second step is performed to measure the amount of loss, if any.
The recoverability of indefinite-lived intangible assets is measured by comparing the carrying amount
to the fair value. The Company determines the fair value of its indefinite-lived intangible assets principally
based on a variation of the income approach, known as the relief from royalty method. If the carrying
amount of the indefinite-lived intangible asset exceeds its fair value, the indefinite-lived intangible asset is
considered impaired.
Business combinations can also result in other intangible assets being recognized. Finite-lived
intangible assets are amortized on a straight-line basis over their estimated useful life and include
contractual agreements and customer relationships and intellectual property. No significant residual values
are estimated for the amortizable intangible assets.
Long-lived Assets
Long-lived assets, such as property, plant and equipment, and finite-lived intangible assets, are
reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of
an asset or asset group may not be recoverable. Recoverability of the asset or asset group is measured by
comparing its carrying amount to the undiscounted future net cash flows the asset is expected to generate.
If the carrying amount of an asset or asset group is not recoverable, the Company recognizes an
impairment loss based on the excess of the carrying amount of the long-lived asset or asset group over its
respective fair value, which is generally determined as the present value of estimated future cash flows or as
the appraised value.
67
Derivative Instruments
All derivative instruments are recorded gross on the 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 accumulated other comprehensive income (“AOCI”), net
of tax, and is subsequently reclassified into the line item within the Consolidated Statements of Operations
in which the hedged items are recorded in the same period in which the hedged item affects earnings. The
inef fective portion of the gain or loss is reco gnized immediately in current earnings. For deriv ative instruments
tha t are not designated as hedging instruments , gains and losses from changes in fair values are recognized in
earnings. Cash receipts and cash pa yments related to deriv ative instruments are recorded in the same category
as the cash flows fr om the items being hedged on the Consolida ted Statements of Cash Flows.
Accumulated Other Comprehensive Income
The following table sets forth the changes in AOCI, net of tax, by component during the fiscal year
ended August 31, 2018 (in thousands):
Foreign
Currency
Translation
Adjustment
Derivative
Instruments
Actuarial
(Loss)
Gain
Prior
Service
Cost
Available
for Sale
Securities Total
Balance as of August 31, 2016 .... $16,338 $ 7,784 $(43,587) $ 941 $(21,353) $(39,877)
Other comprehensive income
(loss) before reclassifications . . 35,297 13,434
(1)
8,443 86 10,611 67,871
Amounts reclassified from
AOCI .................. 5,947 8,749
(2)
1,929
(3)
(138)
(3)
10,139
(4)
26,626
Other comprehensive income
(loss)
(5)
................... 41,244 22,183 10,372 (52) 20,750 94,497
Balance as of August 31, 2017 .... $57,582 $ 29,967 $(33,215) $ 889 $ (603) $ 54,620
Other comprehensive (loss)
income before
reclassifications ........... (50,151) 1,225
(1)
7,067 (1,444) (8,679) (51,982)
Amounts reclassified from
AOCI .................. — (23,076)
(2)
1,127
(3)
(88)
(3)
— (22,037)
Other comprehensive (loss)
income
(5)
................. (50,151) (21,851) 8,194 (1,532) (8,679) (74,019)
Balance as of August 31, 2018 .... $ 7,431 $ 8,116 $(25,021) $ (643) $ (9,282) $(19,399)
(1) Represents changes in fair value of derivative instruments.
(2) Represents reclassification of net (gains) losses realiz ed and included in net income related to derivative
instruments. $14.8 million was classified into net income as a reduction of income tax expense related
to derivative instruments for the fiscal year ended August 31, 2018. The remaining amount for fiscal
year 2018 and the amount for fiscal year 2017 was primarily classified as a component of cost of
revenue. The Company expects to reclassify $9.0 million into earnings during the next 12 months,
which will primarily be classified as a component of cost of revenue.
(3) Amounts are included in the computation of net periodic benefit pension cost. Refer to Note 9 —
“Postretirement and Other Employee Benefits” for additional information.
(4) The portion of AOCI reclassified into earnings during the fiscal year ended August 31, 2017 for
available for sale securities was due to an other than temporary impair ment on securities and was
classified as a component of other expense.
(5) Amounts are net of tax, which are immaterial.
68
Foreign Currency Transactions
For the Company’s foreign subsidiaries that use a currency other than the U.S. dollar as their
functional currency, the assets and liabilities are translated at exchange rates in effect at the balance sheet
date, and revenues and expenses are translated at the average exchange rate for the period. The effects of
these translation adjustments are reported in accumulated other comprehensive income. Gains and losses
arising from transactions denominated in a currency other than the functional currency of the entity
involved are included in operating income.
Revenue Recognition
The Company derives substantially all of its revenue from production and product management
services (collectively referred to as “manufacturing services”), which encompasses the act of producing
tangible components that are built to customer specifications, which are then provided to the customer. The
Company recognizes manufacturing services revenue when such tangible components are shipped to or the
goods are received by the customer, title and risk of ownership have passed, the price to the buyer is fixed or
determinable and collectability is reasonably assured (net of estimated returns). The Company also derives
revenue to a lesser extent from electronic design services to certain customers. Revenue from electronic
design services is generally recognized upon completion and acceptance by the respective customer. Taxes
collected from the Company’s customers and remitted to governmental authorities are presented within the
Company’s Consolidated Statement of Operations on a net basis. The Company records shipping and
handling costs reimbursed by the customer in revenue. Upfront payments from customers are recorded
upon receipt as deferred income and are recognized as revenue as the related manufacturing services are
provided.
Effective September 1, 2018, the Company’s revenue accounting policies will change in conjunction
with the adoption of the accounting standard for revenue recognition. See further discussion of this new
standard in Note 16 — “New Accounting Guidance” to the Consolidated Financial Statements.
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 stock-based compensation expense for time-based and performance based restricted stock is
measured at fair value on the date of grant based on the number of shares expected to vest and the quoted
market price of the Company’s common stock. For restricted stock awards with perfor mance conditions,
stock-based compensation expense is originally based on the number of shares that would vest if the
Company achieved 100% of the performance goal, which is the intended outcome at the grant date.
Throughout the requisite service period, management monitors the probability of achievement of the
performance condition. If it becomes probable, based on the Company’s performance, that more or less
than the current estimate of the awarded shares will vest, an adjustment to stock-based compensation
expense will be recogniz ed as a change in accounting estimate in the period that such probability changes.
The stock-based compensation expense for market-based restricted stock awards is measured at fair
value on the date of grant. 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 specif ied market conditions. Stock-based compensation expense related to an award with a
market condition will be recognized over the requisite service period regardless of whether the market
condition is satisfied, provided that the requisite service period has been completed.
The Company currently expects to satisfy share-based awards with registered shares available to be
issued.
See Note 11 — “Stockholders’ Equity” for further discussion of stock-based compensation expense.
69
Income Taxes
Deferred tax assets and liabilities are recognized for the future tax consequences attributable to
differences between the financial statement carrying amounts of existing assets and liabilities and their
respective tax basis. Deferred tax assets and liabilities are measured using enacted tax rates expected to
apply to taxable income in the years in which those temporary differences are expected to be recovered or
settled. The effect on deferred tax assets and liabilities of a change in the tax rate is recognized in income in
the period that includes the enactment date of the rate change. The Company records a valuation allowance
to reduce its deferred tax assets to the amount that is more likely than not to be realized. The Company
considers future taxable income and ongoing feasible tax planning strategies in assessing the need for the
valuation allowance.
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 shares of common stock outstanding during the period. The Company’s
diluted earnings per share is calculated in a similar manner, but includes the effect of dilutive securities. The
difference between the weighted average number of basic shares outstanding and the weighted average
number of diluted shares outstanding is primarily due to dilutive unvested restricted stock awards and
dilutive stock appreciation rights.
Potential shares of common stock are excluded from the computation of diluted earnings per share
when their effect would be antidilutive. Performance-based restricted stock awards are considered dilutive
when the related performance criterion have been met assuming the end of the reporting period represents
the end of the performance period. All potential shares of common stock are antidilutive in periods of net
loss. Potential shares of common stock not included in the computation of earnings per share because their
effect would have been antidilutive or because the performance criterion was not met were as follows (in
thousands):
Fiscal Year Ended August 31,
2018 2017 2016
Stock appreciation rights .......................... — 265 2,381
Restricted stock awards ........................... 2,426 4,539 7,599
Fair Value of Financial Instruments
The three levels of the fair-value hierarchy include: Level 1 — quoted market prices in active markets
for identical assets and liabilities; Level 2 — inputs other than quoted market prices included in Level 1 that
are observable for the asset or liability, either directly or indirectly; and Level 3 — unobservable inputs for
the asset or liability.
The carrying amounts of cash and cash equivalents, trade accounts receivable, prepaid expenses and
other current assets, accounts pa yable and accrued expenses approximate fair value because of the short-term
na tur e of these financia l instruments. Refer to Note 2 — “Trade Accounts Receivable Securitization and
Sale Programs”, Note 8 — “Notes Payable and Long-Term Debt”, Note 9 — “P ostretirement and Other
Employee Benefits” and Note 13 — “Derivative Financial Instruments and Hedging Activities” for disclosure
surrounding the fair value of the Company’s deferred purchase price receiv ables, debt obligations, pension
plan assets and derivative financial instruments , respectively.
The Company has $50.0 million in Senior Non-Convertible Cumulative Preferred Stock of iQor
Holdings, Inc. that accretes dividends at an annual rate of 8 percent and is redeemable on March 31, 2023
or upon a change in control. The Senior Non-Convertible Cumulative Preferred Stock is valued each
reporting period using unobservable inputs (Level 3 inputs) based on an interest rate lattice model and is
classified as an available for sale security with an unrealized loss recorded to AOCI. The unobservable
inputs have an immaterial impact on the fair value calculation of the Senior Non-Convertible Cumulative
Preferred Stock. As of August 31, 2018 and 2017, the fair value was $47.3 million and $49.8 million,
respectively, and is included within other assets on the Consolidated Balance Sheets.
70
2. Trade Accounts Receivable Securitization and Sale Programs
The Company regularly sells designated pools of trade accounts receivable under two asset-backed
securitization programs and nine 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 fiscal years ended August 31, 2018, 2017 and 2016 were not material. The Company
does not record a servicing asset or liability on the 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 Consolidated Balance
Sheets and are reflected as cash provided by operating activities on the Consolidated Statements of Cash
Flows.
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 and its foreign asset-backed securitization program
(collectively referred to herein as the “asset-backed securitization programs”) to special purpose entities,
which in turn sell 100% of the receivables to: (i) conduits administered by unaffiliated financial institutions
for the North American asset-backed securitization program and (ii) 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 not paid in cash upon the sale
occurring is recorded as a deferred purchase price receivable, which is paid from available cash as payments
on the underlying receivables are collected.
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 Consolidated Financial
Statements.
Following is a summary of the asset-backed securitization programs and key terms:
Maximum Amount of
Net Cash Proceeds
(in millions)
(1)
Expiration Date
North American ........................ $200.0 October 20, 2020
(2)
Foreign .............................. $400.0 September 30, 2021
(3)
(1) Maximum amount available at any one time.
(2) On October 9, 2018, the North American asset-backed securitization program was terminated and the
Company repurchased the outstanding receivables.
(3) On September 21, 2018, the foreign asset-backed securitization program terms were amended and the
program was extended to September 30, 2021. Under the terms of the amended agreement, the
Company continuously sells designated pools of trade accounts receivable to a special purpose entity,
which in turn sells a portion of the receivables to an unaffiliated f inancial institution and a conduit
administered by an unaffiliated financial institution. In connection with this amendment, there is no
longer a deferred purchase price receivable for the foreign asset-backed securitization program.
71
In connection with the asset-backed securitization programs, the Company recognized the following (in
millions):
Fiscal Year Ended August 31,
2018 2017 2016
Eligible trade accounts receivable sold ............... $8,386 $8,878 $7,870
Cash proceeds received
(1)
........................ $7,838 $8,300 $7,336
Pre-tax losses on sale of receivables
(2)
............... $ 15 $ 9 $ 5
Deferred purchase price receivables as of August 31
(3)
. . . . $ 533 $ 569 $ 527
(1) Of this amount, $0.0 million, $0.1 million and $8.4 million, respectively, represented new transfers
during fiscal years 2018, 2017 and 2016, respectively. The remainder represented proceeds from
collections reinvested in revolving-period transfers.
(2) Recorded to other expense within the Consolidated Statements of Operations.
(3) Recorded initially at fair value as prepaid expenses and other current assets on the 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.
The asset-backed securitization programs require compliance with several covenants. The North
American asset-backed securitization program covenants include compliance with the interest coverage
ratio and debt to EBITDA ratio of the five-year unsecured credit facility amended as of November 8, 2017
(“the 2017 Credit Facility”). The foreign asset-backed securitization program covenants include limitations
on certain corporate actions such as mergers and consolidations. As of August 31, 2018 and 2017, the
Company was in compliance with all covenants under the asset-backed securitization programs.
Trade Accounts Receivable Sale Programs
Following is a summary of the nine trade accounts receivable sale programs with unaffiliated financial
institutions where the Company may elect to sell receivables and the unaffiliated financial institution may
elect to purchase, at a discount, on an ongoing basis:
Program
Maximum Amount
(in millions)
(1)
Type of Facility Expiration Date
A ..................... $875.0 Uncommitted August 31, 2022
(2)(3)
B ..................... $150.0 Uncommitted November 30, 2018
(4)
C ..................... 800.0 CNY Uncommitted February 13, 2019
D ..................... $100.0 Uncommitted May 4, 2023
(5)
E ..................... $50.0 Uncommitted August 25, 2019
F ..................... $150.0 Uncommitted January 25, 2019
(6)
G ..................... $50.0 Uncommitted February 23, 2023
(3)
H ..................... $100.0 Uncommitted August 10, 2019
(7)
I...................... $100.0 Uncommitted July 21, 2019
(8)
(1) Maximum amount available at any one time.
(2) The maximum amount under the program will reduce to $650.0 million on February 1, 2019.
(3) Any party may elect to terminate the agreement upon 15 days prior notice.
(4) The program will automatically extend for one year at each expiration date unless either party provides
10 days notice of termination.
72
(5) Any party may elect to terminate the agreement upon 30 days prior notice.
(6) The program will be automatically extended through January 25, 2023 unless either party provides
30 days notice of termination.
(7) The program will be automatically extended through August 10, 2023 unless either party provides
30 days notice of termination.
(8) The program will be automatically extended through August 21, 2023 unless either party provides
30 days notice of termination.
In connection with the trade accounts receivable sale programs, the Company recognized the following
for the fiscal years ended August 31 (in millions):
2018 2017 2016
Trade accounts receivable sold .................... $5,480 $2,968 $3,651
Cash proceeds received ......................... $5,463 $2,962 $3,647
Loss on sales
(1)
............................... $ 17 $ 6 $ 4
(1) The resulting losses on the sales of trade accounts receivable during fiscal years 2018, 2017 and 2016
were recorded to other expense within the Consolidated Statements of Operations.
3. Inventories
Inventories consist of the following (in thousands):
August 31,
2018
August 31,
2017
Raw materials ...................................... $2,070,569 $1,574,241
Work in process ..................................... 788,742 822,628
Finished goods ..................................... 659,335 591,227
Reserve for excess and obsolete inventory . . . ................ (60,940) (46,013)
Inventories, net ..................................... $3,457,706 $2,942,083
4. Income Taxes
Provision for Income Taxes
Income (loss) before income tax expense is summarized below (in thousands):
Fiscal Year Ended August 31,
2018 2017 2016
U.S.
(1)
..................................... $(426,897) $(373,690) $(317,427)
Non-U.S.
(1)
................................. 800,298 629,923 704,472
$ 373,401 $ 256,233 $ 387,045
(1) The U.S. and non-U.S. components of income (loss) before income tax expense include the elimination
of intercompany foreign dividends paid to the U.S.
73
Income tax expense (benefit) is summarized below (in thousands):
Fiscal Year Ended August 31, Current Deferred Total
2018: U.S. – Federal ....................... $ 69,080 $(24,342) $ 44,738
U.S.–State......................... 134 93 227
Non-U.S. .......................... 178,790 62,105 240,895
$248,004 $ 37,856 $285,860
2017: U.S. – Federal ....................... $ 2,436 $ 253 $ 2,689
U.S.–State......................... 12 30 42
Non-U.S. .......................... 188,872 (62,537) 126,335
$191,320 $(62,254) $129,066
2016: U.S. – Federal ....................... $ (649) $ 73 $ (576)
U.S.–State......................... (166) 9 (157)
Non-U.S. .......................... 157,069 (24,187) 132,882
$156,254 $(24,105) $132,149
Reconciliations of the income tax expense at the U.S. federal statutory income tax rate compared to the
actual income tax expense are summarized below (in thousands):
Fiscal Year Ended August 31,
2018 2017 2016
Tax at U.S. federal statutory income tax rate
(1)
............ $ 95,852 $ 89,682 $ 135,470
State income taxes, net of federal tax benefit . ............ (5,417) (8,474) (5,121)
Impact of foreign tax rates
(2)
........................ (71,889) (109,466) (144,521)
Permanent impact of non-deductible cost . . . ............ 21,988 7,336 3,408
Income tax credits ................................ (10,405) (16,254) (5,040)
Changes in tax rates on deferred tax assets and liabilities
(3)
. . . 15,048 688 182
Transition tax related to the Tax Act
(4)
................. 232,405 — —
Change in indefinite reinvestment assertion related to the Tax
Act
(5)
....................................... 21,754 — —
Valuation allowance
(6)
............................. (61,186) 37,934 11,770
Non-deductible equity compensation .................. 20,443 11,531 18,350
Impact of intercompany charges and dividends
(7)
.......... 27,442 98,052 94,596
Reclassification of stranded tax effects in AOCI ........... (14,811) — —
Other, net ...................................... 14,636 18,037 23,055
Total income tax expense ........................... $285,860 $ 129,066 $ 132,149
(1) The U.S. federal statutory income tax rate was 25.7%, 35% and 35% for fiscal years ended August 31,
2018, 2017 and 2016, respectively. As a result of the Tax Cuts and Jobs Act of 2017 (“Tax Act”), the
Company will be subject to a blended U.S. federal tax rate of 25.7% for the fiscal year ended
August 31, 2018 and a 21.0% U.S. federal tax rate for future fiscal years.
(2) For the fiscal year ended August 31, 2018, the decrease in the impact of foreign tax rates was primarily
due to a decrease in the U.S. federal statutory income tax rate from 35% to 25.7% due to the Tax Act.
(3) For the fiscal year ended August 31, 2018, the increase in the changes in tax rates on deferred tax assets
and liabilities was primarily due to the Tax Act. This increase excludes the impact of the enacted rate
change on the U.S. valuation allowance.
74
(4) The Tax Act introduced a one-time mandatory income inclusion of the historically untaxed foreign
earnings of a U.S. company’s foreign subsidiaries and will effectively tax such income at reduced tax
rates (“transition tax”). For the fiscal year ended August 31, 2018, the transition tax related to the Tax
Act reflects the $65.9 million provisional one-time transition tax inclusive of unrecognized tax benefits
and the corresponding utilization of U.S. federal net operating losses and tax credits that historically
had valuation allowances.
(5) For the fiscal year ended August 31, 2018, the change in indefinite reinvestment assertion related to the
Tax Act reflects the $85.0 million of foreign taxes that would be incurred upon future remittances of
certain foreign earnings less the write off of a previously recorded U.S. deferred tax liability that is no
longer taxable due to the Tax Act.
(6) For the fiscal year ended August 31, 2018, the valuation allowance decrease was due to utilization of
U.S. federal net operating losses and tax credits against the one-time transition tax and the change in
enacted tax rate applied to U.S. deferred tax assets and liabilities. The tax benefit from the valuation
allowance reversal on U.S. federal net operating losses utilized in the one-time transition tax was
$85.0 million. The valuation allowance decrease is partially offset by the current year increase of
deferred tax assets in sites with existing valuation allowances.
(7) For the fiscal year ended August 31, 2018, the decrease in the impact of intercompany charges and
dividends was due to a change in the U.S. taxation of foreign dividends as a result of the Tax Act.
On December 22, 2017, the U.S. government enacted comprehensive tax legislation. The Tax Act
reduced the corporate tax rate, limited or eliminated certain tax deductions, established the transition tax,
and changed the taxation of foreign earnings of U.S. multinational companies. The Securities and
Exchange Commission (“SEC”) Staff Accounting Bulletin No. 118, Income Tax Accounting Implications of
the Tax Cut and Jobs Act (“SAB 118”), provides guidance on accounting for the tax effects of the Tax Act.
SAB 118 provides a measurement period that should not extend beyond one year from the Tax Act
enactment date for companies to complete the accounting under Accounting Standards Codification Topic
740, “Income Taxes” (“ASC 740”). In accordance with SAB 118, a company must reflect the income tax
effects of those aspects of the Tax Act for which the accounting under ASC 740 is complete. To the extent
that a company’s accounting for certain income tax effects of the Tax Act is incomplete, but it is able to
determine a reasonable estimate, it must record a provisional estimate in its financial statements.
For the fiscal year ended August 31, 2018, the Company made reasonable estimates related to certain
impacts of the Tax Act and, in accordance with SAB 118, recorded a net provisional income tax expense of
$142.3 million. This net provisional expense is mainly comprised of $65.9 million related to the one-time
transition tax inclusive of unrecognized tax benefits, $(10.5) million related to the re-measurement of the
Company’s U.S. deferred tax attributes, and $85.0 million related to a change in the indefinite reinvestment
assertion on certain earnings from its foreign subsidiaries. For the three months ended August 31, 2018, the
Company recorded $111.4 million associated with the Tax Act, mainly comprised of $24.9 million related
to the one-time transition tax to adjust the amount recorded previously through the nine months ended
May 31, 2018 and $85.0 million for the change in indefinite reinvestment assertion on certain earnings from
the Company’s foreign subsidiaries, resulting in a combined net increase of 29.8% to the Company’s
effective tax rate for the fiscal year ended August 31, 2018.
The calculation of the one-time transition tax of $65.9 million for the fiscal year ended August 31,
2018 is based upon preliminary estimates of post-1986 earnings and prof its, applicable foreign tax credits
and relevant limitations, utilization of U.S. federal net operating losses and tax credits and the amounts of
foreign earnings held in cash and non-cash assets. The adjustment to the transition tax of $24.9 million for
the three months ended August 31, 2018 was primarily related to further analysis of earnings and profits of
the Company’s foreign subsidiaries and utilization of foreign tax credits, a revised provisional calculation of
foreign earnings held in cash and other specified assets, and the Company’s interpretation of additional
regulatory guidance issued. The transition tax remains provisional pending additional regulatory guidance
that may be issued, changes in interpretations and assumptions, and finalization of calculations of the
impact of the Tax Act, including foreign earnings and profits of the Company’s foreign subsidiaries and
applicable foreign tax credits and relevant limitations for fiscal year 2018.
75
The provisional income tax benefit of $(10.5) million recorded for the fiscal year ended August 31,
2018 relates to the re-measurement of the Company’s deferred tax balances, inclusive of valuation
allowances, and is based primarily on the rates at which the deferred tax assets and liabilities are expected to
reverse in the current and future fiscal years. The enactment date re-measurement of U.S. deferred tax assets
and liabilities is provisional as the final re-measurement cannot be determined until the final calculation of
underlying temporary differences is completed, rather than estimated. In addition, the Company is also
analyzing the impact of the Tax Act to the existing valuation allowance assessments from both a federal and
state tax perspective, which could potentially affect the realizability of the existing deferred tax assets.
The change in indefinite reinvestment assertion of $85.0 million recorded during the three months and
fiscal year ended August 31, 2018 relates to certain foreign earnings and the foreign taxes that would be
incurred upon future remittances of such earnings. This amount remains provisional as the Company
completes further analysis of available distributable earnings from its foreign subsidiaries and continued
review of its capital structure.
The Company is still evaluating the Global Intangible Low-Taxed Income (“GILTI”) provisions and
the associated election to record its effects as a period cost or a component of deferred taxes. This analysis
has not been completed due to the complexity of the new GILTI tax rules, which is dependent, in part,
on analyzing the Company’s global income to determine whether the Company expects to have future
U.S. inclusions in taxable income related to GILTI and the associated estimated amount. Because the
Company’s expectations around U.S. inclusions in taxable income related to GILTI depend on its estimated
future results of global operations and preparation and analysis of information not previously relevant or
regularly produced, this accounting election remains open as of August 31, 2018.
For the fiscal year ended August 31, 2018, the Company believes $142.3 million is a reasonable net
estimate related to the Tax Act based on the analysis, interpretations and guidance available at this time. As
the Company f inalizes the accounting for the tax effects of the enactment of the Tax Act during the
measurement period, the Company will reflect adjustments to the provisional amounts recorded and record
additional tax effects in the periods such adjustments are identified. For the reasons outlined above, the
Company has not completed its accounting for any aspect of the Tax Act.
The Company has been granted tax incentives for its Brazilian, Chinese, Malaysian, Polish,
Singaporean and Vietnamese subsidiaries. The majority of the tax incentive benefits expire at various dates
through fiscal year 2028 and are subject to certain conditions with which the Company expects to comply.
These subsidiaries generated income from continuing operations during the fiscal years ended August 31,
2018, 2017 and 2016, resulting in a tax benefit of approximately $52.1 million ($0.30 per basic share),
$38.6 million ($0.22 per basic share) and $50.5 million ($0.27 per basic share), respectively. The benefits of
these incentives are classified as the impact of foreign tax rates and income tax credits in the reconciliation
of income tax expense table above.
76
Deferred Tax Assets and Liabilities
The significant components of the deferred tax assets and liabilities are summarized below (in
thousands):
Fiscal Year Ended August 31,
2018 2017
Deferred tax assets:
Net operating loss carry forward ............................. $119,259 $ 268,853
Receivables ............................................ 7,111 7,497
Inventories ............................................ 7,634 11,618
Compensated absences .................................... 8,266 10,981
Accrued expenses ....................................... 81,912 93,413
Property, plant and equipment, principally due to differences in
depreciation and amortization ............................. 97,420 81,954
U.S. federal and state tax credits ............................. 70,153 57,122
Foreign jurisdiction tax credits .............................. 25,887 24,641
Equity compensation – U.S. ................................ 7,566 16,460
Equity compensation – Non-U.S. ............................ 2,401 2,700
Other ................................................ 18,176 14,573
Total deferred tax assets before valuation allowances ............... 445,785 589,812
Less valuation allowances .................................. (223,487) (285,559)
Net deferred tax assets .................................... $222,298 $ 304,253
Deferred tax liabilities:
Unremitted earnings of non-U.S. subsidiaries .................... 74,654 86,202
Intangible assets ........................................ 39,122 48,229
Cash flow hedges ........................................ — 8,564
Other ................................................ 4,655 4,863
Total deferred tax liabilities ................................. $118,431 $ 147,858
Net deferred tax assets ...................................... $103,867 $ 156,395
As of August 31, 2018, the Company had state (tax-effected) and foreign income tax net operating loss
carry forwards (net of unrecognized tax benefits) of approximately $55.4 million and $318.0 million,
respectively, which are available to reduce future taxes, if any. The net operating loss carry forwards in the
Company’s major tax jurisdictions expire in fiscal years 2019 through 2038 or have an indefinite carry
forward period. The Company has U.S. federal and state tax credit carry forwards of $65.6 million and
$4.8 million, respectively, which are available to reduce future taxes, if any. Most of the U.S. federal tax
credits expire through fiscal year 2027. Most of the U.S. state tax credits expire through fiscal year 2027. As
of August 31, 2018, the foreign jurisdiction tax credits include foreign investment tax credits of
$23.3 million that expire predominantly in fiscal year 2027 and are based on the deferral method.
Based on the Company’s historical operating income, projection of future taxable income, scheduled
reversal of taxable temporary differences, and tax planning strategies, management believes that it is more
likely than not that the Company will realize the benefit of its deferred tax assets, net of valuation
allowances recorded. The net decreases in the total valuation allowance for the fiscal years ended August 31,
2018 and 2017 were $(62.1) million and $(59.3) million, respectively. The f iscal year ended August 31, 2018
decrease in valuation allowance is primarily related to the decrease of a U.S. federal net operating loss carry
forward due to utilization against the one-time transition tax under the Tax Act. This decrease is partially
offset by the increase of deferred tax assets in sites with existing valuation allowances.
77
As a result of the one-time transition tax, the Company will have a substantial amount of previously
taxed earnings that can be distributed to the U.S. without additional U.S. federal taxation. Additionally, the
Tax Act provides for a 100% dividends received deduction for dividends received by U.S. corporations from
10-percent or more owned foreign corporations. During the fiscal year ended August 31, 2018, the
Company recorded liabilities of $85.0 million from a change in the indefinite reinvestment assertion on
certain earnings from its foreign subsidiaries, primarily associated with foreign withholding taxes that
would be incurred upon such future remittances of cash. Of these liabilities, $74.7 million remained as a
deferred tax liability as of August 31, 2018 after current year remittances. The Company intends to
indefinitely reinvest the remaining earnings from its foreign subsidiaries for which a deferred tax liability
has not already been recorded. The accumulated earnings are the most significant component of the basis
difference which is indefinitely reinvested. While the Company has made a reasonable estimate of the
impact of the Tax Act on its indefinite reinvestment assertion, the Company continues to evaluate its
indefinite reinvestment assertion and may further adjust this estimate during the measurement period. As of
August 31, 2018, the indefinitely reinvested earnings in foreign subsidiaries upon which taxes had not been
provided were approximately $2.4 billion. Determination of the amount of unrecognized deferred tax
liability on these undistributed earnings is not practicable.
Unrecognized Tax Benefits
Reconciliations of the unrecognized tax benefits are summarized below (in thousands):
Fiscal Year Ended August 31,
2018 2017 2016
Beginning balance ................................... $201,355 $149,898 $154,648
Additions for tax positions of prior years ................... 14,465 2,155 7,974
Reductions for tax positions of prior years .................. (21,045) (12,233) (20,045)
Additions for tax positions related to current year ............. 81,866 77,807 25,892
Cash settlements .................................... (1,659) (2,298) (6,553)
Reductions from lapses in statutes of limitations .............. (7,496) (10,446) (7,099)
Reductions from settlements with taxing authorities . ........... (5,928) (6,061) (1,787)
Foreign exchange rate adjustment ........................ (4,853) 2,533 (3,132)
Ending balance ..................................... $256,705 $201,355 $149,898
Unrecognized tax benefits that would affect the effective tax rate (if
recognized) ...................................... $117,455 $ 75,223 $ 72,152
For the fiscal year ended August 31, 2018, the additions for tax positions related to current year
primarily related to the impacts of the Tax Act and U.S. taxation of certain intercompany transactions. It is
reasonably possible that the August 31, 2018 unrecognized tax benefits could decrease during the next
12 months by $106.1 million, primarily related to a taxing authority ruling associated with an internal
restructuring and a potential audit settlement associated with intercompany transactions. Both of these tax
positions were previously offset with valuation allowances.
For the fiscal year ended August 31, 2017, the additions for tax positions related to current year
primarily related to certain non-U.S. net operating loss carry forwards, previously offset with a valuation
allowance, that can no longer be recognized due to an internal restructuring.
The Company recognizes interest and penalties related to unrecognized tax benefits in income tax
expense. The Company’s accrued interest and penalties were approximately $20.4 million and $27.1 million
as of August 31, 2018 and 2017, respectively. The Company recognized interest and penalties of
approximately $(6.7) million, $5.2 million and $1.8 million during the fiscal years ended August 31, 2018,
2017 and 2016, respectively.
The Company is no longer subject to U.S. federal and state income tax examinations for fiscal years
before August 31, 2009. In major non-U.S. jurisdictions, the Company is no longer subject to income tax
examinations for fiscal years before August 31, 2008.
78
The Internal Revenue Service (“IRS”) completed its f ield examination of the Company’s tax returns
for fiscal years 2009 through 2011 and issued a Revenue Agent’s Report (“RAR”) on May 27, 2015, which
was updated on June 22, 2016. The IRS completed its field examination of the Company’s tax returns for
fiscal years 2012 through 2014 and issued an RAR on April 19, 2017. The proposed adjustments in the
RAR from both examination periods relate primarily to U.S. taxation of certain intercompany transactions.
If the IRS ultimately prevails in its positions, the Company’s income tax payment due for the fiscal years
2009 through 2011 and 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 that 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. However, there can be no assurance that
management’s beliefs will be realized.
5. Property, Plant and Equipment
Property, plant and equipment consists of the following (in thousands):
August 31,
2018 2017
Land and improvements ............................... $ 144,136 $ 120,574
Buildings ......................................... 849,975 804,861
Leasehold improvements .............................. 1,013,428 877,752
Machinery and equipment ............................. 3,983,025 3,680,881
Furniture, fixtures and office equipment .................... 192,243 178,603
Computer hardware and software ........................ 601,955 583,569
Transportation equipment ............................. 17,215 22,080
Construction in progress ............................... 42,984 85,748
6,844,961 6,354,068
Less accumulated depreciation and amortization .............. 3,646,945 3,125,390
$3,198,016 $3,228,678
Depreciation and maintenance and repair expenses were as follows for the periods indicated (in
thousands):
Fiscal Year Ended August 31,
2018 2017 2016
Depreciation expense .......................... $735,213 $724,856 $659,542
Maintenance and repair expense ................... $266,691 $234,332 $197,373
As of August 31, 2018 and 2017, the Company had $253.6 million and $242.2 million, respectively,
included in accounts payable for the acquisition of property, plant and equipment, which is considered a
non-cash investing activity in the Consolidated Statements of Cash Flows.
6. Goodwill and Other Intangible Assets
The Company completed its annual impairment test for goodwill and indefinite-lived intangible assets
during the fourth quarter of fiscal year 2018 and determined the fair values of the reporting units and the
indefinite-lived intangible assets were substantially in excess of the carrying values and that no impairment
existed as of the date of the impairment test.
79
The following table presents the changes in goodwill allocated to the Company’s reportable segments,
Electronics Manufacturing Services (“EMS”) and Diversified Manufacturing Services (“DMS”), during the
fiscal years ended August 31, 2018 and 2017 (in thousands):
EMS DMS Total
Balance as of August 31, 2016 ................. $51,179 $543,594 $594,773
Acquisitions and adjustments ............... — 8,186 8,186
Change in foreign currency exchange rates ....... 1,395 3,830 5,225
Balance as of August 31, 2017 ................. 52,574 555,610 608,184
Acquisitions and adjustments
(1)
.............. 30,763 (8,186) 22,577
Change in foreign currency exchange rates ....... (667) (2,349) (3,016)
Balance as of August 31, 2018 ................. $82,670 $545,075 $627,745
(1) Includes $8.2 million of goodwill reallocated between DMS and EMS during fiscal year 2018.
The following table is a summary of the Company’s gross goodwill balances and accumulated
impairments as of the periods indicated (in thousands):
August 31, 2018 August 31, 2017
Gross
Carrying
Amount
Accumulated
Impairment
Gross
Carrying
Amount
Accumulated
Impairment
Goodwill ................... $1,647,567 $1,019,822 $1,628,006 $1,019,822
The following table presents the Company’s total purchased intangible assets as of August 31, 2018
and 2017 (in thousands):
Weighted
Average
Amortization
Period
(in years)
August 31, 2018 August 31, 2017
Gross
Carrying
Amount
Accumulated
Amortization
Net
Carrying
Amount
Gross
Carrying
Amount
Accumulated
Amortization
Net
Carrying
Amount
Contractual agreements
and customer
relationships ........ 11 $289,947 $(153,415) $136,532 $265,148 $(132,691) $132,457
Intellectual property .... 5 168,181 (148,672) 19,509 160,456 (131,407) 29,049
Finite-lived trade names . . Not applicable 5,091 (5,091) — 5,114 (5,114) —
Tradenames ......... Indefinite 123,090 — 123,090 123,090 — 123,090
Total intangible assets . . 9 $586,309 $(307,178) $279,131 $553,808 $(269,212) $284,596
Intangible asset amortization for fiscal years 2018, 2017 and 2016 was approximately $38.5 million,
$35.5 million and $37.1 million, respectively. The estimated future amortization expense is as follows (in
thousands):
Fiscal Year Ended August 31,
2019 ................................................ $ 30,212
2020 ................................................ 26,645
2021 ................................................ 18,261
2022 ................................................ 17,119
2023 ................................................ 14,704
Thereafter ............................................ 49,100
Total .............................................. $156,041
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7. Accrued Expenses
Accrued expenses consist of the following (in thousands):
August 31,
2018
August 31,
2017
Deferred income .................................... $ 691,365 $1,017,144
Accrued compensation and employee benefits ................ 570,400 534,143
Other accrued expenses ............................... 1,000,979 617,428
Accrued expenses ................................... $2,262,744 $2,168,715
8. Notes Payable and Long-Term Debt
Notes payable and long-term debt outstanding as of August 31, 2018 and 2017 are summarized below
(in thousands):
Maturity
Date
August 31,
2018
August 31,
2017
8.250% Senior Notes
(1)(2)(3)
..................... Mar15,2018 $ — $ 399,506
5.625% Senior Notes
(1)(2)
....................... Dec15,2020 397,995 397,104
4.700% Senior Notes
(1)(2)
....................... Sep15,2022 497,350 496,696
4.900% Senior Notes
(1)
........................ Jul14,2023 298,814 298,571
3.950% Senior Notes
(1)(2)(3)
..................... Jan12,2028 494,208 —
Borrowings under credit facilities
(4)(5)
..............
Nov 8, 2022 and
Aug 24, 2020 — —
Borrowings under loans
(4)(5)
.....................
Nov 8, 2022 and
Aug 24, 2020 830,332 458,395
Total notes payable and long-term debt ............. 2,518,699 2,050,272
Less current installments of notes payable and long-term
debt .................................... 25,197 444,255
Notes payable and long-term debt, less current
installments ............................... $2,493,502 $1,606,017
(1) The notes are carried at the principal amount of each note, less any unamortized discount and
unamortized debt issuance costs.
(2) The Senior Notes are the Company’s senior unsecured obligations and rank equally with all other
existing and future senior unsecured debt obligations.
(3) During the three months ended February 28, 2018, the Company issued $500.0 million of publicly
registered 3.950% Senior Notes due 2028 (the “3.950% Senior Notes”). The net proceeds from the
offering were used for general corporate purposes, including to redeem $400.0 million of the
Company’s outstanding 8.250% Senior Notes due 2018 and pay related costs and a “make-whole”
premium.
(4) On November 8, 2017, the Company entered into an amended and restated senior unsecured five-year
credit agreement for additional working capital to support the continued growth of the business. The
credit agreement provides for: (i) a Revolving Credit Facility in the initial amount of $1.8 billion, which
may, subject to the lenders’ discretion, potentially be increased up to $2.3 billion (“the 2017 Revolving
Credit Facility”) and (ii) a $500.0 million Term Loan Facility (“the 2017 Term Loan Facility”),
collectively “the 2017 Credit Facility.” The 2017 Credit Facility expires on November 8, 2022. The 2017
Revolving Credit Facility is subject to two whole or partial one-year extensions, at the lender’s
discretion. Interest and fees on the 2017 Credit Facility advances are based on the Company’s
non-credit enhanced long-term senior unsecured debt rating as determined by Standard & Poor’s
Ratings Service, Moody’s Investors Service and Fitch Ratings.
81
During the fiscal year ended August 31, 2018, the interest rates on the 2017 Revolving Credit Facility
ranged from 2.4% to 5.2% and the 2017 Term Loan Facility ranged from 2.6% to 3.5%. Interest is
charged at a rate equal to (a) for the 2017 Revolving Credit Facility, either 0.000% to 0.575% above the
base rate or 0.975% to 1.575% above the Eurocurrency rate and (b) for the 2017 Term Loan Facility,
either 0.125% to 0.875% above the base rate or 1.125% to 1.875% above the Eurocurrency rate. The
base rate represents the greatest of: (i) Citibank, N.A.’s prime rate, (ii) 0.50% above the federal funds
rate, and (iii) 1.0% above one-month LIBOR, but not less than zero. The Eurocurrency rate represents
adjusted LIBOR or adjusted CDOR, as applicable, for the applicable interest period, but not less than
zero. Fees include a facility fee based on the revolving credit commitments of the lenders and a letter of
credit fee based on the amount of outstanding letters of credit.
(5) On August 24, 2018, the Company entered into a senior unsecured two-year credit agreement for
additional working capital to support the continued growth of the business. The credit agreement
provides for: (i) a Revolving Credit Facility in the initial amount of $150.0 million (“the 2018
Revolving Credit Facility”) and (ii) a $350.0 million Ter m Loan Facility (“the 2018 Term Loan
Facility”), collectively “the 2018 Credit Facility.” The 2018 Credit Facility expires on August 24, 2020.
During the fiscal year ended August 31, 2018, no draws were made on the 2018 Revolving Credit
Facility and $350.00 million was borrowed against the 2018 Term Loan Facility. During the fiscal year
ended August 31, 2018 the interest rate on the 2018 Term Loan Facility was 3.1%. Interest is charged at
a rate equal to (a) for the 2018 Revolving Credit Facility, either the base rate or 0.9750% above the
Eurocurrency rate and (b) for the 2018 Term Loan Facility, either 0.125% above the base rate or
1.125% above the Eurocurrency rate. The base rate represents the greatest of: (i) Mizuho Bank, Ltd.’s
prime rate, (ii) 0.50% above the federal funds rate, and (iii) 1.0% above one-month LIBOR, but not less
than zero. The Eurocurrency rate represents adjusted LIBOR for the applicable interest period, but not
less than zero. Fees include a facility fee based on the revolving credit commitments of the lenders.
Additionally, the Company’s foreign subsidiaries had various additional credit facilities that finance
their future growth and any corresponding working capital needs.
As of August 31, 2018, the Company has $2.3 billion in available unused borrowing capacity under its
revolving credit facilities.
Debt Maturities
Debt maturities as of August 31, 2018 are as follows (in thousands):
Fiscal Year Ended August 31,
2019 ................................................ $ 25,197
2020 ................................................ 374,369
2021 ................................................ 441,580
2022 ................................................ 49,806
2023 ................................................ 1,133,353
Thereafter ............................................ 494,394
Total .............................................. $2,518,699
Debt Covenants
Borrowings under the Company’s debt agreements are subject to various covenants that limit the
Company’s ability to: incur additional indebtedness, sell assets, effect mergers and certain transactions, and
effect certain transactions with subsidiaries and affiliates. In addition, the 2017 and 2018 Revolving Credit
Facilities and the 4.900% Senior Notes contain debt leverage and interest coverage covenants. The
Company is also subject to certain covenants requiring the Company to offer to repurchase the 5.625%,
4.700%, 4.900% or 3.950% Senior Notes upon a change of control. As of August 31, 2018 and 2017, the
Company was in compliance with its debt covenants.
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Fair Value
The estimated fair values of the Company’s publicly traded debt, including the 5.625%, 4.700% and
3.950% Senior Notes, were approximately $415.7 million, $503.5 million and $476.0 million respectively, as
of August 31, 2018. 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
$306.5 million, as of August 31, 2018. 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.
9. Postretirement and Other Employee Benefits
Postretirement Benefits
The Company has a qualified defined benef it pension plan for employees of Jabil Circuit UK Limited
(the “UK plan”). The UK plan, which is closed to new participants, provides benefits based on average
employee earnings over a three-year service period preceding retirement and length of employee service.
The Company’s policy is to contribute amounts sufficient to meet minimum funding requirements as set
forth in UK employee benefit and tax laws plus such additional amounts as are deemed appropriate by the
Company.
Additionally, as a result of acquiring various other operations in Europe and Asia, the Company
assumed both qualified and unfunded nonqualified retirement benefits covering eligible employees who
meet age and service requirements (the “other plans”).
The UK plan and other plans are collectively referred to herein as the “plans.”
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Benefit Obligation and Plan Assets
The benefit obligations and plan assets, changes to the benefit obligation and plan assets and the
funded status of the plans as of and for the f iscal years ended August 31 are as follows (in thousands):
Pension
2018 2017
Change in projected benefit obligation
Beginning projected benefit obligation ..................... $167,714 $182,278
Service cost ........................................ 1,063 1,068
Interest cost ....................................... 3,807 2,942
Actuarial (gain) loss .................................. (6,019) (10,147)
Curtailments gain ................................... (998) —
Settlements paid from plan assets ........................ — (2,133)
Total benefits paid ................................... (6,211) (6,790)
Plan participants’ contributions .......................... 31 27
Amendments ....................................... 1,864 —
Terminations ....................................... — (106)
Effect of conversion to U.S. dollars ....................... (147) 575
Ending projected benefit obligation ....................... $161,104 $167,714
Change in plan assets
Beginning fair value of plan assets ........................ 146,698 143,702
Actual return on plan assets ............................ 8,146 2,582
Settlements paid from plan assets ........................ — (2,133)
Employer contributions ............................... 1,811 6,981
Benefits paid from plan assets ........................... (4,758) (3,759)
Plan participants’ contributions .......................... 31 27
Effect of conversion to U.S. dollars ....................... (213) (702)
Ending fair value of plan assets .......................... $151,715 $146,698
Unfunded status .................................... $ (9,389) $ (21,016)
Amounts recognized in the Consolidated Balance Sheets
Accrued benefit liability, current ......................... $ 428 $ 182
Accrued benefit liability, noncurrent ...................... $ 8,961 $ 20,834
Accumulated other comprehensive loss (income)
(1)
Actuarial loss, before tax ............................. $ 22,387 $ 32,247
Prior service cost (credit), before tax ..................... $ 719 $ (1,185)
(1) The Company anticipates amortizing $0.8 million and $0.0 million, before tax, of net actuarial loss
and prior service costs balances, respectively, to net periodic cost in fiscal year 2019.
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Net Periodic Benefit Cost
The following table provides information about the net periodic benefit cost for the plans for
fiscal years 2018, 2017 and 2016 (in thousands):
Pension
2018 2017 2016
Service cost .............................. $1,063 $ 1,068 $ 883
Interest cost ............................. 3,807 2,942 4,844
Expected long-term return on plan assets . . . ...... (5,954) (4,206) (5,560)
Recognized actuarial loss .................... 1,127 1,929 1,046
Amortization of prior service credit . . . .......... (88) (138) (139)
Net settlement loss ......................... 116 1,472 —
Net periodic benefit cost ..................... $ 71 $3,067 $ 1,074
Beginning in the first quarter of fiscal year 2019, the Company will adopt a new accounting standard
to improve the presentation of net periodic benefit cost. The Company expects the adoption of this
standard to result in reclassifications for the service cost component of net periodic benefit cost from
selling, general and administrative expense to cost of revenue and for the other components from selling,
general and administrative expense to other expense.
Assumptions
Weighted-average actuarial assumptions used to determine net periodic benefit cost and projected
benefit obligation for the plans for the fiscal years 2018, 2017 and 2016 were as follows:
Pension
2018 2017 2016
Net periodic benefit cost:
Expected long-term return on plan assets
(1)
............ 3.8% 3.3% 4.3%
Rate of compensation increase ..................... 3.3% 2.7% 2.4%
Discount rate ................................. 2.1% 1.9% 2.9%
Projected benefit obligation:
Expected long-term return on plan assets ............. 3.6% 4.0% 3.3%
Rate of compensation increase ..................... 4.4% 4.4% 4.1%
Discount rate
(2)
............................... 2.2% 2.3% 1.7%
(1) The expected return on plan assets assumption used in calculating net periodic benefit cost is based on
historical return experience and estimates of future long-term performance with consideration to the
expected investment mix of the plan.
(2) The discount rate is used to state expected cash flows relating to future benefits at a present value on
the measurement date. This rate represents the market rate for high-quality fixed income investments
whose timing would match the cash outflow of retirement benefits. Other assumptions include
demographic factors such as retirement, mortality and turnover.
Plan Assets
The Company has adopted an investment policy for a majority of plan assets, which was set by plan
trustees who have the responsibility for making investment decisions related to the plan assets. The plan
trustees oversee the investment allocation, including selecting professional investment managers and setting
strategic targets. The investment objectives for the assets are (1) to acquire suitable assets that hold the
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appropriate liquidity in order to generate income and capital growth that, along with new contributions, will
meet the cost of current and future benefits under the plan, (2) to limit the risk of the plan assets from
failing to meet the plan liabilities over the long-term and (3) to minimize the long-term costs under the plan
by maximizing the return on the plan assets.
Investment policies and strategies governing the assets of the plans are designed to achieve investment
objectives with prudent risk parameters. Risk management practices include the use of external investment
managers; the maintenance of a portfolio diversified by asset class, investment approach and security
holdings; and the maintenance of sufficient liquidity to meet benefit obligations as they come due. Within
the equity securities class, the investment policy provides for investments in a broad range of publicly traded
securities including both domestic and international stocks. Within the debt securities class, the investment
policy provides for investments in corporate bonds as well as fixed and variable interest debt instruments.
The Company currently expects to achieve a target mix of 35% equity and 65% debt securities in fiscal year
2019.
Fair Value
The fair values of the plan assets held by the Company by asset category are as follows (in thousands):
Fair Value
Hierarchy
August 31, 2018 August 31, 2017
Fair Value
Asset
Allocation Fair Value
Asset
Allocation
Asset Category
Cash and cash equivalents
(1)
................ Level1 $ 6,682 4% $ 5,760 4%
Equity Securities:
Global equity securities
(2)(3)
............... Level2 35,932 24% 41,971 29%
Debt Securities:
Corporate bonds
(3)
..................... Level2 41,088 27% 41,987 29%
Government bonds
(3)
................... Level2 51,597 34% 41,738 28%
Other Investments:
Insurance contracts
(4)
................... Level3 16,416 11% 15,242 10%
Fair value of plan assets ................. $151,715 100% $146,698 100%
(1) Carrying value approximates fair value.
(2) Investments in equity securities by companies incorporated, listed or domiciled in developed and/or
emerging market countries.
(3) Investments in global equity securities, corporate bonds, government securities and government bonds
are valued using the quoted prices of securities with similar characteristics.
(4) Consist of an insurance contract that guarantees the payment of the funded pension entitlements, as
well as provides a profit share to the Company. The profit share in this contract is not based on actual
investments, but, instead on a notional investment portfolio that is expected to return a pre-defined
rate. Insurance contract assets are recorded at fair value and is determined based on the cash surrender
value of the insured benefits which is the present value of the guaranteed funded benefits. Insurance
contracts are valued using unobservable inputs (Level 3 inputs), primarily by discounting expected
future cash flows relating to benefits paid from a notional investment portfolio in order to determine
the cash surrender value of the policy. The unobservable inputs consist of estimated future benefits to
be paid throughout the duration of the policy and estimated discount rates, which both have an
immaterial impact on the fair value estimate of the contract.
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Accumulated Benefit Obligation
The following table provides information for the plans with an accumulated benefit obligation for
fiscal years 2018 and 2017 (in thousands):
August 31,
2018 2017
Projected benefit obligation ............................ $161,104 $167,714
Accumulated benefit obligation .......................... $152,380 $158,971
Fair value of plan assets ............................... $151,715 $146,698
Cash Flows
The Company expects to make cash contributions between $0.2 million and $0.4 million to its funded
pension plans during fiscal year 2019. The estimated future benefit payments, which reflect expected future
service, are as follows (in thousands):
Fiscal Year Ended August 31, Amount
2019 .................................................... $ 4,687
2020 .................................................... 5,502
2021 .................................................... 5,065
2022 .................................................... 5,390
2023 .................................................... 5,974
2024 through 2028 .......................................... 37,466
Profit Sharing, 401(k) Plan and Defined Contribution Plans
The Company provides retirement benefits to its domestic employees who have completed a 30-day
period of service through a 401(k) plan that provides a matching contribution by the Company. The
Company also has defined contribution benefit plans for certain of its international employees. The
Company contributed approximately $40.5 million, $33.6 million and $33.3 million for defined contribution
plans for the fiscal years ended August 31, 2018, 2017 and 2016, respectively.
10. Commitments and Contingencies
Lease Agreements
The Company leases certain facilities under non-cancelable operating leases. Lease agreements may
contain lease escalation clauses and purchase or renewal options. The Company recognizes scheduled lease
escalation clauses over the course of the applicable lease term on a straight-line basis in the Consolidated
Statements of Operations. The future minimum lease payments under non-cancelable operating leases as of
August 31, 2018 were as follows (in thousands):
Fiscal Year Ending August 31, Amount
2019 ................................................... $126,038
2020 ................................................... 97,789
2021 ................................................... 81,286
2022 ................................................... 66,400
2023 ................................................... 49,309
Thereafter ............................................... 142,089
Total minimum lease payments . .............................. $562,911
Total operating lease expense was approximately $130.2 million, $117.2 million and $120.4 million for
fiscal years 2018, 2017 and 2016, respectively.
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Legal Proceedings
The Company is party to certain lawsuits in the ordinary course of business. The Company does not
believe that these proceedings, individually or in the aggregate, will have a material adverse effect on the
Company’s financial position, results of operations or cash flows.
11. Stockholders’ Equity
The Company recognized stock-based compensation expense within selling, general and administrative
expense as follows (in thousands):
Fiscal Year Ended August 31,
2018 2017 2016
Restricted stock and stock appreciation rights (“SARS”) . . . . $84,082 $42,122 $52,459
Employee stock purchase plan ....................... 6,891 6,334 6,538
Other
(1)
...................................... 7,538 88 —
Total....................................... $98,511 $48,544 $58,997
(1) For the fiscal year ended August 31, 2018, represents a one-time cash-settled stock award that vested
on November 30, 2017.
Equity Compensation Plan
The 2011 Stock Award and Incentive Plan (the “2011 Plan”) provides for the grant of restricted stock
awards, restricted stock unit awards and other stock-based awards. The maximum aggregate number of
shares that may be subject to awards under the 2011 Plan is 23,300,000.
Upon adoption of the 2011 Plan, the 2002 Stock Incentive Plan (the “2002 Plan”) was terminated. For
any outstanding awards granted under the 2002 Plan that expire, are canceled or forfeited after the
termination of the 2002 Plan, the shares are available for issuance under the 2011 Plan.
Following is a reconciliation of the shares available to be issued under the 2011 Plan as of August 31,
2018:
Shares
Available
for Grant
Balance as of August 31, 2017 ..................................... 12,228,936
SARS canceled ............................................. 35,439
Restricted stock awards forfeited, net of grants
(1)
...................... 572,783
Balance as of August 31, 2018 ..................................... 12,837,158
(1) Represents the maximum number of shares that can be issued based on the achievement of certain
performance criteria.
Stock Appreciation Rights (“SARS”)
The following table summarizes SARS activity from August 31, 2017 through August 31, 2018:
SARS
Outstanding
Average
Intrinsic
Value
(in thousands)
Weighted-
Average
Exercise
Price
Weighted-
Average
Remaining
Contractual
Life (years)
Outstanding as of August 31, 2017 .......... 319,241 $3,651 $19.91 2.10
SARS canceled ...................... (35,439) $21.56
SARS exercised ...................... (127,001) $21.31
Outstanding and exercisable as of August 31,
2018.............................. 156,801 $1,748 $18.41 3.10
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Restricted Stock Awards
Certain key employees have been granted time-based, performance-based and market-based restricted
stock unit awards. The time-based restricted stock units granted generally vest on a graded vesting schedule
over three years. The performance-based restricted stock units generally vest on a cliff vesting schedule over
three years and up to a maximum of 150%, depending on the specified performance condition and the level
of achievement obtained. The performance-based restricted stock units have a vesting condition that is
based upon the Company’s cumulative adjusted core earnings per share during the performance period. The
market-based restricted stock units generally vest on a cliff vesting schedule over three years and up to a
maximum of 200%, depending on the specified performance condition and the level of achievement
obtained. The market-based restricted stock units have a vesting condition that is tied to the Company’s
total shareholder return based on the Company’s stock performance in relation to the companies in the
Standard and Poor’s (S&P) Super Composite Technology Hardware and Equipment Index excluding the
Company.
On October 6, 2017, the Company’s Compensation Committee approved the modification of vesting
criteria for certain perfor mance-based restricted stock awards granted in fiscal year 2015. As a result of the
modification, 0.8 million awards vested during the first quarter of fiscal year 2018, which resulted in
approximately $24.9 million of stock-based compensation expense recognized.
The following table summarizes restricted stock activity from August 31, 2017 through August 31,
2018:
Shares
Weighted-
Average
Grant-Date
Fair Value
Outstanding as of August 31, 2017 ......................... 11,652,319 $22.00
Changes during the period
Shares granted
(1)
.................................... 2,751,300 $29.40
Shares vested ...................................... (2,727,229) $22.95
Shares forfeited ..................................... (3,324,083) $19.20
Outstanding as of August 31, 2018 ......................... 8,352,307 $24.34
(1) For those shares granted that are based on the achievement of certain performance criteria, the
amount represents the maximum number of shares that can vest. During the fiscal year ended
August 31, 2018, the Company awarded approximately 1.4 million time-based restricted stock units,
0.4 million performance-based restricted stock units and 0.4 million market-based restricted
stock units based on target performance criteria.
The following table represents the restricted stock and SARS stock-based compensation information
for the periods indicated (in thousands):
Fiscal Year Ended August 31,
2018 2017 2016
Intrinsic value of SARS exercised ....................... $ 909 $ 5,053 $ 506
Fair value of restricted stock vested ...................... $62,592 $44,010 $34,857
Tax benefit (expense) for stock compensation expense
(1)
....... $ 1,122 $ 560 $ 991
Unrecognized stock-based compensation expense – restricted
stock ......................................... $41,940
Remaining weighted-average period for restricted stock expense . . 1.4 years
(1) Classified as income tax expense within the Consolidated Statements of Operations.
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Employee Stock Purchase Plan
The maximum aggregate number of shares that are available for issuance under the 2011 Employee
Stock Purchase Plan (the “ESPP”) is 12,000,000.
Employees are eligible to participate in the ESPP after 90 days of employment with the Company. The
ESPP permits eligible employees to purchase common stock through payroll deductions, which may not
exceed 10% of an employee’s compensation, as defined in the ESPP, at a price equal to 85% of the fair value
of the common stock at the beginning or end of the offering period, whichever is lower. The ESPP is
intended to qualify under Section 423 of the Internal Revenue Code. As of August 31, 2018, 4,679,061
shares remained available for issue under the 2011 ESPP.
The fair value of shares issued under the ESPP was estimated on the commencement date of each
offering period using the Black-Scholes option pricing model. The following weighted-average assumptions
were used in the model for each respective period:
Fiscal Year Ended August 31,
2018 2017 2016
Expected dividend yield ........................... 0.6% 0.8% 0.7%
Risk-free interest rate ............................. 1.4% 0.5% 0.3%
Expected volatility
(1)
............................. 23.0% 33.0% 28.1%
Expected life ................................... 0.5years 0.5 years 0.5 years
(1) The expected volatility was estimated using the historical volatility derived from the Company’s
common stock.
Dividends
The following table sets forth certain information relating to the Company’s cash dividends declared to
common stockholders during fiscal years 2018 and 2017:
Dividend
Declaration Date
Dividend
per Share
Total of
Cash
Dividends
Declared
Date of Record for
Dividend Payment
Dividend Cash
Payment Date
(in thousands, except for per share data)
Fiscal Year 2018: October 19, 2017 $0.08 $14,588 November 15, 2017 December 1, 2017
January 25, 2018 $0.08 $14,272 February 15, 2018 March 1, 2018
April 19, 2018 $0.08 $13,991 May 15, 2018 June 1, 2018
July 18, 2018 $0.08 $13,677 August 15, 2018 September 4, 2018
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
July 20, 2017 $0.08 $14,698 August 15, 2017 September 1, 2017
Share Repurchases
During fiscal years 2017 and 2016, the Company’s Board of Directors authorized the repurchase of
$450.0 million and $400.0 million, respectively, of the Company’s common stock under share repurchase
programs, which were repurchased during fiscal years 2016, 2017 and 2018.
In June 2018, the Board authorized the repurchase of up to $350.0 million of the Company’s common
stock (the “2018 Share Repurchase Program”). The 2018 Share Repurchase Program expires on August 31,
2019. As of August 31, 2018, no shares had yet been repurchased under this authorization and
$350.0 million remains available under the 2018 Share Repurchase Program.
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12. Concentration of Risk and Segment Data
Concentration of Risk
Financial instruments that potentially subject the Company to concentrations of credit risk consist
principally of cash and cash equivalents and trade receivables. The Company maintains cash and cash
equivalents with various domestic and foreign financial institutions. Deposits held with the financial
institutions may exceed the amount of insurance provided on such deposits, but may generally be redeemed
upon demand. The Company performs periodic evaluations of the relative credit standing of the financial
institutions and attempts to limit exposure with any one institution. For trade receivables, the Company
performs ongoing credit evaluations of its customers and generally does not require collateral. The
Company maintains an allowance for potential credit losses on trade receivables.
Sales of the Company’s products are concentrated among specific customers. For fiscal year 2018, the
Company’s five largest customers accounted for approximately 48% of its net revenue and 80 customers
accounted for approximately 90% of its net revenue. As the Company is a provider of manufacturing
services and solutions and products are built based on customer specifications, it is impracticable to provide
revenues from external customers for each product and service. Sales to the following customer that
accounted for 10% or more of the Company’s net revenues, expressed as a percentage of consolidated net
revenue, and the percentage of accounts receivable for the customer, were as follows:
Percentage of Net Revenue
Fiscal Year Ended August 31,
Percentage of Accounts Receivable
as of August 31,
2018 2017 2016 2018 2017
Apple, Inc.
(1)
................ 28% 24% 24% * *
* Amount was less than 10% of total.
(1) Sales to this customer were reported in the DMS operating segment.
The Company procures components from a broad group of suppliers. Some of the products
manufactured by the Company require one or more components that are available from only a single
source.
Segment Data
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 segments are organized based on the
economic profiles of the services performed, including manufacturing capabilities, market strategy, margins,
return on capital and risk profiles.
The EMS segment is focused around leveraging IT, supply chain design and engineering, technologies
largely centered on core electronics, utilizing the Company’s large scale manufacturing infrastructure and
the ability to serve a broad range of end markets. The EMS segment is typically lower-margin but high
volume business that is produced at a quicker rate (i.e. cycle time) and in higher quantities and includes
customers primarily in the automotive and transportation, capital equipment, computing and storage,
defense and aerospace, digital home, industrial and energy, networking and telecommunications, point of
sale and printing industries.
The DMS segment is focused on providing engineering solutions, with an emphasis on material
sciences and technologies. The DMS segment is typically higher-margin business and includes customers
primarily in the consumer wearables, healthcare, mobility and packaging industries.
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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 and integration costs, loss on disposal of
subsidiaries, settlement of receivables and related charges, impairment of notes receivable and related
charges, goodwill impairment charges, business interruption and impairment charges, net, 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.
The following tables set forth operating segment information (in thousands):
Fiscal Year Ended August 31,
2018 2017 2016
Net revenue
EMS ...................................... $12,268,600 $11,077,622 $11,029,132
DMS ...................................... 9,826,816 7,985,499 7,323,954
$22,095,416 $19,063,121 $18,353,086
Fiscal Year Ended August 31,
2018 2017 2016
Segment income and reconciliation of income before tax
EMS ...................................... $451,149 $ 436,110 $ 373,732
DMS ...................................... 316,998 230,893 256,588
Total segment income ......................... $768,147 $ 667,003 $ 630,320
Reconciling items:
Amortization of intangibles ..................... (38,490) (35,524) (37,121)
Stock-based compensation expense and related charges . . (98,511) (48,544) (58,997)
Restructuring and related charges ................. (36,902) (160,395) (11,369)
Acquisition and integration costs ................. (8,082) — —
Distressed customer charges ..................... (32,710) (10,198) —
Business interruption and impairment charges, net
(1)
. . . (11,299) — —
Loss on disposal of subsidiaries .................. — (2,112) —
Other expense .............................. (37,563) (28,448) (8,380)
Interest income .............................. 17,813 12,525 9,128
Interest expense ............................. (149,002) (138,074) (136,536)
Income before income tax ........................ $373,401 $ 256,233 $ 387,045
(1) Charges, net of insurance proceeds of $24.9 million, for the fiscal year ended August 31, 2018 relate to
business interruption and asset impairment costs associated with damage from Hurricane Maria,
which impacted our operations in Cayey, Puerto Rico, which is classified as a component of cost of
revenue and selling, general and administrative expenses in the Consolidated Statements of Operations.
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August 31,
2018
August 31,
2017
Total assets
EMS........................................... $ 3,456,866 $ 2,778,820
DMS .......................................... 5,378,436 5,290,468
Other non-allocated assets ............................ 3,210,339 3,026,707
$12,045,641 $11,095,995
The Company operates in 29 countries worldwide. Sales to unaffiliated customers are based on the
Company location that maintains the customer relationship and transacts the external sale. The following
tables set forth external net revenue, net of intercompany eliminations, and long-lived asset information
where individual countries represent a material portion of the total (in thousands):
Fiscal Year Ended August 31,
2018 2017 2016
External net revenue:
Singapore ......................... $ 7,193,414 $ 5,585,837 $ 4,983,711
China ............................ 4,585,355 4,012,950 3,873,212
Mexico ........................... 3,533,437 3,207,059 3,043,609
Malaysia .......................... 1,389,851 1,119,384 1,113,456
Hungary .......................... 897,033 944,448 1,130,466
Other ............................ 2,651,632 2,547,750 2,499,241
Foreign source revenue .................. 20,250,722 17,417,428 16,643,695
U.S. ............................. 1,844,694 1,645,693 1,709,391
Total .............................. $22,095,416 $19,063,121 $18,353,086
August 31,
2018 2017
Long-lived assets:
China ....................................... $1,770,732 $1,922,676
Singapore ..................................... 191,506 204,181
Mexico ...................................... 256,086 196,218
Taiwan ...................................... 130,062 136,685
Malaysia ..................................... 113,011 74,341
Hungary ..................................... 91,063 89,814
Spain ........................................ 79,991 83,064
Poland ....................................... 60,847 55,617
Other ........................................ 334,466 343,473
Long-lived assets related to foreign operations . . ........... 3,027,764 3,106,069
U.S.......................................... 1,077,128 1,015,389
Total.......................................... $4,104,892 $4,121,458
13. Derivative Financial Instruments and Hedging Activities
The Company is directly and indirectly affected by changes in certain market conditions. These
changes in market conditions may adversely impact the Company’s financial performance and are referred
to as market risks. The Company, where deemed appropriate, uses derivatives as risk management tools to
mitigate the potential impact 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.
93
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 $293.4 million and $314.6 million as of August 31, 2018 and 2017,
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 September 3, 2018 and May 31, 2019.
In addition to derivatives that are designated as hedging instruments and qualify for hedge accounting,
the Company also enters into forward contracts to economically hedge transactional exposure associated
with commitments arising from trade accounts receivable, trade accounts payable, fixed purchase
obligations and intercompany transactions denominated in a currency other than the functional currency of
the respective operating entity. The aggregate notional amount of these outstanding contracts as of
August 31, 2018 and 2017, was $3.4 billion and $2.1 billion, respectively.
The following table presents the fair values of the Company’s derivative instruments located on the
Consolidated Balance Sheets utilized for foreign currency risk management purposes as of August 31, 2018
and 2017 (in thousands):
Fair Values of Derivative Instruments
Asset Derivatives Liability Derivatives
Balance Sheet
Location
Fair Value
as of
August 31,
2018
(1)
Fair Value
as of
August 31,
2017
(1)
Balance Sheet
Location
Fair Value
as of
August 31,
2018
(1)
Fair Value
as of
August 31,
2017
(1)
Derivatives designated as hedging
instruments:
Forward foreign exchange contracts . .
Prepaid expenses
and other current
assets $ 225 $ 8,380
Accrued
expenses $13,364 $1,408
Derivatives not designated as hedging
instruments:
Forward foreign exchange contracts . .
Prepaid expenses
and other current
assets $10,125 $31,280
Accrued
expenses $46,171 $9,131
(1) Classified as Level 2 in the fair-value hierarchy.
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 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, selling, general and administrative expense, which are the same line items in which
the hedged items are recorded.
During the fiscal year ended August 31, 2018, the Company recognized $29.6 million in foreign
currency losses, which was offset by $48.7 million of gains from related forward contracts. Both the foreign
currency losses and gains from forward contracts were recognized in cost of revenue. For the fiscal years
ended August 31, 2017 and 2016, the amounts were immaterial and were recognized as components of cost
of revenue.
Interest Rate Risk Management
The Company periodically enters into interest rate swaps to manage interest rate risk associated with
the Company’s borrowings.
94
Cash Flow Hedges
During the fourth quarter of fiscal year 2018, the Company entered into interest rate swap transactions
to hedge the variable interest rate payments for the 2018 Term Loan Facility. In connection with this
transaction, the Company pays interest based upon a fixed rate as agreed upon with the respective
counterparties and receives variable rate interest payments based on the three-month LIBOR. The interest
rate swaps have an aggregate notional amount of $350.0 million and have been designated as hedging
instruments and accounted for as cash flow hedges. The interest rate swaps were effective on August 24,
2018 and are scheduled to expire on August 24, 2020. The contracts will be settled with the respective
counterparties on a net basis at each settlement date.
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 2017 Term Loan Facility. In connection with this
transaction, the Company pays interest based upon a fixed rate as agreed upon with the respective
counterparties and receives 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.
During the fourth quarter of fiscal year 2016, the Company entered into forward interest rate swap
transactions to hedge the fixed interest rate payments for an anticipated debt issuance (the 3.950% Senior
Notes). The swaps were accounted for as a cash flow hedge and had a notional amount of $200.0 million.
Concurrently with the pricing of the 3.950% Senior Notes in the second quarter of fiscal year 2018, the
Company settled the swaps. The fair value of the cash received for the swaps at settlement was
$17.2 million. The effective portion of the swaps is recorded in the Company’s Consolidated Balance Sheets
as a component of AOCI and is amortized as a reduction to interest expense in the Company’s
Consolidated Statement of Operations through January 2028. The effective portions of the swaps
amortized as a reduction to interest expense during the fiscal year ended August 31, 2018 was not material.
14. Restructuring and Related Charges
Following is a summary of the Company’s restructuring and related charges (in thousands):
Fiscal Year Ended August 31,
2018
(2)
2017
(2)
2016
(3)
Employee severance and benefit costs ............ $16,269 $ 56,834 $ 8,845
Lease costs .............................. 1,596 3,966 (43)
Asset write-off costs ........................ 16,264 94,346 1,170
Other related costs ......................... 2,773 5,249 1,397
Total restructuring and related charges
(1)
........ $36,902 $160,395 $11,369
(1) Includes $16.3 million, $51.3 million and $10.7 million recorded in the EMS segment, $16.6 million,
$82.4 million and $0.8 million recorded in the DMS segment and $4.0 million, $26.7 million and
$(0.1) million of non-allocated charges for the f iscal years ended August 31, 2018, 2017 and 2016,
respectively. Except for asset write-off costs, all restructuring and related charges are cash settled.
(2) Primarily relates to the 2017 Restructuring Plan.
(3) Costs relate to the 2013 Restructuring Plan, which was substantially complete in fiscal year 2017.
2017 Restructuring Plan
On September 15, 2016, the Company’s Board of Directors formally approved a restructuring plan to
better align the Company’s global capacity and administrative support infrastructure 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 “2017
Restructuring Plan”).
95
Upon completion of the 2017 Restructuring Plan, the Company expects to recognize approximately
$195.0 million in restructuring and other related costs. The Company has incurred $186.4 million of
costs-to-date as of August 31, 2018. The remaining costs for employee severance and benefit costs, asset
write-off costs and other related costs are anticipated to be incurred through the first half of fiscal year
2019.
The table below sets forth the cumulative restructuring and related charges incurred through
August 31, 2018 for the 2017 Restructuring Plan (in thousands):
2017
Restructuring
Plan
(1)
Employee severance and benefit costs . ................................ $ 64,420
Lease costs ................................................... 5,562
Asset write-off costs ............................................. 110,540
Other related costs .............................................. 5,892
Total restructuring and related charges ............................... $186,414
(1) Includes $56.8 million allocated to the EMS segment, $99.0 million allocated to the DMS segment and
$30.6 million of unallocated costs.
The tables below summarize the Company’s liability activity, primarily associated with the 2017
Restructuring Plan (in thousands):
Employee
Severance
and Benefit
Costs
Lease
Costs
Asset
Write-off
Costs
Other
Related Costs Total
Balance as of August 31, 2016
(1)
............ $17,266 $ 21 $ — $ 740 $ 18,027
Restructuring related charges ............ 56,834 3,966 94,346 5,249 160,395
Asset write-off charge and other non-cash
activity .......................... 1,319 59 (94,346) 65 (92,903)
Cash payments ...................... (41,839) (2,381) — (2,911) (47,131)
Balance as of August 31, 2017
(2)
............ 33,580 1,665 — 3,143 38,388
Restructuring related charges ............ 16,269 1,596 16,264 2,773 36,902
Asset write-off charge and other non-cash
activity .......................... (127) 525 (16,264) 25 (15,841)
Cash payments ...................... (31,591) (1,102) — (5,419) (38,112)
Balance as of August 31, 2018
(2)
............ $18,131 $ 2,684 $ — $ 522 $ 21,337
(1) Relates only to the 2013 Restructuring Plan.
(2) Primarily relates to the 2017 Restructuring Plan.
15. Business Acquisitions
Fiscal year 2018
Acquisitions
On September 1, 2017, the Company completed the acquisition of True-Tech Corporation
(“True-Tech”) for approximately $95.9 million in cash. True-Tech is a manufacturer specializing in
aerospace, semiconductor and medical machined components.
The acquisition of True-Tech assets has been accounted for as a business combination using the
acquisition method of accounting. Assets acquired of $114.7 million, including $25.9 million in intangible
assets and $22.6 million in goodwill, and liabilities assumed of $18.8 million were recorded at their
96
estimated fair values as of the acquisition date. The excess of the purchase price over the fair value of the
acquired assets and assumed liabilities was recorded to goodwill and was fully allocated to the EMS
segment. The majority of the goodwill is currently expected to be deductible for income tax purposes. The
results of operations were included in the Company’s condensed consolidated financial results beginning on
September 1, 2017. Pro forma information has not been provided as the acquisition of True-Tech is not
deemed to be significant.
Binding offer
On July 18, 2018, the Company submitted a binding offer to form a strategic collaboration with
Johnson & Johnson Medical Devices Companies that will significantly expand the Company’s medical
device manufacturing portfolio, diversification and capabilities in the DMS segment. The offer has been
accepted with respect to the North American sites and is pending applicable consultative processes for sites
in Switzerland and Germany. Completion of this transaction, which is subject to regulatory clearance and
customary closing conditions, is expected to occur during fiscal years 2019 and 2020.
Fiscal year 2017
Acquisitions
On March 1, 2017, the Company completed the acquisition of Lewis Engineering, which was not
deemed to be significant. The acquired business expanded the Company’s capabilities in precision
machining, manufacturing and design engineering. The aggregate purchase 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 excess of the purchase price over the fair value of the acquired assets and assumed
liabilities of $8.2 million was recorded to goodwill and was fully allocated to the DMS segment. The
majority of the goodwill is currently expected to be deductible for income tax purposes. The Company
expensed transaction costs in connection with the acquisition of approximately $0.8 million during the
fiscal year ended August 31, 2017. The results of operations of the acquired business were included in the
Company’s consolidated financial results beginning on the date of the acquisition. Pro forma information
has not been provided as the acquisition is not deemed to be significant.
Fiscal year 2016
Acquisitions
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 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 results of
operations were included in the Company’s 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. The results of
operations of the acquired businesses were included in the Company’s 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.
97
16. New Accounting Guidance
Recently Issued Accounting Guidance
During fiscal year 2014, the Financial Accounting Standards Board (“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. The accounting standard is effective for the
Company in the first quarter of fiscal year 2019.
The new standard will also impact the Company’s accounting for certain fulfillment costs, which
include up-front costs to prepare for manufacturing activities that are expected to be recovered. Under the
current accounting standard these costs are typically expensed as incurred. Under the new standard, such
up-front costs would be recognized as an asset and amortized on a systematic basis consistent with the
pattern of the transfer of the goods to which the asset relates.
The Company currently recognizes the majority of its revenue from contracts with customers at a
point in time, which is generally when the goods are shipped to or received by the customer, title and risk of
ownership have passed, the price to the buyer is fixed or determinable and collectability is reasonable
assured (net of estimated returns). Under the new accounting guidance, the Company will recognize
revenue over time as manufacturing services are completed for the majority of its contracts with customers
which will result in revenue being recognized earlier than under the historical guidance. Revenue for all
other contracts with customers will be recogniz ed at a point in time, upon transfer of control of the product
to the customer, which is effectively no change to the Company’s historical current accounting.
The Company will adopt the new guidance under the modified retrospective approach with a
cumulative adjustment increasing the opening balance of retained earnings by $30.0 million to
$60.0 million, net of tax. Prior periods will not be retrospectively adjusted.
While the Company is substantially complete with the process of quantifying the impacts that will
result from applying the new guidance, its assessment will be finalized during the f irst quarter of fiscal year
2019. The Company has substantially completed the implementation of changes to its processes, policies
and internal controls to meet the impact of the new standard and disclosure requirements.
During fiscal year 2016, the FASB issued a new accounting standard to address certain aspects of
recognition, measurement, presentation and disclosure of financial instruments. This guidance is effective
for the Company beginning in the first quarter of fiscal year 2019, and must be applied by means of a
cumulative-effect adjustment to the 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 adoption of this standard is not expected to have a material impact on the Company’s
Consolidated Financial Statements; however, the impact on future periods will depend on the facts and
circumstances of future transactions.
During fiscal year 2016, the FASB issued a new accounting standard revising lease accounting. The
new guidance requires organizations to recognize lease assets and lease liabilities on the Consolidated
Balance Sheet and disclose key infor mation 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 the standard must be adopted using a modified retrospective approach. In preparation for
the adoption, the Company is implementing a new lease accounting system. The adoption of this standard
will impact the Company’s Consolidated Balance Sheet. The Company is currently evaluating practical
expedients and accounting policy elections, and assessing overall impacts this new standard will have on its
Consolidated Financial Statements.
During 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
98
adoption is permitted beginning in the f irst 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
Consolidated Financial Statements.
During fiscal year 2016, the FASB issued a new accounting standard to address the presentation of
certain transactions within the statement of cash flows with the objective of reducing the existing diversity
in practice. Adoption of this standard will be required on a retrospective basis and will result in a
reclassification of cash flows from operating activities to investing activities in the Company’s Consolidated
Statement of Cash Flows for cash receipts for the deferred purchase price receivable on asset-backed
securitization transactions. This guidance is effective for the Company beginning in the first quarter of
fiscal year 2019. While the Company is still quantifying the impact of this standard, it expects a material
increase in cash flow from investing activities with a corresponding decrease to cash f low from operating
activities upon adoption of the standard.
During fiscal year 2017, the FASB issued a new accounting standard to improve the accounting for the
income tax consequences of intra-entity transfers of assets other than inventory. The new standard
eliminates the exception for an intra-entity transfer of an asset other than inventory and requires an entity
to recognize the income tax consequences when the transfer occurs. This guidance is effective for the
Company beginning in the first quarter of f iscal year 2019. 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 adoption of this standard is not expected to have a material impact on the
Company’s Consolidated Financial Statements; however, the impact on future periods will depend on the
facts and circumstances of future transactions.
During fiscal year 2017, the FASB issued a new accounting standard which clarifies the scope of
accounting for asset derecognition and adds further guidance for recognizing gains and losses from the
transfer of non-financial assets in contracts with non-customers. This guidance is effective for the Company
beginning in the first quarter of fiscal year 2019 coincident with the new revenue recognition guidance. The
adoption of this standard is not expected to have a material impact on the Company’s Consolidated
Financial Statements; however, the impact on future periods will depend on the facts and circumstances of
future transactions.
During fiscal year 2017, the FASB issued a new accounting standard to improve the financial reporting
of hedging relationships to better portray the economic results of an entity’s risk management activities by
simplifying the application of hedge accounting and improving the related disclosures in its financial
statements. This guidance is effective for the Company beginning in the first quarter of fiscal year 2020,
with early adoption permitted. The guidance must be applied using a modified retrospective approach. The
adoption of this standard is not expected to have a material impact on the Company’s Consolidated
Financial Statements; however, the impact on future periods will depend on the facts and circumstances of
future transactions.
During the second quarter of fiscal year 2018, the SEC staff issued SAB 118, which provides guidance
on accounting for the tax effects of the Tax Act. SAB 118 provides a measurement period that should not
extend beyond one year from the Tax Act enactment date for companies to complete the accounting under
ASC 740. In accordance with SAB 118, a company must reflect the income tax effects of those aspects of
the Tax Act for which the accounting under ASC 740 is complete. To the extent that a company’s
accounting for certain income tax effects of the Tax Act is incomplete, but it is able to determine a
reasonable estimate, it must record a provisional estimate in its financial statements. If a company cannot
determine a provisional estimate to be included in the financial statements, it should continue to apply
ASC 740 on the basis of the provisions of the tax laws that were in effect immediately before the enactment
of the Tax Act. The Company has applied SAB 118, recorded a provisional estimate related to certain
effects of the Tax Act, and provided required disclosures in Note 4 — “Income Taxes.”
During the second quarter of fiscal year 2018, the FASB issued a new accounting standard which
allows a reclassification from AOCI to retained earnings for stranded tax effects resulting from the Tax Act.
This guidance is effective for the Company beginning in the first quarter of fiscal year 2020, with early
adoption permitted. The Company is currently assessing the impact this new standard may have on its
Consolidated Financial Statements.
99
During the fourth quarter of fiscal year 2018, the FASB issued a new accounting standard which aligns
the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service
contract with the requirements for capitalizing implementation costs incurred to develop or obtain
internal-use software. This guidance is effective for the Company beginning in the first quarter of fiscal year
2021, with early adoption permitted. The Company is currently assessing the impact this new standard may
have on its 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.
100
Item 16. Form 10-K Summary
Not applicable.
101
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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
By: /s/ MARK T. MONDELLO
Mark T. Mondello
Chief Executive Officer
Date: October 19, 2018
102
POWER OF ATTORNEY
KNOW ALL THESE PERSONS BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Mark T. Mondello and Michael Dastoor and each of them, jointly and
severally, his or her attorneys-in-fact, each with full power of substitution, for him or her in any and all
capacities, to sign any and all amendments to this Annual Report on For m 10-K, and to file the same, with
exhibits thereto and other documents in connection therewith, with the Securities and Exchange
Commission, hereby ratifying and confirming all that each said attorneys-in-fact or his substitute or
substitutes, may do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed
below by the following persons on behalf of the registrant and in the capacities and on the dates indicated:
Signature Title Date
By: /s/ TIMOTHY L. MAIN
Timothy L. Main
Chairman of the Board of Directors October 19, 2018
By: /s/ T
HOMAS A. SANSONE
Thomas A. Sansone
Vice Chairman of the Board of
Directors
October 19, 2018
By: /s/ M
ARK T. M ONDELLO
Mark T. Mondello
Chief Executive Officer and Director
(Principal Executive Officer)
October 19, 2018
By: /s/ M
ICHAEL DASTOOR
Michael Dastoor
Chief Financial Officer (Principal
Financial and Accounting Officer)
October 19, 2018
By: /s/ ANOUSHEH ANSARI
Anousheh Ansari
Director October 19, 2018
By: /s/ M
ARTHA F. B ROOKS
Martha F. Brooks
Director October 19, 2018
By: /s/ C
HRISTOPHER S. HOLLAND
Christopher S. Holland
Director October 19, 2018
By: /s/ J
OHN C. PLANT
John C. Plant
Director October 19, 2018
By: /s/ S
TEVEN A. RAYMUND
Steven A. Raymund
Director October 19, 2018
By: /s/ D
AVID M. STOUT
David M. Stout
Director October 19, 2018
103
SCHEDULE II
JABIL INC. AND SUBSIDIARIES
SCHEDULE OF VALUATION AND QUALIFYING ACCOUNTS
(in thousands)
Balance at
Beginning
of Period
Additions
and
Adjustments
Charged to
Costs
and Expenses
Additions/
(Reductions)
Charged to
Other
Accounts Write-offs
Balance at
End of Period
Allowance for uncollectible accounts
receivable:
Fiscal year ended August 31, 2018 . . . $14,134 $12,545 $ — $(11,498) $15,181
Fiscal year ended August 31, 2017 . . . $11,094 $ 6,255 $ — $ (3,215) $14,134
Fiscal year ended August 31, 2016 . . . $11,663 $ 292 $ — $ (861) $11,094
Balance at
Beginning
of Period
Additions
and
Adjustments
Charged to
Costs
and Expenses
Additions/
(Reductions)
Charged
to Other
Accounts Write-offs
Balance at
End of Period
Reserve for excess and obsolete
inventory:
Fiscal year ended August 31, 2018 . . . $46,013 $35,538 $ — $(20,611) $60,940
Fiscal year ended August 31, 2017 . . . $32,221 $46,030 $ — $(32,238) $46,013
Fiscal year ended August 31, 2016 . . . $43,477 $12,145 $ — $(23,401) $32,221
Balance at
Beginning
of Period
Additions
Charged to
Costs and
Expenses
(1)
Additions/
(Reductions)
Charged
to Other
Accounts
(2)
Reductions
Charged to
Costs and
Expenses
(3)
Balance at
End of Period
Valuation allowance for deferred taxes:
Fiscal year ended August 31, 2018 . . . $285,559 $18,418 $ (886) $(79,604) $223,487
Fiscal year ended August 31, 2017 . . . $344,828 $65,300 $(97,203) $(27,366) $285,559
Fiscal year ended August 31, 2016 . . . $304,820 $23,891 $ 28,238 $(12,121) $344,828
(1) During the fiscal years ended August 31, 2018, 2017 and 2016, the additions charged to costs and
expenses primarily relate to the increase of deferred tax assets for sites with existing valuation
allowances.
(2) During the fiscal year ended August 31, 2017, the reductions charged to other accounts primarily relate
to the decrease of net operating loss carry forwards due to non-U.S. unrecognized tax benefits and a
non-U.S. tax audit. During the fiscal year ended August 31, 2016, the additions charged to other
accounts primarily related to the recognition of excess tax benefits due to the early adoption of the
new accounting guidance for share-based payment transactions.
(3) During the fiscal year ended August 31, 2018, the reductions charged to costs and expenses primarily
relate to the decrease of U.S. net operating loss carry forwards and tax credits due to utilization against
the one-time transition tax as a result of the Tax Act. During the fiscal year ended August 31, 2017, the
reductions charged to costs and expenses primarily relate to the release of certain non-U.S. valuation
allowances.
See accompanying report of independent registered public accounting firm.
104
EXHIBIT 21.1
JABIL INC. SUBSIDIARIES*
Ownership is 100% except where designated
AOC Technologies (Wuhan) Co., Ltd. (China)
AOC Technologies, Inc. (US)
Badger Technologies, LLC (USA)
Celebit Technology Private Limited (India)
Celetronix India Private Limited (India)
Celetronix USA, Inc. (US)
Clothing Plus Hong Kong Ltd. (Hong Kong)
Clothing Plus MBU Oy (Finland)
Clothing Plus Oy (Finland)
Clothing Plus Zhejiang Ltd. (China)
F-I Holding Company (Cayman Islands)
Green Point (Suzhou) Technology Co., Ltd. (China)
Green Point (Tianjin) Electronic Technology Co., Ltd. (China)
Green Point (Tianjin) Precision Electronic Co., Ltd. (China)
Green Point (Wuxi) Electronic Technology Co., Ltd. (China)
Green Point (Yantai) Precision Electronic Co., Ltd. (China)
Green Point Industrial Co., Ltd. (British Virgin Islands)
Green Point Precision (M) Sdn. Bhd. (Malaysia)
Green Point Precision Components Co., Ltd. (Taiwan)
Green Point Technology (Shenzhen) Co., Ltd. (China)
Green Point Technology (Wuxi) Co., Ltd. (China)
Green Prosperity Co., Ltd. (British Virgin Islands)
Jabil (Mauritius) Holdings Ltd. (Mauritius)
Jabil Advanced Mechanical Solutions de Mexico, S. de R.L. de C.V. (Mexico)
Jabil Advanced Mechanical Solutions, Inc. (US)
Jabil AMS, LLC (US)
Jabil C.M. S.r.l. (Italy)
Jabil Canada Corporation (Canada)
Jabil Circuit (Beijing) Ltd. (China)
Jabil Circuit (BVI) Inc. (British Virgin Islands)
Jabil Circuit (Guangzhou) Ltd. (China)
Jabil Circuit (Shanghai) Co. Ltd. (China)
Jabil Circuit (Singapore) Pte. Ltd. (Singapore)
Jabil Circuit (Wuxi) Co. Ltd. (China)
Jabil Circuit Austria GmbH (Austria)
Jabil Circuit Belgium N.V. (Belgium)
Jabil Circuit Bermuda Ltd. (Ber muda)
Jabil Circuit Cayman L.P. (Cayman Islands)
Jabil Circuit Chihuahua, LLC (US)
Jabil Circuit China Limited (Hong Kong)
Jabil Circuit de Chihuahua S. de R.L. de C.V. (Mexico)
Jabil Circuit de Mexico S.A. de C.V. (Mexico)
Jabil Circuit Financial II, Inc. (US)
Jabil Circuit Guadalajara, LLC (US)
Jabil Circuit Holdings Limited (United Kingdom)
Jabil Circuit Hong Kong Limited (Hong Kong)
Jabil Circuit Hungary Contract Manufacturing Services Ltd. (Hungary)
Jabil Circuit India Private Limited (India)
Jabil Circuit Investment (China) Co., Ltd (China)
Jabil Circuit Italia S.r.l. (Italy)
Jabil Circuit Limited (United Kingdom)
Jabil Circuit Luxembourg II S.à.r.l. (Luxembourg)
Jabil Circuit Luxembourg S.à.r.l. (Luxembourg)
Jabil Circuit Netherlands B.V. (Netherlands)
Jabil Circuit of Michigan, Inc. (US)
Jabil Circuit SAS (France)
Jabil Circuit Sdn Bhd (Malaysia)
Jabil Circuit Services Limited (Hong Kong)
Jabil Circuit Technology LLC (Cayman Islands)
Jabil Circuit Ukraine Limited (Ukraine)
Jabil Circuit, LLC (US)
Jabil Defense and Aerospace Services, LLC (US)
Jabil Denmark Aps (Denmark)
Jabil do Brasil Industria Eletroeletronica Ltda. (Brazil)
Jabil DR, S.R.L. (Dominican Republic)
Jabil Energy (Namibia) (PTY) Ltd. (Namibia)
Jabil Green Point Precision Electronics (Wuxi) Co. Ltd. (China)
Jabil Green Point Technology (Huizhou) Co., Ltd. (China)
Jabil Hungary LP Services, Limited Liability Company (Hungary)
Jabil Industrial do Brasil Ltda. (Brazil)
Jabil International Treasury Pte. Ltd (Singapore)
Jabil Investment Pte. Ltd. (Singapore)
Jabil Israel Ltd. (Israel)
Jabil Japan, Inc. (Japan)
Jabil Luxembourg Manufacturing S.à.r.l. (Luxembourg)
Jabil Mexico Investment, S. de R.L. de C.V. (Mexico)
Jabil Nypro Holding LLC (US)
Jabil Nypro I, LLC (US)
Jabil Nypro II, LLC (US)
Jabil Nypro International B.V. (Netherlands)
Jabil Optics Germany GmbH (Germany)
Jabil Poland Sp. z.o.o. (Poland)
Jabil Precision Industry (Guangzhou) Co., Ltd. (China)
Jabil Sdn Bhd (Malaysia)
Jabil Silver Creek, Inc. (US) formerly known as Wolfe Engineering, Inc.
Jabil South Africa (Pty) LTD (South Africa)
Jabil Technology (Chengdu) Co., Ltd (China)
Jabil Technology and Trading (Wuxi) Co., Ltd. (China)
Jabil Vietnam Company Limited (Vietnam)
Jabil, Limited Liability Company (Russian Federation)
JP Danshui Holding (BVI) Inc. (British Virgin Islands)
Kasalis Inc. (US)
Mikma-Bett (Russian Federation) (Jabil indirectly owns 13.606% of this entity)
Mikromashina (Russian Federation) (Jabil indirectly owns 53.10% of this entity)
NP Medical Inc. (US)
NPA de Mexico S. de R.L. de C.V. (Mexico)
Nypro Alabama LLC (US)
Nypro Atlanta LLC (US)
Nypro China Holdings Limited (Hong Kong)
Nypro de Amazonia (Brazil)
Nypro de la Frontera, S. de R.L. de C.V. (Mexico)
Nypro Deutschland GmbH (Germany)
Nypro France SAS (France)
Nypro Ger many Holdings GmbH (Germany)
Nypro Ger many Verwaltungs B.V. & Co. KG (Germany)
Nypro Global Holdings C.V. (Netherlands)
Nypro Guadalajara S.A. de C.V. (Mexico)
Nypro Healthcare Baja Inc. (US)
Nypro Healthcare GmbH (Germany)
Nypro Healthcare LLC (US)
Nypro Inc. (US)
Nypro Iowa Inc. (US)
Nypro JV Holdings Inc. (US)
Nypro Korea Ltd. (Korea)
Nypro Limited (Ireland)
Nypro Monterrey Management S. de R.L. de C.V. (Mexico)
Nypro Plastics & Metal Products (Shenzhen) Co., Ltd. (China)
Nypro Plastics & Molding Products (Suzhou) Co., Ltd. (China)
Nypro Puerto Rico Inc. (US)
Nypro Research and Development Limited (Ireland)
Nypro Spain Holding, S.L.U. (Spain)
Nypro Tool (Suzhou) Co., Ltd. (China)
Nypro Tool Hong Kong Limited (Hong Kong)
NyproMold Chicago Inc. (US) (Jabil indirectly owns 50% of this entity)
NyproMold Inc. (US) (Jabil indirectly owns 50% of this entity)
NyproMold Investment Corp. (US) (Jabil indirectly owns 50% of this entity)
Plasticast Hungary Korlátolt Felelõsségû Társaság (Hungary)
Plasticos Castella S.A.U. (Spain)
PT Jabil Circuit Indonesia (Indonesia)
Radius Chicago LLC (US)
Radius Hong Kong Limited (Hong Kong)
Radius Innovation and Product Development (Shanghai) Co. Ltd. (China)
Radius Product Development and Consultation (Beijing) Co., Ltd. (China)
Radius Product Development Inc. (US)
Roosevelt Insurance Company, Ltd. (US)
S.M.R. Metal Ltd. (Israel)
Shay Motion Ltd. (Israel)
Shemer Motion (2009) Ltd. (Israel)
Taiwan Green Point Enterprises Co., Ltd. (Taiwan)
Taiwan Green Point Enterprises Co., Ltd. (British Virgin Islands)
Westing Green (Tianjin) Plastic Co., Ltd (China)
Wolfe Engineering (Shanghai) Co., Ltd. (China)
* Jabil Inc. subsidiaries list as of August 31, 2018.
EXHIBIT 23.1
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We consent to the incorporation by reference in the following Registration Statements:
(1) Registration Statement (Form S-3 No. 333-221020) of Jabil Inc. and subsidiaries, and
(2) Registration Statement (Form S-8 Nos. 333-221022, 333-187772, 333-172458, 333-172457,
333-172443, 333-165921, 333-132721, 333-112264, 333-98299, 333-106123, 333-146577,
333-149277 and 333-158291) of Jabil Inc. and subsidiaries
of our reports dated October 19, 2018, with respect to the consolidated financial statements and schedule of
Jabil Inc. and subsidiaries and the effectiveness of internal control over financial reporting of Jabil Inc. and
subsidiaries included in this Annual Report (Form 10-K) for the year ended August 31, 2018.
/s/ ERNST & YOUNG LLP
Tampa, Florida
October 19, 2018
[This page intentionally left blank.]
EXHIBIT 31.1
CERTIFICATIONS
I, Mark T. Mondello, certify that:
1. I have reviewed this annual report on Form 10-K 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 registrant’s 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 def ined 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 registrant’s 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 registrant’s internal control over financial reporting that
occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in
the case of an annual report) that has materially affected, or is reasonably likely to materially
affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of
internal control over financial reporting, to the registrant’s auditors and the audit committee of the
registrant’s 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 registrant’s 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 registrant’s internal control over financial reporting.
Date: October 19, 2018 /s/ M
ARK T. M ONDELLO
Mark T. Mondello
Chief Executive Officer
EXHIBIT 31.2
CERTIFICATIONS
I, Michael Dastoor, certify that:
1. I have reviewed this annual report on Form 10-K 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 registrant’s 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 def ined 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 registrant’s 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 registrant’s internal control over financial reporting that
occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in
the case of an annual report) that has materially affected, or is reasonably likely to materially
affect, the registrant’s internal control over financial reporting; and
5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of
internal control over financial reporting, to the registrant’s auditors and the audit committee of the
registrant’s 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 registrant’s 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 registrant’s internal control over financial reporting.
Date: October 19, 2018 /s/ M
ICHAEL DASTOOR
Michael Dastoor
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 Annual Report of Jabil Inc. (the “Company”) on Form 10-K for the fiscal year
ended August 31, 2018 as filed with the Securities and Exchange Commission on the date hereof (the
“Form 10-K”), 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-K 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-K fairly presents, in all material respects, the financial
condition and results of operations of the Company.
Date: October 19, 2018 /s/ M
ARK T. M ONDELLO
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 Annual Report of Jabil Inc. (the “Company”) on Form 10-K for the fiscal year
ended August 31, 2018 as filed with the Securities and Exchange Commission on the date hereof (the
“Form 10-K”), I, Michael Dastoor, 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-K 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-K fairly presents, in all material respects, the financial
condition and results of operations of the Company.
Date: October 19, 2018 /s/ M
ICHAEL DASTOOR
Michael Dastoor
Chief Financial Officer
Dear Shareholders, Employees and Partners:
Fiscal 2018 was a great year for Jabil.
I’m proud of our team’s many
accomplishments from our strong
nancial performance to the
tremendous progress we made in
execung our strategy, aimed at
diversifying earnings and cash ows.
MARK T. MONDELLO
CHIEF EXECUTIVE OFFICER
2018
ANNUAL
REPORT
CEO MESSAGE
I’d like to begin by oering a sincere and hearelt THANK YOU to our people here at Jabil for your unwavering
commitment to each other, our customers, the communies we serve and our shareholders.
Throughout much of this past year, we were faced with a dicult and highly constrained components and materials
market. Despite these challenges, Jabil prevailed and delivered for our 300+ customers, because of you. THANK YOU.
Many of you acvely sponsored and parcipated in
our Jabil Cares iniaves, which made a dierence in
the lives of the people in the communies where we
operate around the world. THANK YOU.
And nally, in a world of accelerang speed, change and
complexity, you made safety our top priority for every
employee, within our factories and across our enre
enterprise. THANK YOU.
At Jabil, we clearly have a special culture, which serves
as the foundaon for our success. Our autonomous
market-facing business sectors are fully empowered to
always do what’s right. This structure, and our approach,
are true dierenators we believe will help propel us
to becoming the most technologically advanced and
trusted manufacturing soluons provider.
Together, our nearly 200,000 employees simplify
complex challenges to benet our customers with
higher quality products, more ecient supply chains
and innovave soluons – all of which help them
successfully lead and grow their brands in the
markets they serve.
I believe this is what will connue to drive sustainable,
long-term value for both Jabil and our shareholders.
Fiscal 2018 was a great year for Jabil.
I’m proud of our team’s many accomplishments, from
our strong nancial performance to the tremendous
progress we made in execung our strategy, aimed at
diversifying earnings and cash ows.
At the enterprise-level, our goal is simple: to bring
together a balanced porolio of businesses, in markets
where we have earned a proven “right to win.” In doing
so, we endeavor to have no single product or product
family represent more than ve percent of either annual
cash ows or income.
2018
ANNUAL
REPORT
TIMOTHY L.
MAIN
Chairman of the Board
Director since 1999
Age 61
ANOUSHEH
ANSARI
Director since 2016
Age 52
CHRISTOPHER
S. HOLLAND
Director since 2018
Age 52
THOMAS A.
SANSONE
Vice Chairman of the Board
Director since 1983
Age 69
DAVID M.
STOUT
Director since 2009
Age 64
JOHN C.
PLANT
Director since 2016
Age 65
MARK T.
MONDELLO
Chief Executive Officer
Director since 2013
Age 54
MARTHA F.
BROOKS
Director since 2011
Age 59
STEVEN A.
RAYMUND
Director since 1996
Age 63
Jabil’s Board of Directors has standing Audit, Compensation and Nominating & Corporate Governance Committees.
AUDIT: Raymund (Chair), Ansari, Holland
COMPENSATION: Stout (Chair), Brooks, Plant
NOMINATING & CORPORATE GOVERNANCE: Sansone (Chair), Brooks, Stout
Jabil’s Corporate Governance Guidelines, the charters of these committees and the Jabil Code of Conduct can be found on Jabil’s website:
www.jabil.com
INVESTOR INQUIRIES & INFORMATION
Investor Relations
Jabil Inc.
10560 Dr. Martin Luther King Jr. Street N.
St. Petersburg, Florida 33716
Phone: 727.803.3349
E-mail: [email protected]
Our Form 10-K for our fiscal year ended
August 31, 2018 has been filed with the
Securities and Exchange Commission and
is included as a part of this Annual Report.
An online version of the 2018 Annual Report
is available at:
https://www.jabil.com/2018annualreport
ANNUAL MEETING
January 24, 2019 10:00 AM ET
Jabil Headquarters
10560 Dr. Martin Luther King Jr. Street N.
St. Petersburg, Florida 33716
The Annual Meeting proxy statement
contains a description of procedures to
nominate persons for election as directors
or to introduce an item of business at
that meeting, as well as certain Securities
and Exchange Commission requirements
regarding the date by which we must
receive shareholder proposals for
inclusion in our proxy materials.
INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM
Ernst & Young LLP audited the consolidated
financial statements and the effectiveness of
internal control over financial reporting of Jabil
for the fiscal year ended August 31, 2018. A
representative of Ernst & Young LLP is
expected to be present at the Annual Meeting
and available to respond to questions.
TRANSFER AGENT AND REGISTRAR
The transfer agent maintains shareholder
records for Jabil Inc. Please contact the
agent directly for change of address, transfer
of stock, replacement of lost certificates, and
dividend checks. Phone: 877.498.8865.
BOARD OF DIRECTORS AND
SHAREHOLDER INFORMATION
www.jabil.com
2018 ANNUAL REPORT
10560 Dr. Martin Luther King Jr. Street North
St. Petersburg, Florida 33716 USA
www.jabil.com
