Jabil

10560 Dr. Martin Luther King Jr. Street NorthSt. Petersburg, Florida 33716 USAwww.jabil.com2019 ANNUAL REPORTDEAR EMPLOYEES, PARTNERS AND SHAREHOLDERS:I’d like to begin by sharing a heartfelt THANK YOU to our 200,000+ employees globally. Thank you for your commitment and dedication. Thank you for making safety your priority. Thank you for taking great care of our customers. It all starts with YOU!  At Jabil, our PEOPLE truly make all the DIFFERENCE!You’re at the heart of our success. Your diverse perspectives give us strength and your hard work simply makes us better. I appreciate all you do!2019 ANNUAL REPORTAs Jabil continues to grow, I often think about the purpose of our company. Make no mistake, we’re dedicated to providing world-class solutions for our customers, while delivering total value to our shareholders. Yes, results are critical, but how we go about driving those results, and how we conduct ourselves, is paramount to me. At the forefront is our promise to take care of each other and make sure everyone goes home safe-and-sound each and every day. We also have a tremendous opportunity – and responsibility – to make a positive impact on the countless communities we touch around the world, as well as to the environment.FISCAL YEAR NINETEENReflecting on FY19 brings a smile to my face, as it truly was another exceptional year. In fact, it was a record year in terms of revenue and core operating income. The team grew revenue and core earnings per share by 14 percent to $25.3 billion and $2.98, respectively – led by our top-performing business sectors including Healthcare, Cloud, Energy and Retail. In addition, we generated over $500 million of adjusted free cash flow, allowing us to return in excess of $400 million to shareholders in the form of dividends and share buybacks.During the year, we continued to differentiate our solutions through the endless pursuit and transformation of our Factory of the Future activities. Continued investments in machine learning, advanced automation and additive manufacturing will ensure we pursue the highest standards in the services we provide our customers. Our goal is simple: to have the most optimized and technologically advanced factories in the world.CEO MESSAGE2019 DELIVER BEST PRACTICES COMPETITIONThis year, Jabil celebrated the 11th annual Deliver Best Practices, a global competition that shares innovative process improvements, employee programs and social and environmental initiatives across the company. Category Winners (left to right): Operations – Suzhou SIP Tooling, Employees – Wuxi, Beyond the Factory – Penang Global Business Center, Social & Environmental – Belo Horizonte.2019 ANNUAL REPORT

SEGMENT RESULTS

During FY19, our Electronics Manufacturing Services (EMS) team 
targeted a multitude of new and exciting opportunities. The outcome 
was revenue of $15.4 billion, a 26 percent increase year-over-year. We 
believe this growth will offer higher margins and robust cash flows, namely 
in the Automotive, Cloud, Semi-Cap, Retail and Energy end-markets. In 
terms of profitability, the team produced core operating income of $480 
million, which leads me to believe that our value proposition continues to 
resonate with customers.

Within our Diversified Manufacturing Services (DMS) segment, the team 
increased core operating income 25 percent year-over-year on revenue of 
$9.9 billion. This performance is a direct result of our team leveraging their 
broad technical competencies (tooling, optics, automation and material 
sciences) to capture new opportunities in high-value markets, including 
Healthcare, Packaging, Mobility and Consumer Lifestyle Products.  

EMS 
61%

$25.3B 
REVENUE

DMS 
39%

FY19 Business Mix

FY19 REVENUE MIX  
BY END-MARKET

STRENGTH IN DIVERSIFICATION

I believe our strategy is sound and what we’re doing is working. 

A key catalyst has been the increased balance and blend of our income. 
But, as we highlighted throughout the year, being diversified for the sake of 
diversification isn’t all that special. What is special is the composition and 
make-up of Jabil’s commercial portfolio; a portfolio comprised of 
quality products across a wide-range of end-markets. 

With each passing year, our revenues become far less dependent on any 
single product or product family, underpinning the reliability of 
our earnings and enhancing our ability to execute. 

Since FY16, we’ve delivered compounded annual revenue growth of 
11 percent; core operating income growth of 12 percent; and core earnings 
per share growth of 17 percent. At the same time, we bought back nearly 
25 percent of our stock and returned nearly $1.5 billion to shareholders.

Revenue 
(In billions)

11% 
CAGR*

Core Operating Income 
(In millions)

12% 
CAGR*

Core EPS

17% 
CAGR*

$18.4

$19.1

$22.1

$25.3

$630

$667

$768

$877

$1.86

$2.11

$2.62

$2.98

FY16

FY17

FY18

FY19

FY16

FY17

FY18

FY19

FY16

FY17

FY18

FY19

* FY16 - FY19 Compounded Annual Growth Rates

2019 ANNUAL REPORT

IN SUMMARY

Our progress over the past three to four years has been positive and steady. Our strategy leads us; and our path 
forward is clear. We will continue to be selective in the types of opportunities we pursue as we intensify our 
focus on margins and cash flows. 

We will continue our aggressive investments that align with Jabil’s never-ending Factory of the Future journey and 
advance our unique IT systems.  

We are excellent in keeping “fixed things fixed,” as demonstrated by our 50+ year track-record of manufacturing, 
supply chain and design know-how. 

Our industry experts optimally navigate the markets in which we play, while obsessing about serving our 
customers and shareholders.

We understand that servant leadership is not just a theme or words in a book, but truly instrumental to 
our success.

We have the infrastructure, scale and talent to fulfill our vision to be the most technologically advanced 
and trusted manufacturing solutions company… one that’s sustainable for many years to come.

We are making the world just a little bit better, healthier and safer each day. 

I’m honored to have served you again this past year. Thank you for your trust and support.

Humbly Yours,

Mark T. Mondello 
Chief Executive Officer

*  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 41 through 44 of our Annual Report on Form 10-K filed on October 22, 2019 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. Please refer to the Form 8-K filed on September 24, 2019 for a reconciliation of Adjusted Free Cash Flow. Core operating margins are 
defined as core operating income divided by net revenue.

2019 ANNUAL REPORTOUR PEOPLE.  OUR POWER.AT JABIL, OUR DIFFERENCES UNITE US. THEY GIVE US STRENGTH AND MAKE US BETTER.At Jabil, our differences unite us. They give us strength and make us better. And by creating a culture where every employee feels valued and heard, Jabil benefits from everyone’s ideas, skills and engagement.Our diverse workforce involves many different countries, cultures and generations, all contributing unique experiences and abilities to drive solutions for today’s challenges and create opportunities for tomorrow.  At Jabil, everyone is welcome; everyone can be their true self.  It’s better for our customers and our business.  It’s better for the communities we work in, and of course, it creates a better workplace for all of us.UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-K

(Mark One)
È ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT

OF 1934

For the fiscal year ended August 31, 2019
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
(State or other jurisdiction of
incorporation or organization)

38-1886260
(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

Title of each class
Common Stock, $0.001 par value per
share

Securities registered pursuant to Section 12(b) of the Act:
Trading Symbol(s)
JBL

Name of each exchange on which registered
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 È 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 È

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 È 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 È No ‘

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 filer,” “smaller
reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer È
Non-accelerated filer ‘

‘
Accelerated filer
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 È
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, 2019 was approximately $4.2 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 14, 2019, was 152,656,443. 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 23, 2020 is incorporated by

reference in Part III of this Annual Report on Form 10-K to the extent stated herein.

JABIL INC. AND SUBSIDIARIES

2019 FORM 10-K ANNUAL REPORT
TABLE OF CONTENTS

Part I.

Item 1.
Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 1A. Risk Factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 1B. Unresolved Staff Comments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 2.
Item 3.
Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 4. Mine Safety Disclosures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Part II.

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer

Purchases of Equity Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Selected Financial Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Item 6.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of

Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 7A. Quantitative and Qualitative Disclosures About Market Risk . . . . . . . . . . . . . . . . . . . . . . . .
Financial Statements and Supplementary Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 8.
Changes in and Disagreements With Accountants on Accounting and Financial
Item 9.
Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 9A. Controls and Procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 9B. Other Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Part III.

Item 10. Directors, Executive Officers and Corporate Governance . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 11. Executive Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Security Ownership of Certain Beneficial Owners and Management and Related
Item 12.
Stockholder Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 13. Certain Relationships and Related Transactions, and Director Independence . . . . . . . . . . . .
Principal Accounting Fees and Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 14.

2
10
26
26
27
27

28
30

31
52
53

53
53
54

55
55

55
55
55

Part IV.

Item 15. Exhibits and Financial Statement Schedules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Form 10-K Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 16.
Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

56
111
112

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, 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; and

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.

1

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, 2019, our largest customers include Amazon.com, Inc., Apple, Inc., Cisco
Systems, Inc., GoPro, Inc., Hewlett-Packard Company, Ingenico Group, Keysight Technologies, LM Ericsson
Telephone Company, NetApp, Inc. and Nokia Networks. For the fiscal year ended August 31, 2019, we had net
revenues of $25.3 billion and net income attributable to Jabil Inc. of $287.1 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. 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 profiles.
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 a 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, cloud, computing and storage, defense and aerospace, industrial and energy, networking and
telecommunications, print and retail, and smart home and appliances industries. Our DMS segment is focused on
providing engineering solutions, with an emphasis on material sciences, technologies and healthcare. Our DMS
segment includes customers primarily in the edge devices and accessories, healthcare, mobility and packaging
industries.

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.

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

2

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 proficiency 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 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.

• Product Diversification. We focus on balancing our portfolio of products and product families to those
that align with higher return areas of our business, including manufacturing, supply chain management
services, comprehensive electronics design, production and product management services. 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.

• 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.

• 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.

3

• 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.

• 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

4

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.

5

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.

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 significant 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 2019, our five largest customers accounted for approximately 42% of our net revenue and 85

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 periods indicated:

Apple, Inc.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

22%

28%

24%

Competition

Our business is highly competitive. We compete against numerous domestic and foreign electronic

manufacturing service providers, diversified manufacturing service providers and design providers. We also face

Fiscal Year Ended August 31,

2019

2018

2017

6

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.

We compete with different companies depending on the type of service we are providing or the geographic

area in which an activity takes place. We believe that the principal competitive factors in the manufacturing
services market are: cost; accelerated production time-to-market; higher efficiencies; global locations; rapid scale
production; advanced technologies; quality; improved pricing of components. We believe we are extremely
competitive with regard to all of these factors.

Backlog

Our order backlog as of August 31, 2019 and 2018 was valued at approximately $6.2 billion and

$6.8 billion, respectively. Our order backlog is expected to be filled within the current fiscal year. Although our
backlog consists of firm purchase orders, the level of backlog at any particular time may not be necessarily
indicative of future sales. Given the nature of our relationships with our customers, and the fact that we generally
do not enter into long-term purchase commitments with our customers, we frequently allow our customers to
cancel or reschedule deliveries, and therefore, backlog is often not a meaningful indicator of future financial
results.

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 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.

Employees

As of August 31, 2019, we employed approximately 200,000 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.

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,

7

discharge and disposal of hazardous chemicals used during our manufacturing process, those governing worker
health and safety, those requiring design changes, supply chain investigation or conformity assessments or those
relating to the recycling or reuse of products we manufacture.

Information about our Executive Officers

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 51) 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 63) 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 48) was named Senior Vice President, Chief Executive Officer, Jabil Packaging
Solutions in July 2018. Prior to joining Jabil, Ms. Chamulak was Vice President and General Manager of
Personal Care & Home Care, a business unit of Aptar Inc., a global supplier of dispensing and sealing
solutions based in Crystal Lake, Illinois. Ms. Chamuluk served as the President, Global Market
Development for Aptar’s Beauty + Home, Personal Care Business Unit from 2016 to 2017 and served as the
General Manager, Aptar Midland from 2013 to 2016. She joined Aptar in 1992 and held positions of
increasing responsibility with Aptar. Ms. Chamulak has a B.A. in Marketing and International Business
from Carthage College and an MBA from Marquette University.

Michael Dastoor (age 54) 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 63) 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
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 57) 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. In April 2019 he was named Chief Ethics & Compliance Officer. 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

8

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 48) 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 55) has served as Chief Executive Officer and a member of the Board of Directors
since 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 51) 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.

Courtney J. Ryan (age 49) was named Executive Vice President, Corporate Development/Chief of Staff in
July 2016. Mr. Ryan joined Jabil in 1993 as a Quality Engineer and worked his way through various
operations and business development management positions. He was named Senior Vice President, Global
Business Units in 2007. Mr. Ryan served as Executive Vice President, Chief Executive Officer, Nypro from
July 2013 to June 2016. Mr. Ryan holds an MBA with a concentration in Decision and Information Science
and a Bachelor of Arts in Economics, both from the University of Florida. He also serves on the University
of Florida’s MBA and Supply Chain Advisory Board.

Daryn Smith (age 49) was named Senior Vice President, Enterprise & Commercial Controller effective
September 2018. Mr. Smith served as Chief Financial Officer of EMS from June 2013 through June 2018.
Mr. Smith joined Jabil in 2002 and he has held various leadership roles in Risk and Assurance, Financial
Planning and Analysis, and Controllership for Jabil. Prior to joining Jabil, Mr. Smith was with the
Assurance and Advisory Services practice for Arthur Andersen. 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 54) 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. Mr. Wilson has a Bachelor’s degree in Manufacturing
Engineering and a MBA from Edinburgh Business School.

9

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 SEC maintains an Internet site that contains reports, proxy
and information statements, and other information regarding issuers that file electronically with the SEC
(http://www.sec.gov). 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.

Item 1A. Risk Factors

Our operating results may fluctuate 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;

10

•

•

changes in stock-based compensation expense due to changes in the expected vesting of performance-
based equity awards comprising a portion of such stock-based compensation expense; and

failure to comply with foreign laws, which could result in increased costs and/or taxes.

Any one or a combination of these factors could adversely affect our annual and quarterly results of
operations in the future. See “Management’s Discussion and Analysis of Financial Condition and Results of
Operations – Results of Operations.”

If we do not manage our growth effectively, our profitability could decline.

Our business at times experiences periods of rapid growth which can place considerable demands upon our

management team and our operational, financial and management information systems. Our ability to manage
growth effectively requires us to continue to implement and improve these systems; avoid cost overruns;
maintain customer, supplier and other favorable business relationships during transition periods; efficiently and
effectively dedicate resources to existing customers as well as new projects; acquire or construct additional
facilities; occasionally transfer operations to different facilities; acquire equipment in anticipation of demand;
continue to develop the management skills of our managers and supervisors; adapt relatively quickly to new
markets or technologies and continue to hire, train, motivate and manage our employees. Our failure to
effectively manage growth, as well as our failure to realize the anticipated benefits of the actions we take to try to
manage our growth, could have a material adverse effect on our results of operations. See “Management’s
Discussion 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. In addition, 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;

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•

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•

•

•

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, production
schedules and locations, component procurement commitments, personnel needs and other resource
requirements, based on our estimate of customer requirements. Our inability to forecast the level of customer
orders with certainty makes it difficult to schedule production and maximize utilization of our manufacturing
capacity. 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 or designs, delayed production,
changed their sourcing strategy and terminated their relationships with us. We cannot assure you that present or
future customers will not terminate their service arrangements with us or significantly change, reduce, cancel or
delay the amount of services ordered. Such changes, delays and cancellations have led to, 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, reduction in the number of
products that we sell, delays in payment for inventory that we purchased, and reductions in the use of our
manufacturing facilities. As many of our costs and operating expenses are relatively fixed, a reduction in
customer demand, particularly a reduction in demand for a product that represents a significant amount of
revenue, can harm our gross profit margins and results of operations.

In addition, we sometimes experience difficulty forecasting the timing of our receipt of payment from
customers. The necessary process to begin manufacturing can be lengthy. Because we make capital expenditures
during this ramping-up process and do not receive payment 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.

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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.

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-term investments, develop or obtain appropriate intellectual property and

commit significant resources before knowing whether our assumptions will accurately reflect customer demand

13

for our services or for our customer’s products. 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. 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:

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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.

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.

14

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.

Efficient component and material purchasing is critical to our manufacturing processes and contractual
arrangements. A shortage of components or an increase in price could interrupt our operations and reduce
our profit, increase our inventory carrying costs, increase our risk of exposure to inventory obsolescence
and cause us to purchase components of a lesser quality.

Strategic and efficient component and materials purchasing is an aspect of our strategy. When prices rise,

they may impact our margins and results of operations if we are not able to pass the increases through to our
customers or otherwise offset them. Most of our significant long-term customer contracts permit quarterly or
other periodic prospective adjustments to pricing based on decreases and increases in component prices and other
factors; however, we typically bear the risk of component price increases that occur between any such re-pricings
or, if such re-pricing is not permitted, during the balance of the term of the particular customer contract. There
can be no assurance that we will continue to be able to purchase the components and materials needed to
manufacture customer products at favorable prices. Accordingly, certain component price increases could
adversely affect our gross profit margins and results of operations.

Some of the products we manufacture require one or more components that are only available from a single

source. Some of these components are subject to supply shortages from time to time. In some cases, supply
shortages will substantially curtail production of all assemblies using a particular component. A supply shortage
can also increase our cost of goods sold if we have to pay higher prices for components in limited supply, or
cause us to have to redesign or reconfigure products to accommodate a substitute component. In the past there

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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:

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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, less predictable, or relatively undefined, intellectual property laws;

lack of sufficient or available locations from which to operate or inability to renew leases on terms that
are acceptable to us or at all;

unexpected changes in regulatory requirements and laws or government or judicial interpretations of
such regulatory requirements and laws and adverse trade policies, and adverse changes to any of the
policies of either the U.S. or any of the foreign jurisdictions in which we operate;

adverse changes in tax rates or accounting rules and the manner in which the U.S. and other countries
tax multinational companies or interpret their tax laws or accounting rules or restrictions on the transfer
of funds to us from our operations outside the U.S.;

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•

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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;

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; and

international trade disputes could result in tariffs and other protectionist measures that could adversely
affect our business. Tariffs could increase the costs of the components and raw materials we use in the
manufacturing process as well as import and export costs for finished products. Countries could adopt
other protectionist measures that could limit our ability to manufacture products or provide services.
Increased costs to our U.S. customers who use our non-U.S. manufacturing sites and components may
adversely impact demand for our services and our results of operation and financial condition.
Additionally, international trade disputes may cause our customers to decide to relocate the
manufacturing of their products to another location, either within country, or into a new
country. Relocations may require considerable management time as well as expenses related to market,
personnel and facilities development before any significant revenue is generated, which may negatively
affect our margin. Furthermore, there can be no assurance that all customer manufacturing needs can be
met in available locations within the desired timeframe, or at all, which may cause us to lose business,
which may negatively affect our financial condition and results of operation.

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

17

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.

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 fines,
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.

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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.

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, commercial paper program, various foreign subsidiary credit facilities and other debt facilities. These
potential negative impacts could limit our ability to borrow under these financing agreements, contracts, facilities
and programs or renew or obtain future additional financing. Credit market turmoil could also negatively impact
certain of our customers and certain of their respective customers, which could cause them to reduce or cancel
their orders and have a negative effect on our results of operations.

We can offer no assurance under the uncommitted trade accounts receivable sales programs that if we
attempt to sell receivables through such programs in the future that we will receive funding from the associated
banks, which would require us to utilize other available sources of liquidity, including our revolving credit
facilities.

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We are subject to extensive government regulations and industry standards and the terms of complex
contracts; a failure to comply with current and future regulations and standards, or the terms of our
contractual arrangements, could have an adverse effect on our business, customer relationships,
reputation and profitability.

We are subject to extensive government regulation and industry standards relating to the products we design

and manufacture as well as how we conduct our business, including regulations and standards relating to labor
and employment practices, workplace health and safety, the environment, sourcing and import/export practices,
the market sectors we support, privacy and data protection, the regulations that apply to government contracts,
and many other facets of our operations. The regulatory climate in the U.S. and other countries has become
increasingly complex and fragmented, and regulatory activity has increased in recent periods. Failure or
noncompliance with such regulations or standards could have an adverse effect on our reputation, customer
relationships, profitability and results of operations. In addition, we regularly enter into a large number of
complex contractual arrangements as well as operate pursuant to the terms of a significant number of ongoing
intricate contractual arrangements. Our failure or our customers’ failure to comply with the terms of such
arrangements could expose us to claims or other demands and could have an adverse effect on our reputation,
customer relationships, profitability and results of operations.

If we manufacture products containing design or manufacturing defects, demand for our services may
decline, our reputation may be damaged and we may be subject to liability claims.

Our customers’ products and the manufacturing processes and design services that we use to produce them

often are highly complex. Defects in the products we manufacture or design, whether caused by a design,
manufacturing or component failure or error, or deficiencies in our manufacturing processes, may result in
delayed shipments to customers or reduced or canceled customer orders. If these defects or deficiencies are
significant, our business reputation may also be damaged. The failure of the products that we manufacture or of
our manufacturing processes or facilities may subject us to regulatory enforcement, fines or penalties and, in
some cases, require us to shut down, temporarily halt operations or incur considerable expense to correct a
manufacturing process or facility. In addition, these defects may result in liability claims against us, expose us to
liability to pay for the recall or remanufacture of a product or adversely affect product sales or our reputation.
Even if our customers are responsible for the defects or defective specifications, they may not, or may not have
resources to, assume responsibility for any costs or liabilities arising from these defects, which could expose us
to additional liability claims. Any of these actions could increase our expenses, reduce our revenue or damage
our reputation as a supplier to these customers.

We may face heightened liability risks specific to our medical device business as a result of additional
healthcare regulatory related compliance requirements and the potential severe consequences (e.g., death
or serious injury) that could result from manufacturing defects or malfunctions of the medical devices we
manufacture or design.

As a service provider engaged in the business of designing and manufacturing medical devices for our
customers, we have compliance requirements in addition to those relating to other industries we serve within our
business. We are required to register with the U.S. Food and Drug Administration (“FDA”) and are subject to
periodic inspection by the FDA for compliance with the FDA’s Quality System Regulation (“QSR”), including
current Good Manufacturing Practices (cGMPs). This regulation establishes requirements for manufacturers of
medical devices to implement design and process manufacturing controls, quality control, labeling, handling and
documentation procedures. The FDA, through periodic inspections and post-market surveillance, continuously
and rigorously monitors compliance with these QSR requirements and other applicable regulatory requirements.
If any FDA inspection reveals noncompliance, and we do not address the FDA’s concerns to its satisfaction, the
FDA may elect to take enforcement action against us, including issuing inspection observations or a notice of
violation or a warning letter, imposing fines, bringing an action against the Company and its officers, requiring a
recall of the products we manufactured, issuing an import detention on products entering the U.S. from an
offshore facility or temporarily halting operations at or shutting down a manufacturing facility.

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Beyond the FDA, our medical device business is also subject to applicable state and foreign regulatory

requirements. Within the European Union (“EU”), we are required to fulfill certain internationally recognized
standards and must undergo periodic inspections to obtain and maintain certifications to these standards.
Continued noncompliance to the EU regulations could stop the flow of products into the EU from us or from our
customers. In China, the Safe Food and Drug Administration controls and regulates the manufacture and
commerce of healthcare products. We must comply with the regulatory laws applicable to medical device
manufactures or our ability to manufacture products in China could be impacted. In Japan, the Pharmaceutical
Affairs Laws regulate the manufacture and commerce of healthcare products. These regulations also require that
subcontractors manufacturing products intended for sale in Japan register with authorities and submit to
regulatory audits. Other foreign countries where we operate have similar laws regarding the regulation of medical
device manufacturing. In the event of any noncompliance with these requirements, interruption of our operations
and/or ability to allow commerce in these markets could occur, which in turn could cause our reputation and
business to suffer.

Compliance or the failure to comply with current and future environmental, health and safety, product
stewardship and producer responsibility laws or regulations could cause us significant expense.

We are subject to a variety of federal, state, local and foreign environmental, health and safety, product
stewardship and producer responsibility laws and regulations, including those relating to the use, generation,
storage, discharge and disposal of hazardous chemicals used during our manufacturing process, those governing
worker health and safety, those requiring design changes, supply chain investigation or conformity assessments
and those relating to the recycling or reuse of products we manufacture. If we fail to comply with any present or
future regulations or timely obtain any needed permits, we could become subject to liabilities, and we could face
fines or penalties, the suspension of production, or prohibitions on sales of products we manufacture. In addition,
such regulations could restrict our ability to expand our facilities or could require us to acquire costly equipment,
or to incur other significant expenses, including expenses associated with the recall of 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.

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Our manufacturing, production and design processes and services may result in exposure to intellectual
property infringement and other claims.

Providing manufacturing services can expose us to potential claims that products, designs or manufacturing

processes we use infringe third party intellectual property rights. Even though many of our manufacturing
services contracts require our customers to indemnify us for infringement claims relating to their products,
including associated product specifications and designs, a particular customer may not, or may not have the
resources to, assume responsibility for such claims. In addition, we may be responsible for claims that our
manufacturing processes or components used in manufacturing infringe third party intellectual property rights.
Providing turnkey design solutions, and design and other services can expose us to different or greater potential
liabilities than those we face providing just manufacturing services, including an increase in exposure to potential
claims that products we design or supply, or materials or components we use, infringe third party intellectual
property rights. Infringement claims could subject us to significant liability for damages, potential injunctive
action, or hamper our normal operations such as by interfering with the availability of components. Regardless of
the merits of any such claim, it could be time-consuming and expensive to resolve, and have a material adverse
effect on our results of operations and financial position. In the event of such a claim, we may spend significant
amounts of money and effort to 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, and
such discontinuance may result in a significant decrease in our business and/or could have a material adverse
effect on our results of operations and financial position. These risks may be heightened in connection with our
customer relationships with emerging companies.

Components we purchase, products we design and/or manufacture and/or services we provide may infringe
the intellectual property rights of third parties, some of whom may hold key intellectual property rights in areas
in which we operate. Our customers or suppliers could also become subject to infringement claims. Patent
clearance or licensing activities, if any, may be inadequate to anticipate and avoid third party claims.
Additionally, customers for our services in which we have significant technology contributions, typically require
that we indemnify them against the risk of intellectual property infringement. If any claims are brought against
our customers, our suppliers or us for such infringement, regardless of their merits, we could be required to
expend significant resources in the defense or settlement of such claims, or in the defense or settlement of related
indemnification claims. In the event of a claim, we may be required to spend significant amounts of money and
effort to 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, 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.

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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 solutions, designs, processes and products than us.
We have not historically sought patent protection for many of our proprietary processes, designs or other
patentable intellectual property. Further, we may not be able to prevent current and former employees,
contractors and other parties from 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, 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, cyberattacks 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 and the internet of things 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 the threat landscape and new technologies and processes intended to detect
and prevent these attacks. There can be no assurance that the security measures and systems configurations we
choose to implement will be sufficient to protect the data we manage. 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. In addition, we must comply with
increasingly complex regulations intended to protect business and personal data in the U.S. and elsewhere.
Compliance with these regulations can be costly and any failure to comply could result in legal and reputational
risks as well as penalties, fines and damages that could adversely affect our financial results.

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

23

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 changes in the mix of earnings between jurisdictions, 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, or other legislative changes, including the Tax Cuts and Jobs Act of 2017
(“Tax Act”).

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.

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 and our commercial paper 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; cause us to lose the ability to utilize our
commercial paper program; 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

24

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.

In addition, the U. K.’s Financial Conduct Authority, which regulates LIBOR, announced that it intends to

phase out LIBOR by the end of 2021. The U.S. Federal Reserve has begun publishing a Secured Overnight
Funding Rate (“SOFR”), which is intended to replace U.S. dollar LIBOR. Plans for alternative reference rates for
other currencies have also been announced. At this time, we cannot predict how markets will respond to these
proposed alternative rates or the effect of any changes to LIBOR or the discontinuation of LIBOR. If LIBOR is
no longer available or if our lenders have increased costs due to changes in LIBOR, we may experience potential
increases in interest rates on our variable rate debt, which could adversely impact our interest expense, results of
operations and cash flows.

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. 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

25

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 first
applied 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.

Item 2. Properties

We own or lease facilities located primarily 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 majority of the square footage is active manufacturing space
and are reported in both the EMS and DMS operating segments, as both use these properties. Our corporate
headquarters is located in St. Petersburg, Florida.

26

The table below lists the approximate square footage for our facilities as of August 31, 2019 (in thousands):

Location

Asia . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Americas . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Europe . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total as of August 31, 2019 (1)(2)

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Approximate
Square Footage

32,620
15,425
4,791

52,836

(1) Approximately 11% of our total square footage is not currently used in business operations.
(2) Consists of 18.1 million square feet in facilities that we own with the remaining 34.7 million square feet in

leased facilities.

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.

27

PART II

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.” See 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 14, 2019, the closing sales price for our common stock as reported on the New York Stock
Exchange was $35.64. As of October 14, 2019, there were 1,313 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, 2019, 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.

28

Comparison of 5 Year Cumulative Total Return

200.00

150.00

100.00

50.00

0.00

2014

August 31

2015

2016

2017

2018

2019

Jabil Inc.

S&P 400 Index - Total Return 

Peer Group

2014

2015

2016

2017

2018

2019

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Jabil Inc.
S&P MidCap 400 Index – Total Returns . . . . . . . . . . . . . . . . . . . . . .
Peer Group . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$100
100
100

$ 91
100
88

$101
112
91

$152
126
145

$145
151
110

$143
142
82

Issuer Purchases of Equity Securities

The following table provides information relating to our repurchase of common stock during the three

months ended August 31, 2019:

Period

Total Number
of Shares
Purchased(1)

Average Price
Paid per Share

Total Number of
Shares Purchased
as Part of Publicly
Announced Program(2)

June 1, 2019 - June 30, 2019 . . . . . . . . . . .
July 1, 2019 - July 31, 2019 . . . . . . . . . . .
August 1, 2019 - August 31, 2019 . . . . . . .

Total

. . . . . . . . . . . . . . . . . . . . . . . . .

45
633
—

678

$26.92
$30.92
$ —

$30.65

—
—
—

—

Approximate
Dollar Value of
Shares that May
Yet Be Purchased
Under the Program
(in thousands)(2)

$—
$—
$—

(1)

(2)

The purchases include amounts that are attributable to shares surrendered to us by employees to satisfy, in
connection with the vesting of restricted stock units and the exercise of stock options and stock appreciation
rights, their tax withholding obligations.
In September 2019, our Board of Directors (“the Board”) authorized the repurchase of up to $600.0 million
of our common stock as publicly announced in a press release on September 24, 2019 (“the 2020 Share
Repurchase Program”). From September 24, 2019 through October 14, 2019, we repurchased 874,475
shares, utilizing a total of $30.8 million of the $600.0 million authorized by our Board of Directors.

29

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,

2019

2018

2017

2016

2015

(in thousands, except for per share data)

Consolidated Statement of

Operations Data:

Net revenue . . . . . . . . . . . . . . . . . . . . .

$25,282,320

$22,095,416

$19,063,121

$18,353,086

$17,899,196

Operating income . . . . . . . . . . . . . . . .

701,356

542,153

410,230

522,833

555,411

Income from continuing operations

before tax . . . . . . . . . . . . . . . . . . . . .

450,704

373,401

256,233

387,045

431,646

Income from continuing operations,

net of tax . . . . . . . . . . . . . . . . . . . . .

289,474

87,541

127,167

254,896

294,185

Discontinued operations, net of

tax(1) . . . . . . . . . . . . . . . . . . . . . . . . .

—

—

—

—

(8,573)

Net income . . . . . . . . . . . . . . . . . . . . .

289,474

87,541

127,167

254,896

285,612

Net income attributable to Jabil

Inc. . . . . . . . . . . . . . . . . . . . . . . . . . .

$

287,111 $

86,330

$

129,090

$

254,095

$

284,019

Earnings per share attributable to the

stockholders of Jabil Inc.:

Basic:

Income from continuing

operations, net of tax . . . .

$

1.85

$

0.50

$

0.71

$

1.33

$

1.51

Discontinued operations, net
of tax(1) . . . . . . . . . . . . . . .

Net income . . . . . . . . . . . . .

$

$

Diluted:

Income from continuing

— $

— $

— $

— $

(0.04)

1.85

$

0.50

$

0.71

$

1.33

$

1.47

operations, net of tax . . . .

$

1.81

$

0.49

$

0.69

$

1.32

$

1.49

Discontinued operations, net
of tax(1) . . . . . . . . . . . . . . .

Net income . . . . . . . . . . . . .

$

$

— $

— $

— $

— $

(0.04)

1.81

$

0.49

$

0.69

$

1.32

$

1.45

30

2019

2018

August 31,

2017

(in thousands)

2016

2015

Consolidated Balance Sheets Data:
Working capital(2)

. . . . . . . . . . . . . . . . .

$ (187,020) $

319,050

$ (243,910) $

280,325

$ 191,168

Total assets . . . . . . . . . . . . . . . . . . . . . .

$12,970,475

$12,045,641

$11,095,995

$10,322,677

$9,591,600

Current installments of notes payable

and long-term debt

. . . . . . . . . . . . . .

$

375,181 $

25,197

$

444,255

$

44,689

$ 321,964

Notes payable and long-term debt, less

current installments . . . . . . . . . . . . . .

$ 2,121,284

$ 2,493,502

$ 1,606,017

$ 2,046,655

$1,308,663

Total Jabil Inc. stockholders’ equity . . . $ 1,887,443

$ 1,950,257

$ 2,353,514

$ 2,438,171

$2,314,856

Common stock shares outstanding . . . .

153,520

164,588

177,728

186,998

192,068

2019

2018

2017

2016

2015

Fiscal Year Ended August 31,

(in thousands)

$ (1,005,480) $ (1,036,651) $ (716,485) $ (924,239) $ (963,145)

$

218,708 $

350,291

$

175,000

$

26,031

$

15,784

Consolidated Cash Flow Data:
Investing activities:

Acquisition of property, plant and
. . . . . . . . . . . . . . . . .

equipment

Proceeds and advances from sale

of property, plant and
equipment

. . . . . . . . . . . . . . . . .

Financing activities:

Payments to acquire treasury

stock . . . . . . . . . . . . . . . . . . . . .

$ (350,323) $ (450,319) $ (306,640) $ (148,340) $ (85,576)

(1) During fiscal 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.

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 profiles.
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 a 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, cloud, computing and storage, defense and aerospace, industrial and energy, networking and
telecommunications, print and retail, and smart home and appliances industries. Our DMS segment is focused on
providing engineering solutions, with an emphasis on material sciences, technologies and healthcare. Our DMS

31

segment includes customers primarily in the edge devices and accessories, 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, our ability to purchase components and materials efficiently may contribute
significantly to our operating results. While we periodically negotiate cost of materials adjustments with our
customers, rising component and material prices may negatively affect our margins. 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.

See Note 12 – “Concentration of Risk and Segment Data” to the Consolidated Financial Statements.

32

Summary of Results

The following table sets forth, for the periods indicated, certain key operating results and other financial

information (in thousands, except per share data):

Fiscal Year Ended August 31,

2019

2018

2017

Net revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Operating income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net income attributable to Jabil Inc. . . . . . . . . . . . . . . . . . . . . . . . . . .
Earnings per share – basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Earnings per share – diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Key Performance Indicators

$25,282,320
$ 1,913,401
$
$
$
$

701,356 $
287,111 $
$
1.85
$
1.81

$22,095,416
$ 1,706,792
542,153
86,330
0.50
0.49

$19,063,121
$ 1,545,643
410,230
$
129,090
$
0.71
$
0.69
$

Management regularly reviews financial 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:

August 31, 2019 May 31, 2019

February 28, 2019 November 30, 2018

Three Months Ended

Sales cycle(1) . . . . . . . . . . . . . . . . . . . . . . . . . . .
Inventory turns (annualized)(2) . . . . . . . . . . . . .
. . . . . . . . . . . . .
Days in accounts receivable(3)
. . . . . . . . . . . . . . . . . . . . .
Days in inventory(4)
. . . . . . . . . . . . . . .
Days in accounts payable(5)

19 days
6 turns
38 days
58 days
77 days

27 days
6 turns
39 days
64 days
76 days

25 days
6 turns
38 days
65 days
78 days

16 days
6 turns
38 days
60 days
82 days

August 31, 2018 May 31, 2018

February 28, 2018 November 30, 2017

Three Months Ended

Sales cycle(1) . . . . . . . . . . . . . . . . . . . . . . . . . . .
Inventory turns (annualized) . . . . . . . . . . . . . .
Days in accounts receivable . . . . . . . . . . . . . . .
Days in inventory(4)
. . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . .
Days in accounts payable(5)

1 day
6 turns
26 days
58 days
83 days

9 days
6 turns
26 days
60 days
77 days

3 days
6 turns
26 days
62 days
85 days

(2) days
6 turns
25 days
58 days
85 days

(2)

(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.
In connection with the adoption of Accounting Standards Update No. 2014-09 (“ASU 2014-09”), Revenue
Recognition (Topic 606), inventory turns are calculated based on inventory and contract asset balances for
the three months ended August 31, 2019, May 31, 2019, February 28, 2019 and November 30, 2018.
(3) During the three months ended November 30, 2018, the increase in days in accounts receivable from the
prior sequential quarter was primarily due to an increase in accounts receivable, primarily driven by the
amended and new securitization programs and higher sales and timing of collections.
In connection with the adoption of ASU 2014-09, days in inventory are calculated based on inventory and
contract asset balances for the three months ended August 31, 2019, May 31, 2019, February 28, 2019 and
November 30, 2018. During the three months ended August 31, 2019, the decrease in days in inventory
from prior sequential quarter was primarily due to increased sales activity during the quarter. During the
three months ended February 28, 2019, days in inventory increased from the prior sequential quarter to
support anticipated ramps and expected sales levels in the second half of fiscal year 2019 and due to the
acquisition of certain assets of Johnson & Johnson Medical Devices Companies (“JJMD”) facilities at the
end of February. During the three months ended November 30, 2018, days in inventory increased from the

(4)

33

prior sequential quarter to support expected sales levels in the second quarter of fiscal year 2019. 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 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.

(5) During the three months ended May 31, 2019, the decrease in days in accounts payable from the prior

sequential quarter was primarily due to timing of purchases and cash payments for purchases during the
quarter. During the three months ended February 28, 2019, the decrease in days in accounts payable from
the prior sequential quarter was primarily due to lower materials purchases during the quarter and timing of
purchases and cash payments for purchases during the quarter. 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.

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

Effective September 1, 2018, our revenue recognition accounting policies changed in conjunction with the

adoption of the new revenue recognition standard. For further discussion, refer to Note 18—“Revenue” to the
Consolidated Financial Statements. We derive substantially all of our revenue from production and product
management services (collectively referred to as “manufacturing services”), which encompasses the act of
producing tangible products that are built to customer specifications, which are then provided to the customer.

We generally enter into manufacturing service contracts with our customers that provide the framework
under which business will be conducted and customer purchase orders will be received for specific quantities and
with predominantly fixed pricing. As a result, we consider our contract with a customer to be the combination of
the manufacturing service contract and the purchase order, or any agreements or other similar documents.

The majority of our manufacturing service contracts relate to manufactured products which have no
alternative use and for which we have an enforceable right to payment for the work completed to date. As a
result, revenue is recognized over time when or as we transfer control of the promised products or services
(known as performance obligations) to our customers. For certain other contracts with customers that do not meet
the over time revenue recognition criteria, transfer of control occurs at a point in time which generally occurs
upon delivery and transfer of risk and title to the customer.

Most of our contracts have a single performance obligation as the promise to transfer the individual

manufactured product or service is capable of being distinct and is distinct within the context of the contract. For

34

the majority of customers, performance obligations are satisfied over time based on the continuous transfer of
control as manufacturing services are performed and are generally completed in less than one year.

We also derive revenue to a lesser extent from electronic design services to certain customers. Revenue

from electronic design services is generally recognized over time as the services are performed.

For our over time customers, we believe the measure of progress which best depicts the transfer of control is
based on costs incurred to date, relative to total estimated cost at completion (i.e., an input method). This method
is a faithful depiction of the transfer of goods or services because it results in the recognition of revenue on the
basis of our to-date efforts in the satisfaction of a performance obligation relative to the total expected efforts in
the satisfaction of the performance obligation. We believe that the use of an input method best depicts the
transfer of control to the customer, which occurs as we incur costs on our contracts. The transaction price of each
performance obligation is generally based upon the contractual stand-alone selling price of the product or service.

Certain contracts with customers include variable consideration, such as rebates, discounts, or returns. We
recognize estimates of this variable consideration that are not expected to result in a significant revenue reversal
in the future, primarily based on the most likely level of consideration to be paid to the customer under the
specific terms of the underlying programs.

Allowance for Doubtful Accounts

We maintain an allowance for doubtful accounts related to receivables not expected to be collected from our
customers. This allowance is based on management’s assessment of specific customer balances after considering
the age of receivables and financial stability of the customer. If there is an adverse change in the financial
condition and circumstances of our customers, or if actual defaults are higher than provided for, an addition to
the allowance may be necessary.

Inventory Valuation

We 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.

35

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 events

or changes in circumstances indicate that the carrying value may not be recoverable. 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-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.

We completed our annual impairment test for goodwill and indefinite-lived intangible assets during the
fourth quarter of fiscal year 2019 and determined that the fair values of our reporting units and the indefinite-
lived intangible assets are 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 and operating income 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
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. For further discussion related to our income taxes, refer to Note 4 — “Income Taxes” to the
Consolidated Financial Statements.

Recent Accounting Pronouncements

See Note 17 – “New Accounting Guidance” to the Consolidated Financial Statements for a discussion of

recent accounting guidance.

Results of Operations

Refer to Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations”
section contained in our Annual Report on Form 10-K for the fiscal year ended August 31, 2018 for the results of
operations discussion for the fiscal year ended August 31, 2018 compared to the fiscal year ended August 31,
2017.

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

36

increases generated by acquisitions as opposed to existing business. In addition, the added cost structures
associated with our acquisitions have historically been relatively insignificant when compared to our overall cost
structure.

The distribution of revenue across our segments has fluctuated, and will continue to fluctuate, as a result of
numerous factors, including the following: fluctuations in customer demand; efforts to diversify certain portions
of our business; business growth from new and existing customers; specific product performance; and any
potential termination, or substantial winding down, of significant customer relationships.

(dollars in millions)

2019

2018

2017

2019 vs. 2018

2018 vs. 2017

Net revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$25,282.3

$22,095.4

$19,063.1

14.4%

15.9%

Fiscal Year Ended August 31,

Change

2019 vs. 2018

Net revenue increased during the fiscal year ended August 31, 2019 compared to the fiscal year ended
August 31, 2018. Specifically, the EMS segment revenues increased 26% primarily due to (i) a 10% increase in
revenues from new customers within our cloud business, (ii) an 8% increase in revenues from existing customers
within our industrial and energy business, (iii) a 6% increase in revenues from existing customers within our
networking and telecommunications business, (iv) a 5% increase in revenues from existing customers within our
print and retail business and (v) a 1% increase in revenues spread across various industries within the EMS
segment. The increase is partially offset by a 4% decrease from existing customers within our computing and
storage business and our capital equipment business, which we expect to remain weak into the second half of
calendar year 2020. DMS segment revenues remained consistent due to a 7% increase in revenues from new and
existing customers in our healthcare and packaging businesses. The increase is offset by a 7% decrease in
revenue from customers within our mobility business as a result of decreased end user product demand.

Effective September 1, 2018, our revenue recognition accounting policies changed in conjunction with the

adoption of the new revenue recognition standard. Subsequent to adoption, we recognize revenue over time as
manufacturing services are performed for the majority of our contracts with customers, which results in revenue
being recognized earlier than under the previous guidance. Revenue for all other contracts with customers will be
recognized at a point in time, upon transfer of control of the product to the customer, which is effectively no
change to our historical accounting. For further discussion of the new revenue recognition standard, refer to
Note 18—“Revenue” to the Consolidated Financial Statements.

The following table sets forth, for the periods indicated, revenue by segment expressed as a percentage of

net revenue:

EMS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
DMS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

61%
39%

56%
44%

58%
42%

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,

2019

2018

2017

Foreign source revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

87.7% 91.7% 91.4%

Fiscal Year Ended August 31,

2019

2018

2017

37

Gross Profit

(dollars in millions)

Fiscal Year Ended August 31,

2019

2018

2017

Gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Percent of net revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$1,913.4 $1,706.8 $1,545.6

7.6%

7.7%

8.1%

2019 vs. 2018

For the fiscal year ended August 31, 2019, gross profit for our DMS segment increased as a percentage of

net revenue due to improved profitability across the various businesses. This increase was offset by a decrease in
gross profit as a percentage of net revenue in our EMS segment due to continued weakness in the capital
equipment business and ramp costs associated with new business awards. As a result, gross profit remained
relatively consistent as a percentage of net revenue during the fiscal year end August 31, 2019, compared to the
fiscal year end August 31, 2018.

Selling, General and Administrative

(dollars in millions)

Fiscal Year Ended August 31,

Change

2019

2018

2017

2019 vs. 2018

2018 vs. 2017

Selling, general and administrative . . . . . . . . . . . . . . .

$1,111.3 $1,050.7 $907.7

$60.6

$143.0

2019 vs. 2018

Selling, general and administrative expenses increased during the fiscal year ended August 31, 2019
compared to the fiscal year ended August 31, 2018. The increase is predominantly due to (i) a $48.4 million
increase in salary and salary related expenses and other costs primarily to support new business growth and
development and our strategic collaboration with a healthcare company and (ii) a $44.6 million increase in
acquisition and integration charges related to our strategic collaboration with a healthcare company. The increase
is partially offset by an additional $32.4 million of stock-based compensation expense recognized during the
fiscal year ended August 31, 2018 as a result of the one-time modification of certain performance-based
restricted stock unit awards and a one-time cash-settled award.

Research and Development

(dollars in millions)

Fiscal Year Ended August 31,

2019

2018

2017

Research and development . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Percent of net revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$42.9

$38.5

$29.7

0.2%

0.2%

0.2%

2019 vs. 2018

Research and development expenses remained consistent as a percent of net revenue during the fiscal year

ended August 31, 2019 compared to the fiscal year ended August 31, 2018.

Amortization of Intangibles

(dollars in millions)

Fiscal Year Ended August 31,

Change

2019

2018

2017

2019 vs. 2018

2018 vs. 2017

Amortization of intangibles . . . . . . . . . . . . . . . . . . . . . . . .

$31.9

$38.5

$35.5

$(6.6)

$3.0

38

2019 vs. 2018

Amortization of intangibles decreased during the fiscal year ended August 31, 2019 compared to the fiscal
year ended August 31, 2018 primarily due to intangible assets related to the Nypro acquisition, which were fully
amortized during fiscal year 2018.

In the fourth quarter of fiscal year 2019, we made a strategic decision that the indefinite-lived trade name of

$72.5 million acquired during the acquisition of Nypro would be phased out over the next four years. In
connection with a strategic shift to further diversify our portfolio, focus on innovation and technology within our
healthcare business and as a result of the strategic collaboration with a certain medical device company, we
decided to implement a rebranding initiative to Jabil Healthcare. Management believes the name change better
leverages the Jabil brand and the full range of services available to our customers.

As a result of our decision to rebrand, we determined the indefinite-lived trade name should no longer be

classified as an indefinite-lived intangible asset. As such, this trade name was assigned a four-year estimated
useful life and will be amortized on an accelerated basis. See Note 6 – “Goodwill and Other Intangible Assets” to
the Consolidated Financial Statements for further discussion.

Restructuring and Related Charges

Following is a summary of our restructuring and related charges:

(dollars in millions)

Fiscal Year Ended August 31,

2019

2018

2017(2)

Employee severance and benefit costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Lease costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Asset write-off costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$16.0
—
(3.6)
13.5

Total restructuring and related charges(1)

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$25.9

$16.3
1.6
16.2
2.8

$36.9

$ 56.8
4.0
94.3
5.3

$160.4

(1)

(2)

Includes $21.5 million, $16.3 million and $51.3 million recorded in the EMS segment, $2.6 million,
$16.6 million and $82.4 million recorded in the DMS segment and $1.8 million, $4.0 million and
$26.7 million of non-allocated charges for the fiscal years ended August 31, 2019, 2018 and 2017,
respectively. Except for asset write-off costs, all restructuring and related charges are cash settled.
Fiscal year ended August 31, 2017, includes expenses related to the 2017 and 2013 Restructuring Plans.

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 included headcount reductions across our selling, general and administrative cost base and capacity
realignment in higher cost locations (the “2017 Restructuring Plan”).

The 2017 Restructuring Plan, totaling $195.0 million in restructuring and related costs, is complete as of

August 31, 2019.

2020 Restructuring Plan

On September 20, 2019, our Board of Directors formally approved a restructuring plan to realign our global
capacity support infrastructure, particularly in our mobility footprint in China, in order to optimize organizational
effectiveness. This action includes headcount reductions and capacity realignment (the “2020 Restructuring
Plan”). The 2020 Restructuring Plan reflects our intention only and restructuring decisions, and the timing of
such decisions, at certain locations are still subject to consultation with our employees and their representatives.

39

We currently expect to recognize approximately $85.0 million in pre-tax restructuring and other related

costs primarily over the course of our fiscal year 2020. The charges relating to the 2020 Restructuring Plan are
currently expected to result in cash expenditures in the range of approximately $30.0 million to $40.0 million that
will be payable over the course of our fiscal years 2020 and 2021. The exact timing of these charges and cash
outflows, as well as the estimated cost ranges by category type, have not been finalized. This information will be
subject to the finalization of timetables for the transition of functions, consultation with employees and their
representatives as well as the statutory severance requirements of the particular jurisdictions impacted, and the
amount and timing of the actual charges may vary due to a variety of factors. Our estimates for the charges
discussed above exclude any potential income tax effects.

See Note 14 – “Restructuring and Related Charges” to the Consolidated Financial Statements for further

discussion of restructuring and related charges for the 2017 and 2020 Restructuring Plans.

Restructuring of Securities

(dollars in millions)

2019

Restructuring of securities loss . . . . . . . . . . . . . . . . . . . . .

$29.6

2018

$—

2017

2019 vs. 2018

2018 vs. 2017

$—

$29.6

$—

Fiscal Year Ended August 31,

Change

2019 vs. 2018

Restructuring of securities loss increased during the fiscal year ended August 31, 2019 compared to the
fiscal year ended August 31, 2018, due to the exchange of preferred stock of iQor Holdings, Inc. (“iQor”) during
the fourth quarter of fiscal year 2019 in association with iQor’s previously announced sale of its international
logistics and product service assets. As a result of the restructuring, the Company recognized a restructuring of
securities loss, which primarily consisted of a credit loss. See Note 16 – “Fair Value Measurements” to the
Consolidated Financial Statements for further discussion.

Other Expense

(dollars in millions)

Fiscal Year Ended August 31,

Change

2019

2018

2017

2019 vs. 2018

2018 vs. 2017

Other expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$53.8

$37.6

$28.4

$16.2

$9.2

2019 vs. 2018

Other expense increased during the fiscal year ended August 31, 2019 compared to the fiscal year ended

August 31, 2018, primarily due to: (i) $23.8 million related to an increase in fees associated with the utilization
of the trade accounts receivable sales programs and additional fees incurred for the amendment of the foreign
asset-backed securitization program and the new North American asset-backed securitization program. The
increase was partially offset by (i) $5.0 million of other expense and (ii) $2.6 million of costs incurred during the
fiscal year ended August 31, 2018, as a result of the early redemption of the 8.250% Senior Notes due 2018.

Interest Income

(dollars in millions)

Fiscal Year Ended August 31,

Change

2019

2018

2017

2019 vs. 2018

2018 vs. 2017

Interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$21.5

$17.8

$12.5

$3.7

$5.3

40

2019 vs. 2018

Interest income increased during the fiscal year ended August 31, 2019 compared to the fiscal year ended
August 31, 2018 due to increased cash equivalents (investments that are readily convertible to cash with maturity
dates of 90 days or less).

Interest Expense

(dollars in millions)

Fiscal Year Ended August 31,

Change

2019

2018

2017

2019 vs. 2018

2018 vs. 2017

Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$188.7

$149.0

$138.1

$39.7

$10.9

2019 vs. 2018

Interest expense increased during the fiscal year ended August 31, 2019, compared to the fiscal year ended

August 31, 2018, due to additional borrowings on our credit facilities and higher interest rates. For the fiscal year
ended August 31, 2019, additional borrowings were driven by the timing and scale of our ongoing new business
ramps.

Income Tax Expense

Effective income tax rate . . . . . . . . . . . . . . . . . . . . . . . . . .

35.8% 76.6% 50.4%

(40.8)%

26.2%

Fiscal Year Ended August 31,

Change

2019

2018

2017

2019 vs. 2018

2018 vs. 2017

2019 vs. 2018

The effective income tax rate decreased for the fiscal year ended August 31, 2019, compared to the fiscal

year ended August 31, 2018, primarily due to: (i) $142.3 million of tax expense from the Tax Cuts and Jobs Act
of 2017 (“Tax Act”) for the fiscal year ended August 31, 2018, (ii) $19.1 million of tax benefit for the fiscal year
ended August 31, 2019 related to Tax Act adjustments and (iii) $17.5 million of tax benefit for the reversal of a
U.S. valuation allowance for the fiscal year ended August 31, 2019. The decrease was partially offset by
$16.1 million of tax benefit from the lapse of statute in a non-U.S. jurisdiction and $14.8 million of tax benefit
related to the release of stranded tax effects previously classified as accumulated other comprehensive income
(“AOCI”) for the fiscal year ended August 31, 2018. Refer to Note 4 – “Income Taxes” to the Consolidated
Financial Statements for further information on the Tax Act.

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

41

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, restructuring of securities loss, 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” diluted earnings per
share based upon evaluation of the statutory tax treatment and the applicable tax rate of the jurisdiction in which
the pre-tax items were incurred, and for which realization of the resulting tax benefit, if any, is expected. In
certain jurisdictions where we do not expect to realize a tax benefit (due to existing tax incentives or a history of
operating losses or other factors resulting in a valuation allowance related to deferred tax assets), a reduced or
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.

42

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:

Reconciliation of U.S. GAAP Financial Results to Non-GAAP Measures

(in thousands, except for per share data)

Fiscal Year Ended August 31,

2019

2018

2017

Operating income (U.S. GAAP) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$701,356 $542,153 $410,230

Amortization of intangibles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Stock-based compensation expense and related charges . . . . . . . . . . . . . . . . . .
Restructuring and related charges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Distressed customer charges(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Business interruption and impairment charges, net(2)
. . . . . . . . . . . . . . . . . . . .
Acquisition and integration charges(3)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Loss on disposal of subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

31,923
61,346
25,914
6,235
(2,860)
52,697
—

38,490
98,511
36,902
32,710
11,299
8,082
—

35,524
48,544
160,395
10,198
—
—
2,112

Adjustments to operating income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

175,255

225,994

256,773

Core operating income (Non-GAAP) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$876,611 $768,147 $667,003

Net income attributable to Jabil Inc. (U.S. GAAP) . . . . . . . . . . . . . . . . . . . .
Adjustments to operating income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other than temporary impairment on securities . . . . . . . . . . . . . . . . . . . . . . . . .
Restructuring of securities loss(4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Adjustment for taxes(5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$287,111 $ 86,330
225,994
175,255
—
—
—
29,632
(18,633)

146,206

$129,090
256,773
11,539
—
(4,726)

Core earnings (Non-GAAP)

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$473,365 $458,530 $392,676

Diluted earnings per share (U.S. GAAP) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Diluted core earnings per share (Non-GAAP) . . . . . . . . . . . . . . . . . . . . . . . . . .

$

$

1.81

2.98

$

$

0.49

2.62

$

$

0.69

2.11

Diluted weighted average shares outstanding used in the calculation of

earnings per share (U.S. GAAP and Non-GAAP) . . . . . . . . . . . . . . . . . . . . .

158,647

175,044

185,838

(1) Charges during fiscal years 2019 and 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.

(2) Charges, net of insurance proceeds of $2.9 million and $24.9 million, for the fiscal years ended August 31,
2019 and 2018, respectively, relate to business interruption and asset impairment costs associated with
damage from Hurricane Maria, which impacted our operations in Cayey, Puerto Rico.

(3) Charges related to our strategic collaboration with Johnson & Johnson Medical Devices Companies

(“JJMD”).

(4) Relates to a restructuring of securities loss on available for sale securities during fiscal year 2019. See Note

(5)

16 – “Fair Value Measurements” to the Consolidated Financial Statements for further discussion.
The fiscal year ended August 31, 2019 includes a $13.3 million income tax benefit for the effects of the Tax
Act recorded during the three months ended November 30, 2018. The fiscal year ended August 31, 2018
includes a $142.3 million provisional estimate to account for the effects of the Tax Act.

43

ROIC & Core ROIC

(in thousands)

Numerator:
Operating income (U.S. GAAP) . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Tax effect (1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

After-tax operating income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Annualized after-tax operating income . . . . . . . . . . . . . . . . . . . . . . .

Core operating income (Non-GAAP)
. . . . . . . . . . . . . . . . . . . . . . . .
Tax effect (2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

After-tax core operating income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Fiscal Year Ended August 31,

2019

2018

2017

$

701,356 $
(183,381)

542,153
(300,979)

$

410,230
(137,087)

$

$

517,975
x1

241,174
x1

517,975 $

241,174

876,611 $
(188,722)

768,147
(144,261)

687,889
x1

623,886
x1

$

$

273,143
x1

273,143

667,003
(134,930)

532,073
x1

Annualized after-tax core operating income . . . . . . . . . . . . . . . . . .

$

687,889 $

623,886

$

532,073

Denominator:
Average total Jabil Inc. stockholders’ equity (3)
Average notes payable and long-term debt, less current

. . . . . . . . . . . . . . . . . .

$ 1,918,850 $ 2,151,886

$ 2,395,843

installments (3)

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2,307,393

2,063,047

1,853,302

Average current installments of notes payable and long-term

debt (3)

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Average cash and cash equivalents (3) . . . . . . . . . . . . . . . . . . . . . . . . . .

200,189
(1,210,646)

235,348
(1,223,934)

245,654
(1,050,989)

Net invested capital base . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 3,215,786 $ 3,226,347

$ 3,443,810

Return on Invested Capital (U.S. GAAP) . . . . . . . . . . . . . . . . . . . . .
Adjustments noted above . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Core Return on Invested Capital (Non-GAAP) . . . . . . . . . . . . . . . .

16.1%
5.3%
21.4%

7.5%
11.8%
19.3%

7.9%
7.6%
15.5%

(1)

(2)

(3)

The tax effect is calculated by applying the U.S. GAAP effective tax rate for the fiscal years ended
August 31, 2019, 2018, and 2017 to U.S. GAAP operating income less interest expense.
The tax effect is calculated by applying the core effective tax rate for the fiscal years ended August 31,
2019, 2018 and 2017 to core operating income less interest expense.
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, 2019, 2018
and 2017, respectively, and dividing by two.

Quarterly Results (Unaudited)

The following table sets forth certain unaudited quarterly financial information for the 2019 and 2018 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 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.

44

Fiscal Year 2019

(in thousands, except for per share data)

August 31, 2019 May 31, 2019

February 28, 2019 November 30, 2018

Three Months Ended

Net revenue . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gross profit(4) . . . . . . . . . . . . . . . . . . . . . . . . . .
Operating income(1)(4) . . . . . . . . . . . . . . . . . . . .
Net income(2)(3)(4)
. . . . . . . . . . . . . . . . . . . . . . .
Net income attributable to Jabil Inc.(2)(3)(4) . . . .
Earnings per share attributable to the

stockholders of Jabil Inc.

$6,573,453
495,078
189,745
53,761
52,675

$

$6,135,602
443,799
140,918
44,032
43,482

$

$6,066,990
454,874
153,983
67,607
67,354

$

$6,506,275
519,650
216,710
124,074
$ 123,600

Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . .

$
$

0.34
0.34

$
$

0.28
0.28

$
$

0.44
0.43

$
$

0.77
0.76

Fiscal Year 2018

Three Months Ended

(in thousands, except for per share data)

August 31, 2018 May 31, 2018

February 28, 2018 November 30, 2017

Net revenue . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gross profit(4) . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . .
Operating income(1)(4)(5)
Net (loss) income(2)(4)(5)
. . . . . . . . . . . . . . . . . .
Net (loss) income attributable to Jabil

$5,771,831
442,147
153,896
(56,608)

$5,436,952
398,227
112,971
42,702

$5,301,101
397,133
129,532
37,528

$5,585,532
469,285
145,754
63,919

Inc.(2)(4)(5) . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ (57,314)

$

42,541

$

37,308

$

63,795

(Loss) earnings per share attributable to the

stockholders of Jabil Inc.

Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . .

$
$

(0.34)
(0.34)

$
$

0.25
0.25

$
$

0.21
0.21

$
$

0.36
0.35

(1)

(2)

(3)

(4)

(5)

Includes acquisition and integration charges related to our strategic collaboration with JJMD of
$17.6 million, $13.4 million, $12.8 million, $8.9 million and $8.1 million for the three months ended
August 31, 2019, May 31, 2019, February 28, 2019, November 30, 2018 and August 31, 2018, respectively.
Includes ($13.3 million), $111.4 million and $30.9 million of income tax (benefit) expense for the three
months ended November 30, 2018, August 31, 2018 and February 28, 2018, respectively, related to the Tax
Act.
Includes a restructuring of securities loss of $29.6 million for the three months ended August 31, 2019.
Includes a distressed customer charge of $6.2 million, $18.0 million and $14.7 million during the three
months ended August 31, 2019, August 31, 2018 and February 28, 2018, respectively.
Includes $32.4 million of stock-based compensation expense for the modification of certain performance-
based restricted stock units and a one-time cash settled award during the three months ended November 30,
2017.

Acquisitions and Expansion

During fiscal year 2018, the Company and JJMD entered into a Framework Agreement to form a strategic

collaboration and expand our existing relationship. The strategic collaboration expands our medical device
manufacturing portfolio, diversification and capabilities.

On February 25, 2019 and April 29, 2019, under the terms of the Framework Agreement, we completed the

initial closing and second closing, respectively, of our acquisition of certain assets of JJMD. The preliminary
aggregate purchase price paid for both the initial closing and second closing was approximately $153.2 million in
cash, which remains subject to certain post-closing adjustments. The acquisition of the JJMD assets has been

45

accounted for as a business combination using the acquisition method of accounting. Total assets acquired of
$167.6 million and total liabilities assumed of $14.4 million were recorded at their estimated fair values as of the
acquisition dates. The final closing, which is subject to customary closing conditions, is expected to occur during
fiscal year 2020.

We are currently evaluating the fair values of the assets and liabilities related to this business combination.

The preliminary estimates and measurements are, therefore, subject to change during the measurement period for
assets acquired, liabilities assumed and tax adjustments. The results of operations were included in our
consolidated financial results beginning on February 25, 2019 for the initial closing and April 29, 2019 for the
second closing. We believe it is impracticable to provide pro forma information for the acquisition of JJMD
assets.

On September 30, 2019 we completed the third closing of our acquisition of certain assets of JJMD for a

cash payment of $117.1 million, primarily for inventory and the assumption of certain employee liabilities. The
purchase price for the third closing is subject to certain post-closing adjustments based on conditions within the
Framework Agreement.

Refer to Note 15 – “Business Acquisitions” to the Consolidated Financial Statements for further discussion.

Liquidity and Capital Resources

We believe that our level of liquidity sources, which includes available borrowings under our revolving

credit facilities and commercial paper program, 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, approved share repurchase programs, 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, 2019, we had approximately $1.2 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, 2019 could be repatriated to the United States without potential tax consequences.

46

Notes Payable and Credit Facilities

Following is a summary of principal debt payments and debt issuance for our notes payable and credit

facilities:

(in thousands)

Balance as of

8.250%
Senior
Notes(1)

5.625%
Senior
Notes

4.700%
Senior
Notes

4.900%
Senior
Notes

3.950%
Senior
Notes(1)

Borrowings
under
revolving
credit
facilities(2)(3)(4)

Borrowings
under
loans(2)(3)

Total notes
payable
and
credit
facilities

August 31, 2017 . . . . $ 399,506 $397,104 $496,696 $298,571 $ — $

— $

Borrowings . . . . . . . . . .
Payments . . . . . . . . . . . .
Other . . . . . . . . . . . . . . .

—

(400,000)
494

—
—
891

—
—
654

— 498,659
—
243

(4,451)

8,778,855
— (8,778,855)

—

Balance as of

August 31, 2018 . . . .
Borrowings . . . . . . . . . .
Payments . . . . . . . . . . . .
Other . . . . . . . . . . . . . . .

Balance as of

— 397,995 497,350 298,814 494,208
—
—
—
—
654
—

—
— 11,985,978
— (11,985,259)
(719)
617

—
—
891

—
—
243

458,395 $ 2,050,272
9,677,514
400,000
(9,204,762)
(25,907)
(4,325)
(2,156)

830,332

2,518,699
— 11,985,978
(25,134) (12,010,393)
2,181

495

August 31, 2019 . . . . $

— $398,886 $498,004 $299,057 $494,825 $

— $

805,693 $ 2,496,465

Maturity Date
Original Facility/
Maximum
Capacity . . . . . . . . . .

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)

$

400.0
million

$

400.0
million

$

500.0
million

$

300.0
million

$

500.0
million

$

2.6
billion(2)(3)

$ 851.7
million(2)(3)

(1) During the fiscal year ended August 31, 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

to support the continued growth of the business. In addition, the revolving credit facility supports
commercial paper outstanding, if any. 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 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 Term Loan
Facility (“the 2018 Term Loan Facility”), collectively “the 2018 Credit Facility.” The 2018 Credit Facility
expires on August 24, 2020.

The interest rates on the 2017 Revolving Credit Facility borrowings ranged from 3.1% to 5.7% and the 2017
Term Loan Facility ranged from 3.5% to 3.9% during the fiscal year ended August 31, 2019. The interest
rate on the 2018 Revolving Credit Facility borrowings ranged from 3.1% to 3.4% and the 2018 Term Loan
Facility ranged from 3.3% to 3.8% during the fiscal year ended August 31, 2019.

47

Additionally, our foreign subsidiaries have various additional credit facilities that finance their future
growth and any corresponding working capital needs.

(4) On August 15, 2019, we entered into a commercial paper program with a borrowing capacity of up to

$1.8 billion. We intend to use the net proceeds from the commercial paper to support more efficient
financing terms. The revolving credit facility supports commercial paper outstanding, if any. As of
August 31, 2019, no commercial paper had been issued.

In the ordinary course of business, we have letters of credit and surety bonds with banks and insurance
companies outstanding of $119.1 million as of August 31, 2019. Unused letters of credit were $74.7 million as of
August 31, 2019. Letters of credit and surety bonds are generally available for draw down in the event we do not
perform.

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, 2019 and 2018, 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 foreign asset-

backed securitization program to a special purpose entity, which in turn sells certain of the receivables to an
unaffiliated financial institution and a conduit administered by an unaffiliated financial institution on a monthly
basis. Effective October 1, 2018, the foreign asset-backed securitization program terms were amended and the
program was extended to September 30, 2021. In connection with this amendment, there is no longer a deferred
purchase price receivable for the foreign asset-backed securitization program as the entire purchase price is paid
in cash when the receivables are sold.

As of October 1, 2018, approximately $734.2 million of accounts receivable sold under the foreign asset-

backed securitization program was exchanged for the outstanding deferred purchase price receivable of
$335.5 million. The remaining amount due to the financial institution of $398.7 million was subsequently settled
for $25.2 million of cash and $373.5 million of trade accounts receivable sold to the financial institution. Prior to
the amendment, any portion of the purchase price for the receivables not paid in cash upon the sale occurring was
recorded as a deferred purchase price receivable, which was paid from available cash as payments on the
receivables were collected. The amended foreign asset-backed securitization program contains a guarantee of
payment by the special purpose entity, in an amount equal to approximately the net cash proceeds under the
program. No liability has been recorded for obligations under the guarantee as of August 31, 2019.

The North American asset-backed securitization program was terminated on October 9, 2018 and as of this

date approximately $500.0 million of accounts receivable sold under the program was exchanged for the
outstanding deferred purchase price receivable of $300.0 million and $200.0 million of cash. The previously sold
trade accounts receivable were recorded at fair market value.

On November 27, 2018, we entered into a new North American asset-backed securitization program. We
continuously sell designated pools of trade accounts receivable, at a discount, under our new North American
asset-backed securitization program to a special purpose entity, which in turn sells certain of the receivables
to conduits administered by unaffiliated financial institutions on a monthly basis. There is no longer a deferred
purchase price receivable for the North American asset-backed securitization program as the entire purchase

48

price is paid in cash when the receivables are sold. Additionally, certain unsold receivables covering the
maximum amount of net cash proceeds available under the program are pledged as collateral to the unaffiliated
financial institution as of August 31, 2019.

Following is a summary of our asset-backed securitization programs and key terms:

Maximum Amount of
Net Cash Proceeds (in millions)(1)

Expiration
Date

North American . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$390.0
$400.0

November 22, 2021
September 30, 2021

(1) Maximum amount available at any one time.

In connection with our asset-backed securitization programs, during the fiscal year ended August 31, 2019,
we sold $4.1 billion of trade accounts receivable and we received cash proceeds of $4.0 billion. As of August 31,
2019, we had up to $27.8 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, 2019 and 2018, 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 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

A . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
B . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
C . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
D . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
E . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
G . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
H . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
I . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
J . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
K . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Maximum
Amount (in millions)(1)

Type of
Facility

Expiration
Date

Uncommitted
August 31, 2022 (2)
Uncommitted November 30, 2019 (3)

$800.0
$150.0
800.0 CNY Uncommitted
Uncommitted
$100.0
Uncommitted
$ 50.0
Uncommitted
$150.0
Uncommitted
$ 50.0
Uncommitted
$100.0
Uncommitted
$100.0
Uncommitted
$740.0
Uncommitted
$110.0

June 30, 2020
May 4, 2023 (4)

August 25, 2020
January 25, 2020 (5)
February 23, 2023 (2)
August 10, 2020 (6)
July 21, 2020 (7)
February 28, 2020 (8)
April 11, 2020 (9)

(1) Maximum amount available at any one time.
(2) Any party may elect to terminate the agreement upon 15 days prior notice.
(3)

The program will automatically extend for one year at each expiration date unless either party provides
10 days notice of termination.

(4) Any party may elect to terminate the agreement upon 30 days prior notice.
(5)

The program will be automatically extended through January 25, 2023 unless either party provides 30 days
notice of termination.
The program will be automatically extended through August 10, 2023 unless either party provides 30 days
notice of termination.
The program will be automatically extended through August 21, 2023 unless either party provides 30 days
notice of termination.

(6)

(7)

49

(8)

(9)

The program will be automatically extended through February 28, 2024 unless either party provides 90 days
notice of termination.
The program will be automatically extended each year through April 11, 2025 unless either party provides
30 days notice of termination.

During the fiscal year ended August 31, 2019, we sold $6.8 billion of trade accounts receivable under these

programs and we received cash proceeds of $6.7 billion. As of August 31, 2019, we had up to $1.5 billion in
available liquidity under our trade accounts receivable sale programs.

Capital Expenditures

For fiscal year 2020, we anticipate our net capital expenditures will be approximately $800.0 million. Our
capital expenditures will support ongoing maintenance in our DMS and EMS segments and investments in new
markets. The amount of actual capital expenditures may be affected by general economic, financial, competitive,
legislative and regulatory factors, among other things.

Cash Flows

The following table sets forth selected consolidated cash flow information (in thousands):

Net cash provided by (used in) operating activities . . . . . . . . . . . . . . . .
Net cash (used in) provided by investing activities . . . . . . . . . . . . . . . .
Net cash used in financing activities . . . . . . . . . . . . . . . . . . . . . . . . . . .
Effect of exchange rate changes on cash and cash equivalents . . . . . . .

$1,193,066
(872,454)
(415,772)
554

$(1,105,448) $(1,464,085)
2,141,263
(404,546)
5,228

1,240,914
(47,044)
(20,392)

Net (decrease) increase in cash and cash equivalents . . . . . . . . . . . . . .

$ (94,606) $

68,030

$

277,860

Fiscal Year Ended August 31,

2019

2018

2017

Operating Activities

Net cash provided by operating activities during the fiscal year ended August 31, 2019 was primarily due to
increased accounts payable, accrued expenses and other liabilities, decreased inventories and non-cash expenses,
partially offset by increased contract assets and accounts receivable. The increase in accounts payable, accrued
expenses and other liabilities is primarily due to the timing of collections on accounts receivable sold under the
securitization programs and the timing of purchases and cash payments. The decrease in inventories is primarily
due to the adoption of ASU 2014-09 and the reclassification to contract assets for revenue recognized for over
time customers, partially offset by an increase in inventories to support expected sales levels in the first quarter
of fiscal year 2020. The increase in contract assets is due to the adoption of ASU 2014-09 and the timing of
revenue recognition for over time customers. The increase in accounts receivable is primarily driven by the
amended and new securitization programs and higher sales and timing of collections.

Investing Activities

Net cash used in investing activities during the fiscal year ended August 31, 2019 consisted primarily of
capital expenditures principally to support ongoing business in the DMS and EMS segments and expenditures for
assets acquired in connection with the initial and second closings of the acquisition of certain assets of JJMD,
partially offset by proceeds and advances from the sale of property, plant and equipment and cash receipts on
sold receivables under the asset-backed securitization programs.

Financing Activities

Net cash used in financing activities during the fiscal year ended August 31, 2019 was primarily due to:

(i) payments for debt agreements, (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

50

activities was partially offset by: (i) borrowings under debt agreements and (ii) net proceeds from the exercise of
stock options and issuance of common stock under the employee stock purchase plan.

Dividends and Share Repurchases

Following is a summary of the dividends and share repurchases for the fiscal years ended August 31, 2019,

2018, 2017 and 2016 (in thousands):

Fiscal year 2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fiscal year 2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fiscal year 2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fiscal year 2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 62,436
$ 59,959
$ 57,833
$ 52,004

$ 148,185
$ 306,397
$ 450,000
$ 350,000

$ 210,621
$ 366,356
$ 507,833
$ 402,004

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$232,232

$1,254,582

$1,486,814

Dividends Paid(1)

Share Repurchases(2)

Total

(1)

(2)

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.
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 each quarter following its review of our financial performance.

In June 2018, the Board authorized the repurchase of up to $350.0 million of our common stock. As of

August 31, 2019, the total amount authorized by the Board of Directors had been repurchased.

In September 2019, the Board authorized the repurchase of up to $600.0 million of our common stock as

part of a two-year capital allocation framework. From September 24, 2019 through October 14, 2019, we
repurchased 874,475 shares, utilizing a total of $30.8 million of the $600.0 million authorized by the Board.

Contractual Obligations

Our contractual obligations as of August 31, 2019 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.

Notes payable and long-term debt . . . . . . . . . . . . .
Future interest on notes payable and long-term

debt(1)

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Operating lease obligations . . . . . . . . . . . . . . . . . .
Capital lease obligations . . . . . . . . . . . . . . . . . . . .
Non-cancelable purchase order obligations(2)
. . . .
Pension and postretirement contributions and

payments(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other(4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Payments due by period (in thousands)

Total

Less than 1
year

1-3 years

3-5 years

After 5
years

$2,496,465

$375,181

$491,655 $1,134,733

$494,896

373,762
603,185
77,829
351,230

109,506
118,312
6,038
289,516

142,082
187,644
11,726
61,537

55,463
114,297
10,928
177

66,711
182,932
49,137
—

14,618
77,669

1,135
17,922

1,904
27,863

2,396
14,214

9,183
17,670

Total contractual obligations(5)

. . . . . . . . . . . . . . .

$3,994,758

$917,610

$924,411 $1,332,208

$820,529

51

(1) Consists of interest on notes payable and long-term debt outstanding as of August 31, 2019. 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.

(2) Consists of purchase commitments entered into as of August 31, 2019 primarily for property, plant and

(3)

(4)

equipment and software pursuant to legally enforceable and binding agreements.
Includes the estimated company contributions to funded pension plans during fiscal year 2020 and the
expected benefit payments for unfunded pension and postretirement plans from fiscal years 2020 through
2029. These future payments are not recorded on the Consolidated Balance Sheets but will be recorded as
incurred.
Includes (i) a $28.5 million capital commitment, (ii) a $16.2 million obligation related to a new human
resource system and (iii) $33.0 million related to the one-time transition tax as a result of the Tax Act that
will be paid in annual installments through fiscal year 2026.

(5) As of August 31, 2019, we have $1.5 million and $103.7 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.

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 12 months being the maximum term of the contracts
outstanding as of August 31, 2019. 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 and Mexican pesos.

Based on our overall currency rate exposures as of August 31, 2019, 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 $804.9 million in borrowings outstanding under debt facilities with variable interest rates as of
August 31, 2019. 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.

52

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 August 31, 2020 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 $4.2 million for fiscal year 2020.

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.

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, 2019. 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 Internal Control over Financial Reporting

We assessed the effectiveness of our internal control over financial reporting as of August 31, 2019.
Management’s report on internal control over financial reporting as of August 31, 2019 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, 2019, 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.

53

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, 2019.

The SEC’s general guidance permits the exclusion of an assessment of the effectiveness of a registrant’s
controls and procedures as they relate to its internal control over financial reporting for an acquired business
during the first year following such acquisition if, among other circumstances and factors, there is not an
adequate amount of time between the acquisition date and the date of assessment. On February 25, 2019 and
April 29, 2019, we completed the initial closing and second closing, respectively, of our acquisition of certain
assets of Johnson & Johnson Medical Devices Companies (“JJMD”). In accordance with the SEC guidance, the
scope of our evaluation of internal controls over financial reporting as of August 31, 2019 did not include the
internal control over financial reporting of these acquired operations. Assets acquired from JJMD represent 1.8%
of our total consolidated assets at August 31, 2019. Net revenue generated by JJMD subsequent to the dates of
acquisition represents 1.3% of our consolidated net revenue for the fiscal year ended August 31, 2019. We
continue to evaluate internal controls over financial reporting for these acquired operations. From the acquisition
dates to August 31, 2019, the processes and systems of the acquired operations did not significantly impact our
internal control over financial reporting.

(c) Changes in Internal Control over Financial Reporting

For our fiscal quarter ended August 31, 2019, 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.

54

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

“Information about our Executive Officers.”

The other information required by this item is incorporated by reference to the information set forth under

the captions “Election of Directors”, “Beneficial Ownership – Delinquent Section 16(a) Reports” and “Corporate
Governance” and “Board of Directors” 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, 2019 (“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”, “Board of Directors – Director
Compensation”, “Corporate Governance – 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 – Related Party Transactions – Certain Related Party Transactions”, “Corporate
Governance –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 “Audit Committee Matters – Principal Accounting Fees and Services”, “– Policy on Audit Committee
Pre-Approval of Audit, Audit-Related and Permissible Non-Audit Services” and ”– Ratification of Appointment
of Independent Registered Public Accounting Firm” in our Proxy Statement.

55

PART IV

Item 15. Exhibits and Financial Statement Schedules

(a) The following documents are filed as part of this Report:

1

2

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.

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 LIST

Exhibit No.

Description

Registrant’s Certificate of Incorporation, as amended.

Registrant’s Bylaws, as amended.

Incorporated by Reference Herein

Form

Exhibit

Filing Date/
Period End

10-Q

10-Q

3.1

3.2

5/31/2017

5/31/2017

Form of Certificate for Shares of the Registrant’s Common
Stock. (P)

S-1

1

3/17/1993

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.

Form of 5.625% Registered Senior Notes issued on November 2,
2010

Form of 4.700% Registered Senior Notes issued on August 3, 2012

8-K

4.2

1/17/2008

8-K

8-K

4.1

4.1

11/2/2010

8/6/2012

Officers’ Certificate of the Registrant pursuant to the Indenture,
dated November 2, 2010

8-K

4.3

11/2/2010

Officers’ Certificate of the Registrant pursuant to the Indenture,
dated August 3, 2012.

8-K

4.3

8/6/2012

Officers’ Certificate, dated as of January 17, 2018, establishing the
3.950% Senior Notes due 2028.

8-K

4.1

1/17/2018

Description of Jabil Securities

Restated cash or deferred profit sharing plan under section
401(k). (P)

S-1

3/3/1993

56

3.1

3.2

4.1

4.2

4.3

4.4

4.5

4.6

4.7

4.8*

10.1†

10.2†

10.3†

10.3a

10.3b

10.3c

10.3d

10.3e

10.3f

10.3g

10.3h

10.3i†

10.3j†

10.4†

10.4a

10.4b

10.4c

10.4d

10.4e

10.4f

10.4g

10.4h

10.4i

Form of Indemnification Agreement between the Registrant and its
Officers and Directors. (P)

Jabil 2002 Stock Incentive Plan.

S-1

3/3/1993

10-K

10.5

8/31/2010

Form of Jabil Circuit, Inc. 2002 Stock Incentive Plan Stock Option
Agreement (prior form).

10-K 10.6.1

8/31/2004

Form of Jabil Circuit, Inc. 2002 Stock Incentive Plan-French
Subplan Stock Option Agreement (prior form).

10-K 10.6.2

8/31/2004

Form of Jabil Circuit, Inc. 2002 Stock Incentive Plan-UK Subplan
CSOP Option Certificate (prior form).

10-K 10.6.3

8/31/2004

Form of Jabil Circuit, Inc. 2002 Stock Incentive Plan-UK Subplan
Stock Option Agreement (prior form).

10-K 10.6.4

8/31/2004

Form of Jabil Circuit, Inc. Restricted Stock Award Agreement
(prior form).

Form of Jabil Circuit, Inc. Time-Based Restricted Stock Award
Agreement (prior form).

Form of Jabil Circuit, Inc. Performance-Based Restricted Stock
Award Agreement (prior form).

10-K

10.5f

8/31/2009

10-K

10.5f

8/31/2010

10-K 10.5g

8/31/2010

Form of Stock Appreciation Right Agreement (prior form).

10-K 10.6.6

8/31/2005

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

Schedule to the Jabil Circuit, Inc. 2002 Stock Incentive Plan for
Grantees Resident in the United Kingdom.

S-8

4.1

8/16/2002

Jabil 2011 Stock Award and Incentive Plan, as Amended and
Restated.

Form of Performance-Based Restricted Stock Unit Award
Agreement (PBRSU EPS Officer – EU5).

Form of Performance-Based Restricted Stock Unit Award
Agreement (PBRSU EPS Officer – Non-EU5).

Form of Performance-Based Restricted Stock Unit Award
Agreement (PBRSU EPS Non-Officer5).

Form of Performance-Based Restricted Stock Unit Award
Agreement (PBRSU TSR Officer – EU).

Form of Performance-Based Restricted Stock Unit Award
Agreement (PBRSU TSR Officer – Non-EU).

Form of Time-Based Restricted Stock Unit Award Agreement
(TBRSU DIR).

Form of Time-Based Restricted Stock Unit Award Agreement
(TBRSU NON).

Form of Time-Based Restricted Stock Unit Award Agreement
(TBRSU OEU).

Form of Time-Based Restricted Stock Unit Award Agreement
(TBRSU ONEU).

57

14A

A

12/9/2016

10-K 10.6m 8/31/2016

10-K 10.6n

8/31/2016

10-K 10.6o

8/31/2016

10-K 10.6m 8/31/2015

10-K 10.6n

8/31/2015

10-Q

10.4

5/31/2011

10-Q

10.5

5/31/2011

10-Q

10.6

5/31/2011

10-Q

10.7

5/31/2011

10.4j

10.4k

10.5†

10.5a

10.5b

10.5c

10.5d

10.5e

10.5f

10.5g

Form of Time-Based Restricted Stock Unit Award Agreement (ACQ
TBRSU).

10-Q 10.1

5/31/2015

Form of Stock Appreciation Right Award Agreement (SAR Officer –
Non EU).

10-K 10.7q

8/31/2014

Jabil Inc. 2011 Employee Stock Purchase Plan, as amended

10-Q 10.8

11/30/2018

Form of Jabil Inc. Restricted Stock Unit Award Agreement (PBRSU
EPS – Executive – EU)

10-Q 10.1

11/30/2018

Form of Jabil Inc. Restricted Stock Unit Award Agreement (PBRSU
EPS – Executive – Non-EU)

10-Q 10.2

11/30/2018

Form of Jabil Inc. Restricted Stock Unit Award Agreement (PBRSU
TSR – ONEU).

10-Q 10.3

11/30/2018

Form of Jabil Inc. Restricted Stock Unit Award Agreement (PBRSU
TSR – OEU).

10-Q 10.4

11/30/2018

Form of Jabil Inc. Restricted Stock Unit Award Agreement (TBRSU-
ONEU)

10-Q 10.5

11/30/2018

10-Q

10.6

11/30/2018

10-Q

10.7

11/30/2018

S-8

4.1

2/25/2011

10-K 10.8

8/31/2015

8-K

10.1

8/27/2018

Form of Jabil Inc. Restricted Stock Unit Award Agreement
(TBRSU-OEU)

Form of Jabil Inc. Restricted Stock Unit Award Agreement
(TBRSU-DIR)

10.6†

Executive Deferred Compensation Plan.

10.7

10.8

21.1*

23.1*

24.1*

31.1*

31.2*

32.1*

Amended and Restated Five Year Credit Agreement dated as of July 6,
2015, amoung the Registraint; the intial 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., and The Bank of Nova Scotia as documentation
agents; and Citigroup Global Markets Inc., JPMorgan Securities LLC,
Merrill Lynch, Pierce, Fenner & Smith Incorporated, BNP Paribas
Securities Corp., Mizuho Bank, Ltd. and The Bank of Nova Scotia.

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.

List of Subsidiaries.

Consent of Independent Registered Public Accounting Firm.

Power of Attorney (See Signature page).

Rule 13a-14(a)/15d-14(a) Certification by the Chief Executive Officer
of the Registrant.

Rule 13a-14(a)/15d-14(a) Certification by the Chief Financial Officer
of the Registrant.

Section 1350 Certification by the Chief Executive Officer of the
Registrant.

58

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, 2019 and August 31,
2018; (ii) Consolidated Statement of Operations for the fiscal years ended
August 31, 2019, 2018 and 2017; (iii) Consolidated Statements of
Comprehensive Income for the fiscal years ended August 31, 2019, 2018
and 2017; (iv) Consolidated Statements of Comprehensive Stockholders’
Equity for the fiscal years ended August 31, 2019, 2018 and 2017; (v)
Consolidated Statements of Cash Flows for the fiscal years ended
August 31, 2019, 2018 and 2017; 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.

59

JABIL INC. AND SUBSIDIARIES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULE

Management’s Report on Internal Control over Financial Reporting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Reports of Independent Registered Public Accounting Firm (Ernst & Young LLP) . . . . . . . . . . . . . . . . . . . .

Consolidated Financial Statements:

Consolidated Balance Sheets – August 31, 2019 and 2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated Statements of Operations – Fiscal years ended August 31, 2019, 2018, and 2017 . . . . . .
Consolidated Statements of Comprehensive Income – Fiscal years ended August 31, 2019, 2018, and

2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Consolidated Statements of Stockholders’ Equity – Fiscal years ended August 31, 2019, 2018, and

2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated Statements of Cash Flows – Fiscal years ended August 31, 2019, 2018 and 2017 . . . . . .
Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

61
62

67
68

69

70
71
72

Financial Statement Schedule:

Schedule II – Valuation and Qualifying Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

114

60

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, 2019. 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, 2019, 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 22, 2019

61

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, 2019,
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, 2019, based on the COSO criteria.

As indicated in the accompanying Management’s Report on Internal Control over Financial Reporting,
management’s assessment of and conclusion on the effectiveness of internal control over financial reporting did
not include the internal controls of the operations acquired from Johnson & Johnson Medical Devices Companies
(JJMD), which are included in the 2019 consolidated financial statements of the Company and constituted 1.8%
of consolidated total assets as of August 31, 2019 and 1.3% of consolidated net revenue for the year then ended.
Our audit of internal control over financial reporting of the Company also did not include an evaluation of the
internal control over financial reporting of the operations acquired from JJMD.

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, 2019 and 2018, 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, 2019, and the related notes and financial statement
schedule listed in the Index at Item 15(a), and our report dated October 22, 2019 expressed an unqualified
opinion thereon.

Basis for Opinion

The Company’s management is responsible for maintaining effective internal control over financial reporting and
for its assessment of the effectiveness of internal control over financial reporting included in the accompanying
Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion
on the Company’s internal control over financial 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. federal 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 require that we plan
and perform the audit to obtain reasonable assurance about whether effective internal control over financial
reporting was maintained in all material respects.

Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that
a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based
on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We
believe that our audit provides a reasonable basis for 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,

62

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 22, 2019

63

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, 2019 and 2018, 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, 2019, 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, 2019 and 2018, and the results of its
operations and its cash flows for each of the three years in the period ended August 31, 2019, in conformity with
U.S. 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, 2019, 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 22, 2019 expressed
an unqualified opinion thereon.

Adoption of New Accounting Standards

As discussed in Note 18 to the consolidated financial statements, the Company changed its method of accounting
for revenue from contracts with customers and certain fulfillment costs in 2019 due to the adoption of ASU
No. 2014-09, Revenue from Contracts with Customers (Topic 606). See below for discussion of our related
critical audit matter.

As discussed in Note 2 to the consolidated financial statements, the Company changed its classification of cash
receipts on the deferred purchase price receivable on asset-backed securitization transactions in 2019 due to the
adoption of ASU No. 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts
and Cash Payments.

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.

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current period audit of the financial
statements that were communicated or required to be communicated to the audit committee and that: (1) relate to

64

accounts or disclosures that are material to the financial statements and (2) involved our especially challenging,
subjective or complex judgments. The communication of critical audit matters does not alter in any way our
opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical
audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to
which they relate.

Description of the
Matter

How We Addressed the
Matter in Our Audit

Description of the
Matter

Adoption of ASU No. 2014-09, Revenue from Contracts with Customers

As more fully described above and in Note 18 to the consolidated financial
statements, effective September 1, 2018, the Company adopted ASU No. 2014-09,
Revenue from Contracts with Customers, on a modified retrospective basis, which
resulted in a $43 million transition adjustment to increase retained earnings.

Auditing the Company’s implementation of the new revenue standard was
challenging due to the judgment in applying the new standard regarding whether
performance obligations within the Company’s contracts with customers are satisfied
over time or at a point in time. More specifically, applying the criteria within the new
standard for determining the timing of satisfaction of performance obligations, such
as whether an enforceable right to payment for performance completed to date exists,
was complex.

We obtained an understanding, evaluated the design and tested the operating
effectiveness of controls over the Company’s implementation of the new revenue
standard. We tested controls over management’s contract reviews, including controls
over the application of the new standard to contracts to assess whether performance
obligations are satisfied over time or at a point in time.

To test the Company’s implementation of the new revenue standard, our audit
procedures included, among others, assessing whether the Company’s new
accounting policy complies with the new standard, evaluating the terms of the
Company’s contracts with customers and evaluating management’s application of the
new standard to the Company’s contracts. More specifically, we inspected the terms
of a sample of the Company’s contracts and evaluated management’s determination
of whether performance obligations are satisfied over time or at a point in time based
on the criteria within the new standard. We also tested the data and assumptions used
in the computation of the Company’s transition adjustment.

Uncertain Tax Positions

As disclosed in Note 4 to the consolidated financial statements, the Company
operates in a complex multinational tax environment and is subject to laws and
regulations in various jurisdictions regarding intercompany transactions. Uncertain
tax positions may arise from interpretations and judgments made by the Company in
the application of the relevant laws, regulations and tax rulings. The Company uses
significant judgment in (1) determining whether the technical merits of tax positions
for certain intercompany transactions are more-likely-than-not to be sustained and
(2) measuring the related amount of tax benefit that qualifies for recognition.

Auditing the tax positions related to certain intercompany transactions was
challenging because the recognition and measurement of the tax positions is highly
judgmental and is based on interpretations of laws, regulations and tax rulings.

How We Addressed the
Matter in Our Audit

We tested controls over the Company’s process to assess the technical merits of tax
positions related to certain intercompany transactions and also tested controls over
the Company’s process to determine the application of the relevant laws, regulations

65

and tax rulings, including management’s process to recognize and measure the
related tax positions.

In testing the recognition and measurement criteria, we involved tax professionals to
assist in assessing the technical merits of the Company’s tax positions. In addition,
we used our knowledge of and experience with the application of domestic and
international income tax laws by the relevant tax authorities to evaluate the
Company’s accounting for those tax positions. We also assessed the Company’s
assumptions and data used to measure the amount of tax benefit that qualifies for
recognition, and tested the accuracy of the calculations. Lastly, we evaluated the
Company’s income tax disclosures included in Note 4 in relation to the Company’s
uncertain tax positions.

/s/ ERNST & YOUNG LLP

We have served as the Company’s auditor since 2010.

Tampa, Florida
October 22, 2019

66

JABIL INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands, except for share data)

August 31,

2019

2018

Current assets:

ASSETS

Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accounts receivable, net of allowance for doubtful accounts . . . . . . . . . . . . . . .
Contract assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Inventories, net of reserve for excess and obsolete inventory . . . . . . . . . . . . . .
Prepaid expenses and other current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 1,163,343
2,745,226
911,940
3,023,003
501,573

Total current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Property, plant and equipment, net of accumulated depreciation . . . . . . . . . . . . . . . .
Goodwill
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Intangible assets, net of accumulated amortization . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

8,345,085
3,333,750
622,255
256,853
198,827
213,705

$ 1,257,949
1,693,268

—

3,457,706
1,141,000

7,549,923
3,198,016
627,745
279,131
218,252
172,574

Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$12,970,475

$12,045,641

Current liabilities:

LIABILITIES AND EQUITY

Current installments of notes payable and long-term debt . . . . . . . . . . . . . . . . .
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Notes payable and long-term debt, less current installments . . . . . . . . . . . . . . . . . . .
Other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income tax liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$

375,181 $

5,166,780
2,990,144

8,532,105
2,121,284
163,821
136,689
115,818

25,197
4,942,932
2,262,744

7,230,873
2,493,502
94,617
148,884
114,385

Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

11,069,717

10,082,261

Commitments and contingencies
Equity:

Jabil Inc. stockholders’ equity:
Preferred stock, $0.001 par value, authorized 10,000,000 shares; no shares

issued and outstanding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Common stock, $0.001 par value, authorized 500,000,000 shares; 260,406,796
and 257,130,145 shares issued and 153,520,380 and 164,588,172 shares
outstanding at August 31, 2019 and August 31, 2018, respectively . . . . . . . .
Additional paid-in capital
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accumulated other comprehensive loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Treasury stock at cost, 106,886,416 and 92,541,973 shares as of August 31,

—

—

260
2,304,552
2,037,037
(82,794)

257
2,218,673
1,760,097
(19,399)

2019 and August 31, 2018, respectively . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(2,371,612)

(2,009,371)

Total Jabil Inc. stockholders’ equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Noncontrolling interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1,887,443
13,315

1,950,257
13,123

Total equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1,900,758

1,963,380

Total liabilities and equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$12,970,475

$12,045,641

See accompanying notes to Consolidated Financial Statements.

67

JABIL INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except for per share data)

Fiscal Year Ended August 31,

2019

2018

2017

Net revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cost of revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$25,282,320
23,368,919

$22,095,416
20,388,624

$19,063,121
17,517,478

Gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Operating expenses:

1,913,401

1,706,792

1,545,643

Selling, general and administrative . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Research and development
Amortization of intangibles . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Restructuring and related charges . . . . . . . . . . . . . . . . . . . . . . . .
Loss on disposal of subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . .

1,111,347
42,861
31,923
25,914
—

1,050,716
38,531
38,490
36,902
—

Operating income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Restructuring of securities loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Income before income tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income tax expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net income (loss) attributable to noncontrolling interests, net of

701,356
29,632
53,750
(21,460)
188,730

450,704
161,230

289,474

542,153
—
37,563
(17,813)
149,002

373,401
285,860

87,541

907,702
29,680
35,524
160,395
2,112

410,230
—
28,448
(12,525)
138,074

256,233
129,066

127,167

tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2,363

1,211

(1,923)

Net income attributable to Jabil Inc. . . . . . . . . . . . . . . . . . . . . . . . . . .

$

287,111 $

86,330

$

129,090

Earnings per share attributable to the stockholders of Jabil Inc.:

Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Weighted average shares outstanding:

Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$

$

1.85

1.81

$

$

0.50

0.49

$

$

0.71

0.69

155,613

158,647

172,237

175,044

181,902

185,838

See accompanying notes to Consolidated Financial Statements.

68

JABIL INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(in thousands)

Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other comprehensive (loss) income:

Change in foreign currency translation . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Change in derivative instruments:

Change in fair value of derivatives . . . . . . . . . . . . . . . . . . . . . . . . . . .
Adjustment for net losses (gains) realized and included in net

Fiscal Year Ended August 31,

2019

2018

2017

$289,474 $ 87,541

$127,167

(21,729)

(50,151)

41,244

(67,773)

1,225

13,434

income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

20,259

(23,076)

8,749

Total change in derivative instruments . . . . . . . . . . . . . . . . . . . .

(47,514)

(21,851)

22,183

Change in available for sale securities:

Unrealized (loss) gain on available for sale securities . . . . . . . . . . . .
Adjustment for net losses realized and included in net income . . . . .

(24,508)
33,333

Total change in available for sale securities . . . . . . . . . . . . . . . .

Actuarial (loss) gain . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Prior service credit (cost) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

8,825

(3,012)
35

(8,679)
—

(8,679)

8,194
(1,532)

10,611
10,139

20,750

10,372
(52)

Total other comprehensive (loss) income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(63,395)

(74,019)

94,497

Comprehensive income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Comprehensive income (loss) attributable to noncontrolling interests . . . . . . .

$226,079 $ 13,522
1,211

2,363

$221,664
(1,923)

Comprehensive income attributable to Jabil Inc.

. . . . . . . . . . . . . . . . . . . . . . . .

$223,716 $ 12,311

$223,587

See accompanying notes to Consolidated Financial Statements.

69

JABIL INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(in thousands, except for share data)

Fiscal Year Ended August 31,

2019

2018

2017

Total stockholders’ equity, beginning balances . . . . . . . . . . . . . . . . . .

$ 1,963,380 $ 2,368,344

$ 2,457,497

Common stock:

Beginning balances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Shares issued under employee stock purchase plan . . . . . . .
Vesting of restricted stock . . . . . . . . . . . . . . . . . . . . . . . . . . .

Ending balances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

257
1
2

260

253
1
3

257

250
1
2

253

Additional paid-in capital:

Beginning balances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Shares issued under employee stock purchase plan . . . . . . .
Vesting of restricted stock . . . . . . . . . . . . . . . . . . . . . . . . . . .
Recognition of stock-based compensation . . . . . . . . . . . . . .

2,218,673
26,999
(2)
58,882

2,104,203
24,865
(3)
89,608

2,034,525
21,791
(2)
47,889

Ending balances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2,304,552

2,218,673

2,104,203

Retained earnings:

Beginning balances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Declared dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cumulative effect adjustment for adoption of new

1,760,097
(51,026)

1,730,893
(57,126)

1,660,820
(59,017)

accounting standards . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net income attributable to Jabil Inc. . . . . . . . . . . . . . . . . . . .

40,855
287,111

—
86,330

—
129,090

Ending balances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2,037,037

1,760,097

1,730,893

Accumulated other comprehensive (loss) income:

Beginning balances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other comprehensive (loss) income . . . . . . . . . . . . . . . . . . .

Ending balances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(19,399)
(63,395)

(82,794)

54,620
(74,019)

(19,399)

(39,877)
94,497

54,620

Treasury stock:

Beginning balances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Purchases of treasury stock under employee stock plans . . .
Treasury shares purchased . . . . . . . . . . . . . . . . . . . . . . . . . .

(2,009,371)
(11,918)
(350,323)

(1,536,455)
(22,597)
(450,319)

(1,217,547)
(12,268)
(306,640)

Ending balances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(2,371,612)

(2,009,371)

(1,536,455)

Noncontrolling interests:

Beginning balances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net income (loss) attributable to noncontrolling interests . .
Acquisition of noncontrolling interests . . . . . . . . . . . . . . . . .
Purchase of noncontrolling interests . . . . . . . . . . . . . . . . . . .
Disposition of noncontrolling interests . . . . . . . . . . . . . . . . .
Declared dividends to noncontrolling interests . . . . . . . . . . .
Foreign currency adjustments attributable to noncontrolling
interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

13,123
2,363
1,112
—
(1,785)
(1,500)

—

2

14,830
1,211
—
—
—
(2,920)

2
—

19,326
(1,923)
—
(134)
—
(2,293)

(146)
—

Ending balances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

13,315

13,123

14,830

Total stockholders’ equity, ending balances . . . . . . . . . . . . . . . . . . . . .

$ 1,900,758 $ 1,963,380

$ 2,368,344

See accompanying notes to Consolidated Financial Statements.

70

JABIL INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)

Cash flows provided by (used in) operating activities:

Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Adjustments to reconcile net income to net cash provided

by (used in) operating activities:

Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . .
Restructuring and related charges . . . . . . . . . . . . . . . . . . . .
Recognition of stock-based compensation expense and

related charges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Provision for allowance for doubtful accounts . . . . . . . . . .
Restructuring of securities loss . . . . . . . . . . . . . . . . . . . . . .
Other, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Change in operating assets and liabilities, exclusive of net

assets acquired:

Accounts receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Contract assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Prepaid expenses and other current assets . . . . . . . . . . . . .
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accounts payable, accrued expenses and other

liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net cash provided by (used in) operating activities . . . . . . . . . .

Cash flows (used in) provided by investing activities:

Acquisition of property, plant and equipment . . . . . . . . . . . . . . .
Proceeds and advances from sale of property, plant and

equipment

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Cash paid for business and intangible asset acquisitions,

net of cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash receipts on sold receivables . . . . . . . . . . . . . . . . . . . . . . . .
Other, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net cash (used in) provided by investing activities . . . . . . . . . .

Cash flows used in financing activities:

Borrowings under debt agreements . . . . . . . . . . . . . . . . . . . . . . .
Payments toward debt agreements . . . . . . . . . . . . . . . . . . . . . . .
Payments to acquire treasury stock . . . . . . . . . . . . . . . . . . . . . . .
Dividends paid to stockholders . . . . . . . . . . . . . . . . . . . . . . . . . .
Net proceeds from exercise of stock options and issuance

of common stock under employee stock purchase plan . . . . .

Treasury stock minimum tax withholding related to vesting

of restricted stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net cash used in financing activities . . . . . . . . . . . . . . . . . . . . . .
Effect of exchange rate changes on cash and cash equivalents . . . . .
Net (decrease) increase in cash and cash equivalents . . . . . . . . . . . . .
Cash and cash equivalents at beginning of period . . . . . . . . . . . . . . .
Cash and cash equivalents at end of period . . . . . . . . . . . . . . . . . . . .

Fiscal Year Ended August 31,

2019

2018

2017

$

289,474 $

87,541

$

127,167

61,346
20,998
15,867
29,632
37,017

(586,511)
(878,469)
483,074
28,897
(38,188)

771,833
(3,566)

773,704
16,264

760,405
94,346

48,544
(63,001)
10,112
—
22,109

90,664
52,705
38,030
—
(13,600)

(2,334,367)

(2,828,328)

—

(499,105)
(97,795)
(34,747)

—

(445,089)
95,593
(30,413)

961,662
1,193,066

815,258
(1,105,448)

744,470
(1,464,085)

(1,005,480)

(1,036,651)

(716,485)

218,708

350,291

175,000

(153,239)
96,846
(29,289)
(872,454)

(109,664)
2,039,298
(2,360)
1,240,914

(36,620)
2,720,728
(1,360)
2,141,263

11,985,978
(12,013,004)
(350,323)
(52,004)

9,677,424
(9,206,016)
(450,319)
(57,833)

7,434,107
(7,479,150)
(306,640)
(59,959)

26,999

24,865

21,791

(11,918)
(1,500)
(415,772)
554
(94,606)
1,257,949

(22,597)
(12,568)
(47,044)
(20,392)
68,030
1,189,919
$ 1,163,343 $ 1,257,949

(12,268)
(2,427)
(404,546)
5,228
277,860
912,059
$ 1,189,919

Supplemental disclosure information:

Interest paid, net of capitalized interest . . . . . . . . . . . . . . . . . . . .

Income taxes paid, net of refunds received . . . . . . . . . . . . . . . . .

$

$

185,696 $

167,278

168,053 $

180,423

$

$

130,635

187,871

See accompanying notes to Consolidated Financial Statements.

71

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 principally in the Americas, Europe and Asia.

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.

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 $17.2 million and $15.2 million were recorded as of August 31, 2019 and 2018,
respectively. As the financial condition and circumstances of the Company’s customers change, adjustments to
the allowance for doubtful accounts are made as necessary.

Contract Balances

Timing of revenue recognition may differ from the timing of invoicing to customers. The Company records

an asset when revenue is recognized prior to invoicing a customer (“contract assets”) while a liability is
recognized when a customer pays an invoice prior to the Company transferring control of the goods or services
(“contract liabilities”). Amounts recognized as contract assets are generally transferred to receivables in the
succeeding quarter due to the short-term nature of the manufacturing cycle. Contract assets are classified
separately on the Consolidated Balance Sheets and transferred to receivables when right to payment becomes
unconditional.

72

The Company reviews contract assets for impairment whenever events or changes in circumstances indicate

that the carrying amount of the asset may not be recoverable after considering factors such as the age of the
balances and the financial stability of the customer.

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.

Fulfillment Costs

The Company capitalizes costs incurred to fulfill its contracts that i) relate directly to the contract or

anticipated contracts, ii) are expected to generate or enhance the Company’s resources that will be used to satisfy
the performance obligation under the contract, and iii) are expected to be recovered through revenue generated
from the contract. Capitalized fulfillment costs are amortized to cost of revenue as the Company satisfies the
related performance obligations under the contract with approximate lives ranging from 1-3 years. These costs,
which are included in prepaid expenses and other current assets and other assets on the Consolidated Balance
Sheets, generally represent upfront costs incurred to prepare for manufacturing activities.

The Company assesses the capitalized fulfillment costs for impairment at the end of each reporting period.

The Company will recognize an impairment loss to the extent the carrying amount of the capitalized costs
exceeds the recoverable amount. Recoverability is assessed by considering the capitalized fulfillment costs in
relation to the forecasted profitability of the related manufacturing performance obligations.

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

Buildings

Leasehold improvements

Machinery and equipment

Estimated Useful Life

Up to 35 years

Shorter of lease term or useful life of the improvement

2 to 10 years

Furniture, fixtures and office equipment

5 years

Computer hardware and software
Transportation equipment

3 to 7 years
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 recoverable.

73

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 either a straight-line or accelerated basis over their estimated useful life and include
contractual agreements and customer relationships, tradenames 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.

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 ineffective portion of the gain or loss is recognized
immediately in current earnings. For derivative instruments that are not designated as hedging instruments, gains
and losses from changes in fair values are recognized in earnings. Cash receipts and cash payments related to
derivative instruments are recorded in the same category as the cash flows from the items being hedged on the
Consolidated Statements of Cash Flows.

74

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, 2019 (in thousands):

Foreign
Currency
Translation
Adjustment

Derivative
Instruments

Actuarial
(Loss) Gain

Prior
Service (Cost)
Credit

Available
for Sale
Securities

Total

$ 7,431

$ 8,116

$(25,021)

$(643)

$ (9,282) $ (19,399)

(21,729)
—

(67,773)
20,259

(3,753)
741

79
(44)

(24,508)
33,333

(117,684)
54,289

Balance as of August 31, 2018 . . . . .
Other comprehensive (loss) income

before reclassifications . . . . . . . . .
Amounts reclassified from AOCI . . .

Other comprehensive (loss)

income(1)

. . . . . . . . . . . . . . . . . . . .

(21,729)

(47,514)

(3,012)

35

8,825

(63,395)

Balance as of August 31, 2019 . . . . .

$(14,298)

$(39,398)

$(28,033)

$(608)

$

(457) $ (82,794)

(1) Amounts are net of tax, which are immaterial.

The following table sets forth the amounts reclassified from AOCI into the Consolidated Statements of
Operations, and the associated financial statement line item, net of tax, for the periods indicated (in thousands):

Comprehensive Income Components

Foreign currency translation adjustment
Realized losses (gains) on derivative instruments:(3)

. . . . . . . . . . . . .

Foreign exchange contracts . . . . . . . . . . . . . . . . . . .
Interest rate contracts . . . . . . . . . . . . . . . . . . . . . . . .
Actuarial loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Prior service credit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Available for sale securities . . . . . . . . . . . . . . . . . . . . . . .

Fiscal Year Ended August 31,

Financial Statement Line
Item

2019

2018

2017

Operating income

$ — $ — $ 5,947

Cost of revenue
Interest expense
(1)

(1)

(2)

21,982
(1,723)
741
(44)
33,333

(9,379)
(13,697)
1,127
(88)
—

4,799
3,950
1,929
(138)
10,139

Total amounts reclassified from AOCI(4) . . . . . . . . . . . . .

$54,289 $(22,037) $26,626

(1) Amounts are included in the computation of net periodic benefit pension cost. Refer to Note 9 –

(2)

(3)

“Postretirement and Other Employee Benefits” for additional information.
The portions of AOCI reclassified into earnings during the fiscal years ended August 31, 2019 and 2017 for
available for sale securities were due to a restructuring of securities loss and an other than temporary
impairments on securities, respectively, and were recorded to restructuring of securities loss and other
expense, respectively.
The Company expects to reclassify $17.0 million into earnings during the next twelve months, which will
primarily be classified as a component of cost of revenue.

(4) Amounts are net of tax, which are immaterial for the fiscal years ended August 31, 2019 and 2017. The
amount for the fiscal year ended August 31, 2018 includes a reduction to income tax expense related to
derivative instruments of $14.8 million.

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

75

denominated in a currency other than the functional currency of the entity involved are included in operating
income.

Revenue Recognition

Effective September 1, 2018, the Company’s revenue recognition accounting policies changed in

conjunction with the adoption of ASU 2014-09, Revenue Recognition (Topic 606). For further discussion, refer
to Note 18—“Revenue” to the Consolidated Financial Statements.

The Company provides comprehensive electronics design, production and product management services to

companies in various industries and end markets. 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 products that are built to customer specifications, which are then
provided to the customer.

The Company generally enters into manufacturing service contracts with its customers that provide the

framework under which business will be conducted and customer purchase orders will be received for specific
quantities and with predominantly fixed pricing. As a result, the Company considers its contract with a customer
to be the combination of the manufacturing service contract and the purchase order, or any agreements or other
similar documents.

The majority of the Company’s manufacturing service contracts relate to manufactured products which have

no alternative use and for which the Company has an enforceable right to payment for the work completed to
date. As a result, revenue is recognized over time when or as the Company transfers control of the promised
products or services (known as performance obligations) to its customers. For certain other contracts with
customers that do not meet the over time revenue recognition criteria, transfer of control occurs at a point in time
which generally occurs upon delivery and transfer of risk and title to the customer.

Most of the Company’s contracts have a single performance obligation as the promise to transfer the
individual manufactured product or service is capable of being distinct and is distinct within the context of the
contract. For the majority of customers, performance obligations are satisfied over time based on the continuous
transfer of control as manufacturing services are performed and are generally completed in less than one year.

The Company also derives revenue to a lesser extent from electronic design services to certain customers.

Revenue from electronic design services is generally recognized over time as the services are performed.

For the Company’s over time customers, it believes the measure of progress which best depicts the transfer
of control is based on costs incurred to date, relative to total estimated cost at completion (i.e., an input method).
This method is a faithful depiction of the transfer of goods or services because it results in the recognition of
revenue on the basis of the Company’s to-date efforts in the satisfaction of a performance obligation relative to
the total expected efforts in the satisfaction of the performance obligation. The Company believes that the use of
an input method best depicts the transfer of control to the customer, which occurs as the Company incurs costs on
its contracts. The transaction price of each performance obligation is generally based upon the contractual stand-
alone selling price of the product or service.

Certain contracts with customers include variable consideration, such as rebates, discounts, or returns. The

Company recognizes estimates of this variable consideration that are not expected to result in a significant
revenue reversal in the future, primarily based on the most likely level of consideration to be paid to the customer
under the specific terms of the underlying programs.

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 and are excluded from the transaction

76

price. The Company has elected to account for shipping and handling activities related to contracts with
customers as costs to fulfill the promise to transfer the goods. Accordingly, the Company records customer
payments of shipping and handling costs as a component of net revenue, and classifies such costs as a component
of cost of revenue.

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 unit awards
(“restricted stock units”) 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 units with performance
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 recognized as a change in
accounting estimate in the period that such probability changes.

The stock-based compensation expense for market-based restricted stock units 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
specified 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.

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 units and dilutive stock appreciation
rights.

77

Potential shares of common stock are excluded from the computation of diluted earnings per share when

their effect would be antidilutive. Performance-based restricted stock units are considered dilutive when the
related performance 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,

2019

2018

2017

Stock appreciation rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . —
796
Restricted stock units . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

—
2,426

265
4,539

Fair Value of Financial Instruments

Fair value is categorized in one of three levels based on the lowest level of significant input used. 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.

2. Trade Accounts Receivable Securitization and Sale Programs

The Company regularly sells designated pools of trade accounts receivable under a foreign asset-backed

securitization program, a North American asset-backed securitization program and 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, 2019, 2018 and 2017 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. The adoption of
Accounting Standards Update No. 2016-15 (“ASU 2016-15”) described in Note 17, New Accounting Guidance,
resulted in a reclassification of cash flows from operating activities to investing activities for all periods
presented in the Company’s Consolidated Statement of Cash Flows for cash receipts related to collections on the
deferred purchase price receivable (i.e. beneficial interest) on asset-backed securitization transactions. In
addition, the beneficial interest of $162.2 million, $2.0 billion, and $2.8 billion for the fiscal years ended
August 31, 2019, 2018, and 2017, respectively, obtained in exchange for securitized receivables are reported as
non-cash investing activities.

Asset-Backed Securitization Programs

The Company continuously sells designated pools of trade accounts receivable, at a discount, under its

foreign asset-backed securitization program to a special purpose entity, which in turn sells certain of the
receivables to an unaffiliated financial institution and a conduit administered by an unaffiliated financial
institution on a monthly basis. Effective October 1, 2018, the foreign asset-backed securitization program terms
were amended and the program was extended to September 30, 2021. In connection with this amendment, there
is no longer a deferred purchase price receivable for the foreign asset-backed securitization program as the entire
purchase price is paid in cash when the receivables are sold.

As of October 1, 2018, approximately $734.2 million of accounts receivable sold under the foreign asset-

backed securitization program was exchanged for the outstanding deferred purchase price receivable of

78

$335.5 million. The remaining amount due to the financial institution of $398.7 million was subsequently settled
for $25.2 million of cash and $373.5 million of trade accounts receivable sold to the financial institution. The
previously sold trade accounts receivable were recorded at fair market value. Prior to the amendment, any portion
of the purchase price for the receivables not paid in cash upon the sale occurring was recorded as a deferred
purchase price receivable, which was paid from available cash as payments on the receivables were collected.
The amended foreign asset-backed securitization program contains a guarantee of payment by the special
purpose entity, in an amount equal to approximately the net cash proceeds under the program. No liability has
been recorded for obligations under the guarantee as of August 31, 2019.

The special purpose entity in the foreign asset-backed securitization program is a separate bankruptcy-
remote entity whose assets would be first available to satisfy the creditor claims of the unaffiliated financial
institution. The Company is deemed the primary beneficiary of this special purpose entity as the Company has
both the power to direct the activities of the entity that most significantly impact the entity’s economic
performance and the obligation to absorb losses or the right to receive the benefits that could potentially be
significant to the entity from the transfer of the trade accounts receivable into the special purpose entity.
Accordingly, the special purpose entity associated with the foreign asset-backed securitization program is
included in the Company’s Consolidated Financial Statements.

The North American asset-backed securitization program was terminated on October 9, 2018 and as of this

date approximately $500.0 million of accounts receivable sold under the program was exchanged for the
outstanding deferred purchase price receivable of $300.0 million and $200.0 million of cash. The previously sold
trade accounts receivable were recorded at fair market value.

On November 27, 2018, the Company entered into a new North American asset-backed securitization
program. The Company continuously sells designated pools of trade accounts receivable, at a discount, under its
new North American asset-backed securitization program to a special purpose entity, which in turn sells certain
of the receivables to conduits administered by unaffiliated financial institutions on a monthly basis. The special
purpose entity in the North American asset-backed securitization program is a wholly-owned subsidiary of the
Company and is included in the Company’s Consolidated Financial Statements. There is no longer a deferred
purchase price receivable for the North American asset-backed securitization program as the entire purchase
price is paid in cash when the receivables are sold. Additionally, certain unsold receivables covering the
maximum amount of net cash proceeds available under the program are pledged as collateral to the unaffiliated
financial institution as of August 31, 2019.

Following is a summary of the asset-backed securitization programs and key terms:

Maximum Amount of
Net Cash Proceeds (in millions)(1)

Expiration
Date

North American . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$390.0
$400.0

November 22, 2021
September 30, 2021

(1) Maximum amount available at any one time.

In connection with the asset-backed securitization programs, the Company recognized the following (in

millions):

Fiscal Year Ended August 31,

2019(3)

2018

2017

Trade accounts receivable sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash proceeds received(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Pre-tax losses on sale of receivables(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred purchase price receivables as of August 31 . . . . . . . . . . . . . . . . . . . . . . . . . .

79

$4,057 $8,386 $8,878
$4,031 $7,838 $8,300
$
$
9
15
$ 569
$ — $ 533

26

$

(1)

The amounts primarily represent proceeds from collections reinvested in revolving-period transfers.

(2) Recorded to other expense within the Consolidated Statements of Operations.
(3)

Excludes $650.3 million of trade accounts receivable sold, $488.1 million of cash and $13.9 million of net
cash received prior to the amendment of the foreign asset-backed securitization program and under the
previous North American asset-backed securitization program.

The asset-backed securitization programs require compliance with several covenants. The North American

asset-backed securitization program covenants include compliance with the interest ratio and debt to EBITDA
ratio of the five-year unsecured credit facility amended as of November 8, 2017 (“the 2017 Credit Facility”). The
foreign asset-backed securitization program covenants include limitations on certain corporate actions such as
mergers and consolidations. As of August 31, 2019 and 2018, the Company was in compliance with all
covenants under the asset-backed securitization programs.

Trade Accounts Receivable Sale Programs

Following is a summary of the trade accounts receivable sale programs with unaffiliated financial

institutions where the Company may elect to sell receivables and the unaffiliated financial institution may elect to
purchase, at a discount, on an ongoing basis:

Program

A . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
B . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
C . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
D . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
E . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
G . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
H . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
I . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
J . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
K . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Maximum
Amount (in millions)(1)

Type of
Facility

Expiration
Date

Uncommitted
August 31, 2022(2)
Uncommitted November 30, 2019(3)

$800.0
$150.0
800.0 CNY Uncommitted
Uncommitted
$100.0
Uncommitted
$ 50.0
Uncommitted
$150.0
Uncommitted
$ 50.0
Uncommitted
$100.0
Uncommitted
$100.0
Uncommitted
$740.0
Uncommitted
$110.0

June 30, 2020
May 4, 2023(4)

August 25, 2020
January 25, 2020(5)
February 23, 2023(2)
August 10, 2020(6)
July 21, 2020(7)
February 28, 2020(8)
April 11, 2020(9)

(1) Maximum amount available at any one time.
(2) Any party may elect to terminate the agreement upon 15 days prior notice.
(3)

The program will automatically extend for one year at each expiration date unless either party provides 10
days notice of termination.

(4) Any party may elect to terminate the agreement upon 30 days prior notice.
(5)

The program will be automatically extended through January 25, 2023 unless either party provides 30 days
notice of termination.
The program will be automatically extended through August 10, 2023 unless either party provides 30 days
notice of termination.
The program will be automatically extended through August 21, 2023 unless either party provides 30 days
notice of termination.
The program will be automatically extended through February 28, 2024 unless either party provides 90 days
notice of termination.
The program will be automatically extended each year through April 11, 2025 unless either party provides
30 days notice of termination.

(6)

(7)

(8)

(9)

80

In connection with the trade accounts receivable sale programs, the Company recognized the following (in

millions):

Fiscal Year Ended August 31,

2019

2018

2017

Trade accounts receivable sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash proceeds received . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Pre-tax losses on sale of receivables(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(1) Recorded to other expense within the Consolidated Statements of Operations.

3. Inventories

Inventories consist of the following (in thousands):

$6,751 $5,480 $2,968
$6,723 $5,463 $2,962
6
$

28

17

$

$

Raw materials . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Work in process . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Finished goods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Reserve for excess and obsolete inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$2,310,081
468,217
314,258
(69,553)

$2,070,569
788,742
659,335
(60,940)

Inventories, net

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$3,023,003

$3,457,706

August 31, 2019 August 31, 2018

4. Income Taxes

Provision for Income Taxes

Income (loss) before income tax expense is summarized below (in thousands):

Domestic(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign(1)

$(415,707) $(426,897) $(373,690)
629,923
800,298

866,411

$ 450,704

$ 373,401

$ 256,233

Fiscal Year Ended August 31,

2019

2018

2017

(1)

Includes the elimination of intercompany foreign dividends paid to the U.S.

Income tax expense (benefit) is summarized below (in thousands):

Fiscal Year Ended August 31,

2019

2018

2017

Current:

Domestic – federal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Domestic – state . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ (23,675) $ 69,080
134
178,790

1,383
175,993

$

2,436
12
188,872

Total current . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

153,701

248,004

191,320

Deferred:

Domestic – federal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Domestic – state . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(8,000)
(2,202)
17,731

(24,342)
93
62,105

253
30
(62,537)

Total deferred . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

7,529

37,856

(62,254)

Total income tax expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$161,230 $285,860 $129,066

81

Reconciliation of the U.S. federal statutory income tax rate to the Company’s effective income tax rate is

summarized below:

Fiscal Year Ended August 31,

2019

2018

2017

U.S. federal statutory income tax rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
State income taxes, net of federal tax benefit
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Impact of foreign tax rates(1)(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Permanent impact of non-deductible cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income tax credits(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Changes in tax rates on deferred tax assets and liabilities(3)
. . . . . . . . . . . . . . . . . . . . .
One-time transition tax related to the Tax Act(4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Indefinite reinvestment assertion impact(4)
Valuation allowance(5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-deductible equity compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Impact of intercompany charges and dividends(6) . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Reclassification of stranded tax effects in AOCI
Global Intangible Low-Taxed Income(7) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

21.0% 25.7% 35.0%
(3.3)
(1.5)
(1.7)
(42.7)
(19.3)
(9.9)
2.9
5.9
1.8
(6.3)
(2.8)
(3.1)
0.3
4.0
0.2
—
62.2
(0.5)
—
5.8
0.9
14.8
(16.4)
1.3
4.5
5.5
1.4
7.3
38.3
10.4
(4.0) —
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . —
—
—
10.4
6.9
4.2
3.6

Effective income tax rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

35.8% 76.6% 50.4%

(1)

(2)

(3)

(4)

(5)

(6)

The Company has been granted tax incentives for various subsidiaries in Brazil, China, Malaysia, Poland,
Singapore and Vietnam, which expire at various dates through fiscal year 2031 and are subject to certain
conditions with which the Company expects to comply. These tax incentives resulted in a tax benefit of
approximately $67.3 million ($0.43 per basic share), $52.1 million ($0.30 per basic share) and $38.6 million
($0.22 per basic share) during the fiscal years ended August 31, 2019, 2018 and 2017, respectively.
For the fiscal years ended August 31, 2019 and 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 due to the Tax Act.
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, excluding the impact of the enacted rate change on the U.S.
valuation allowance.
The indefinite reinvestment assertion impact for the fiscal year ended August 31, 2018 is related to the Tax
Act as further discussed below.
The valuation allowance change for the fiscal years ended August 31, 2019 and 2018 was primarily due to
utilization of domestic 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 for the fiscal year ended
August 31, 2018. The increase for the fiscal year ended August 31, 2019 was partially offset by an income
tax benefit of $17.5 million for the reversal of a U.S. valuation allowance due to an intangible asset
reclassification from indefinite-life to finite-life.
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.

(7) GILTI applied beginning in the fiscal year ended August 31, 2019 and primarily related to the utilization of

current year U.S. federal operating losses.

Tax Act

On December 22, 2017, the U.S. government enacted comprehensive tax legislation commonly referred to

as the Tax Cuts and Jobs Act of 2017 (“Tax Act”). The Tax Act reduced the corporate tax rate, limited or
eliminated certain tax deductions, introduced Global Intangible Low-Taxed Income (“GILTI”) as a newly
defined category of foreign subsidiary income which is taxable to U.S. shareholders each year, and changed the
taxation of foreign earnings of U.S. multinational companies. The enacted changes included a mandatory income

82

inclusion of the historically untaxed foreign earnings of a U.S. company’s foreign subsidiaries and effectively
taxed such income at reduced tax rates (“transition tax”). As a result of the one-time transition tax, the Company
has a substantial amount of previously taxed earnings that can be distributed to the U.S. without additional U.S.
taxation. Additionally, the Tax Act provides for a 100% dividends received deduction for dividends received by
U.S. corporations from 10-percent or more owned foreign corporations. During the fiscal year ended August 31,
2018, the Company made reasonable estimates related to certain impacts of the Tax Act and, in accordance with
Staff Accounting Bulletin No. 118, Income Tax Accounting Implications of the Tax Cut and Jobs Act (“SAB
118”), recorded a net provisional income tax expense (benefit). During the fiscal year ended August 31, 2019, the
Company completed its accounting for the effects of the Tax Act under SAB 118 based on the analysis,
interpretations and guidance available at that time. During the first quarter of fiscal year 2019, the Company
elected to record the GILTI effects as a period cost.

The following table summarizes the tax expense (benefit) related to the Tax Act recognized during the

SAB 118 measurement period (in millions):

One-time
transition tax,
inclusive of
unrecognized tax
benefits (1)

Re-measurement
of the Company’s
U.S. deferred tax
attributes

Change in
indefinite
reinvestment
assertion (2)

Other

Income tax
expense (benefit)

$ 65.9

$(10.5)

$85.0

$ 1.9

$142.3

$(19.7)

$ 1.6

$ —

$(0.3)

$ (18.4)

Provisional income tax expense (benefit)
– recognized in fiscal year 2018 . . . . .
Income tax (benefit) expense adjustment
– recognized in fiscal year 2019 . . . . .

Income tax expense (benefit) related to

the Tax Act . . . . . . . . . . . . . . . . . . . . .

$ 46.2

$ (8.9)

$85.0

$ 1.6

$123.9

(1)

(2)

The calculation of the one-time transition tax is based upon post-1986 earnings and profits, applicable
foreign tax credits and relevant limitations, utilization of U.S. federal net operating losses and tax credits
and the amount of foreign earnings held in cash and non-cash assets. The adjustments during the fiscal year
ended August 31, 2019 were primarily related to further analysis of the Company’s utilization of foreign tax
credits and applicable limitations.
The liability recorded for a change in the indefinite reinvestment assertion on certain earnings from the
Company’s foreign subsidiaries is primarily associated with foreign withholding taxes that would be
incurred upon such future remittances of cash.

83

Deferred Tax Assets and Liabilities

Significant components of the deferred tax assets and liabilities are summarized below (in thousands):

Deferred tax assets:

Net operating loss carry forward . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Compensated absences . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Property, plant and equipment, principally due to differences in depreciation

and amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Domestic federal and state tax credits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign jurisdiction tax credits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Equity compensation – Domestic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Equity compensation – Foreign . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Domestic federal interest carry forward . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash flow hedges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Unrecognized capital loss carry forward . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Revenue recognition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other

Fiscal Year Ended August 31,

2019

2018

$ 183,297
6,165
9,590
10,401
81,731

$ 119,259
7,111
7,634
8,266
81,912

66,268
42,464
15,345
7,617
2,179
5,853
9,878
7,799
19,195
21,907

97,420
70,153
25,887
7,566
2,401
—
—
—
—
18,176

Total deferred tax assets before valuation allowances . . . . . . . . . . . . . . . . . . .
Less valuation allowances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

489,689
(287,604)

445,785
(223,487)

Net deferred tax assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 202,085

$ 222,298

Deferred tax liabilities:

Unremitted earnings of foreign subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . .
Intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other

75,387
39,242
4,447

74,654
39,122
4,655

Total deferred tax liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 119,076

$ 118,431

Net deferred tax assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 83,009

$ 103,867

Based on the Company’s historical operating income, projection of future taxable income, scheduled
reversal of taxable temporary differences, and tax planning strategies, management believes that it is more likely
than not that the Company will realize the benefit of its deferred tax assets, net of valuation allowances recorded.
The net increase in the total valuation allowance for the fiscal year ended August 31, 2019 is primarily related to
the increase of a net operating loss carry forward due to a release of a non-U.S. unrecognized tax benefit and the
increase of deferred tax assets in sites with existing valuation allowances. The decrease in domestic federal and
state tax credits is primarily related to the utilization of tax credits against the one-time transition tax.

As of August 31, 2019, the Company intends to indefinitely reinvest the remaining earnings from its foreign

subsidiaries for which a deferred tax liability has not already been recorded. The accumulated earnings are the
most significant component of the basis difference which is indefinitely reinvested. As of August 31, 2019, the
indefinitely reinvested earnings in foreign subsidiaries upon which taxes had not been provided were
approximately $1.9 billion. The estimated amount of the unrecognized deferred tax liability on these reinvested
earnings was approximately $0.2 billion.

84

Tax Carryforwards

The amount and expiration dates of income tax net operating loss carryforwards and tax credit
carryforwards, which are available to reduce future taxes, if any, as of August 31, 2019 are as follows:

(dollars in thousands)

Last Fiscal Year of Expiration

Amount

Income tax net operating loss carryforwards:(1)

Domestic – state . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2039
2039 or indefinite

Tax credit carryforwards:(1)
Domestic – federal
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Domestic – state . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2029
2027
2027 or indefinite

$ 57,299
$565,609

$ 39,784
$
3,313
$ 15,345

(1) Net of unrecognized tax benefits.
(2) Calculated based on the deferral method and includes foreign investment tax credits.

Unrecognized Tax Benefits

Reconciliation of the unrecognized tax benefits is summarized below (in thousands):

Fiscal Year Ended August 31,

2019

2018

2017

Beginning balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Additions for tax positions of prior years . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Reductions for tax positions of prior years(1)
. . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . .
Additions for tax positions related to current year(2)
Cash settlements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Reductions from lapses in statutes of limitations . . . . . . . . . . . . . . . . . . . . . . .
Reductions from settlements with taxing authorities(3) . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign exchange rate adjustment

$ 256,705 $201,355 $149,898
2,155
(12,233)
77,807
(2,298)
(10,446)
(6,061)
2,533

20,158
(106,252)
35,769
—
(2,570)
(35,582)
(3,845)

14,465
(21,045)
81,866
(1,659)
(7,496)
(5,928)
(4,853)

Ending balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 164,383 $256,705 $201,355

Unrecognized tax benefits that would affect the effective tax rate (if

recognized) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 93,237 $117,455 $ 75,223

(1)

(2)

(3)

The reductions for tax positions of prior years for the fiscal year ended August 31, 2019 are primarily
related to a non-U.S. taxing authority ruling related to certain non-U.S. net operating loss carry forwards,
offset with a valuation allowance and the impacts of the Tax Act.
The additions for the fiscal years ended August 31, 2019 and 2018 are primarily related to the impacts of the
Tax Act and taxation of certain intercompany transactions. The additions for the fiscal year ended
August 31, 2017 are 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 reductions from settlements with taxing authorities for the fiscal year ended August 31, 2019 are
primarily related to the settlement of a U.S. audit.

The Company recognizes interest and penalties related to unrecognized tax benefits in income tax

expense. The Company’s accrued interest and penalties were approximately $18.9 million and $20.4 million as
of August 31, 2019 and 2018, respectively. The Company recognized interest and penalties of approximately
$(1.5) million, $(6.7) million and $5.2 million during the fiscal years ended August 31, 2019, 2018 and 2017,
respectively.

It is reasonably possible that the August 31, 2019 unrecognized tax benefits could decrease during the next

12 months by $5.8 million, primarily related to a state settlement.

85

The Company is no longer subject to U.S. federal tax examinations for fiscal years before August 31, 2015.
In major non-U.S. and state jurisdictions, the Company is no longer subject to income tax examinations for fiscal
years before August 31, 2009.

The Internal Revenue Service (“IRS”) completed its field examination of the Company’s tax returns for
fiscal years 2009 through 2011 and issued a Revenue Agent’s Report (“RAR”) on May 27, 2015, which was
updated on June 22, 2016. The IRS completed its field examination of the Company’s tax returns for fiscal years
2012 through 2014 and issued an RAR on April 19, 2017. The proposed adjustments in the RAR from both
examination periods relate primarily to U.S. taxation of certain intercompany transactions. On May 8, 2019, the
tax return audits for fiscal years 2009 through 2014 were effectively settled when the Company agreed to the IRS
Office of Appeals’ Form 870-AD (Offer to Waive Restrictions on Assessment and Collection of Tax Deficiency
and to Accept Overassessment) adjustments, which were substantially lower than the initial RAR proposed
adjustments. The settlement did not have a material effect on the Company’s financial position, results of
operations, or cash flows and no additional tax liabilities were recorded.

5. Property, Plant and Equipment

Property, plant and equipment consists of the following (in thousands):

Land and improvements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Buildings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Leasehold improvements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Machinery and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Furniture, fixtures and office equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Computer hardware and software . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Transportation equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Construction in progress . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Less accumulated depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

August 31,

2019

2018

$ 146,719 $ 144,136
849,975
1,013,428
3,983,025
192,243
601,955
17,215
42,984

962,559
1,092,787
4,262,015
209,257
671,252
16,423
83,234

7,444,246
4,110,496

6,844,961
3,646,945

$3,333,750

$3,198,016

Depreciation and maintenance and repair expenses were as follows for the periods indicated (in thousands):

Depreciation expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Maintenance and repair expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$739,910 $735,213 $724,856
$288,309 $266,691 $234,332

As of August 31, 2019 and 2018, the Company had $235.2 million and $253.6 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.

Fiscal Year Ended August 31,

2019

2018

2017

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 2019 and determined the fair values of the reporting units and the
indefinite-lived intangible assets were in excess of the carrying values and that no impairment existed as of the
date of the impairment test.

86

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, 2019 and 2018 (in thousands):

Balance as of August 31, 2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Acquisitions and adjustments(1)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Change in foreign currency exchange rates . . . . . . . . . . . . . . . . . . . . . . . . .

$52,574 $555,610 $608,184
22,577
(8,186)
(3,016)
(2,349)

30,763
(667)

Balance as of August 31, 2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Change in foreign currency exchange rates . . . . . . . . . . . . . . . . . . . . . . . . .

82,670
(702)

545,075
(4,788)

627,745
(5,490)

Balance as of August 31, 2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$81,968 $540,287 $622,255

EMS

DMS

Total

(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, 2019

August 31, 2018

Gross
Carrying
Amount

Accumulated
Impairment

Gross
Carrying
Amount

Accumulated
Impairment

Goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$1,642,077

$1,019,822

$1,647,567

$1,019,822

The following table presents the Company’s total purchased intangible assets as of August 31, 2019 and

2018 (in thousands):

Weighted
Average
Amortization
Period
(in years)

August 31, 2019

August 31, 2018

Gross
Carrying
Amount

Accumulated
Amortization

Net
Carrying
Amount

Gross
Carrying
Amount

Accumulated
Amortization

Net
Carrying
Amount

Contractual agreements and

customer relationships . . . . .
Intellectual property . . . . . . . . .
Finite-lived trade names . . . . . . Not applicable
Indefinite
Trade names . . . . . . . . . . . . . . .

12 $292,797 $(175,199) $117,598 $289,947 $(153,415) $136,532
19,509
6 173,771
—
77,536
50,590

16,165 168,181
5,091
72,500
50,590 123,090

(157,606)
(5,036)
—

(148,672)
(5,091)

— 123,090

Total intangible assets . . .

11 $594,694 $(337,841) $256,853 $586,309 $(307,178) $279,131

In the fourth quarter of fiscal year 2019, the Company made a strategic decision that the indefinite-lived
trade name of $72.5 million acquired during the acquisition of Nypro would be phased out over the next four
years. In connection with a strategic shift to further diversify our portfolio, focus on innovation and technology
within the Company’s healthcare business and as a result of the strategic collaboration with a certain medical
device company, management decided to implement a rebranding initiative to Jabil Healthcare. Management
believes the name change better leverages the Jabil brand and the full range of services available to its customers.

As a result of the decision to rebrand, the Company determined the indefinite-lived trade name should no
longer be classified as an indefinite-lived intangible asset. Accordingly, prior to reclassifying the trade name to a
finite-lived intangible asset, the Company tested it for impairment and determined the fair value of the asset
exceeded the carrying value. As such, this trade name was assigned a four-year estimated useful life and will be
amortized on an accelerated basis.

87

Intangible asset amortization for fiscal years 2019, 2018 and 2017 was approximately $31.9 million,
$38.5 million and $35.5 million, respectively. The estimated future amortization expense is as follows (in
thousands):

Fiscal Year Ended August 31,
2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2021 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2022 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2023 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2024 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Thereafter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 54,165
43,780
28,291
25,877
10,976
43,174

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$206,263

7. Accrued Expenses

Accrued expenses consist of the following (in thousands):

Contract liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued compensation and employee benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Obligation associated with securitization programs . . . . . . . . . . . . . . . . . . . . . . . .
Other accrued expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 511,329
—

600,907
475,251
1,402,657

$

—

691,365
570,400
—

1,000,979

Accrued expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$2,990,144

$2,262,744

August 31, 2019 August 31, 2018

8. Notes Payable and Long-Term Debt

Notes payable and long-term debt outstanding as of August 31, 2019 and 2018 are summarized below (in

thousands):

Maturity Date

August 31, 2019 August 31, 2018

5.625% Senior Notes(1)(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
4.700% Senior Notes(1)(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
4.900% Senior Notes(1)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
3.950% Senior Notes(1)(2)(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Borrowings under credit facilities(4)(5)(6)

Dec 15, 2020
Sep 15, 2022
Jul 14, 2023
Jan 12, 2028
. . . . . . . . . . . . . . . . . . Nov 8, 2022 and
Aug 24, 2020
. . . . . . . . . . . . . . . . . . . . . . . . . . . Nov 8, 2022 and
Aug 24, 2020

Borrowings under loans(4)(5)

Total notes payable and long-term debt
Less current installments of notes payable and long-term

. . . . . . . . . . . . . . . . . .

debt

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Notes payable and long-term debt, less current installments . .

398,886
498,004
299,057
494,825

397,995
497,350
298,814
494,208

—

—

805,693

830,332

2,496,465

2,518,699

375,181

25,197

$2,121,284

$2,493,502

(1)

(2)

The notes are carried at the principal amount of each note, less any unamortized discount and unamortized
debt issuance costs.
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 fiscal year ended August 31, 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

88

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 to support the continued growth of the business. In addition, the revolving credit facility supports
commercial paper outstanding, if any. 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.

During the fiscal year ended August 31, 2019, the interest rates on the 2017 Revolving Credit Facility
ranged from 3.1% to 5.7% and the 2017 Term Loan Facility ranged from 3.5% to 3.9%. 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 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 Term 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, 2019, the interest rates on the 2018 Revolving Credit Facility
ranged from 3.1% to 3.4% and the 2018 Term Loan Facility ranged from 3.3% to 3.8%. Interest is charged
at a rate equal to (a) for the 2018 Revolving Credit Facility, either the base rate or 0.9750% above the
Eurocurrency rate and (b) for the 2018 Term Loan Facility, either 0.125% above the base rate or 1.125%
above the Eurocurrency rate. The base rate represents the greatest of: (i) Mizuho Bank, Ltd.’s prime rate,
(ii) 0.50% above the federal funds rate, and (iii) 1.0% 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, 2019, the Company has $2.6 billion, in available unused borrowing capacity under its
revolving credit facilities.

(6) On August 15, 2019, the Company entered into a commercial paper program with a borrowing capacity of

up to $1.8 billion. The Company intends to use the net proceeds from the commercial paper to support more
efficient financing terms. The revolving credit facility supports commercial paper outstanding, if any. As of
August 31, 2019, no commercial paper had been issued.

In the ordinary course of business, the Company has letters of credit and surety bonds with banks and

insurance companies outstanding of $119.1 million as of August 31, 2019. Unused letters of credit were
$74.7 million as of August 31, 2019. Letters of credit and surety bonds are generally available for draw down in
the event the Company does not perform.

89

Debt Maturities

Debt maturities as of August 31, 2019 are as follows (in thousands):

Fiscal Year Ended August 31,
2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2021 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2022 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2023 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2024 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Thereafter

$ 375,181
441,858
49,797
1,134,613
120
494,896

Total

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$2,496,465

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, 2019 and 2018, the Company was in
compliance with its debt covenants.

Fair Value

Refer to Note 16 – “Fair Value Measurements” for the estimated fair values of the Company’s notes payable

and long-term debt.

9. Postretirement and Other Employee Benefits

Postretirement Benefits

The Company has a qualified defined benefit 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, Asia and Mexico 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.”

90

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 fiscal years ended August 31 are as follows (in thousands):

Change in projected benefit obligation
Beginning projected benefit obligation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Service cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Actuarial loss (gain)
Curtailments gain . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total benefits paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Plan participants’ contributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amendments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Acquisitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Effect of conversion to U.S. dollars . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Pension

2019

2018

$161,104 $167,714
1,063
3,807
(6,019)
(998)
(6,211)
31
1,864
—
(147)

1,437
3,715
19,060
—
(6,568)
35
—
6,040
(10,133)

Ending projected benefit obligation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$174,690 $161,104

Change in plan assets
Beginning fair value of plan assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Actual return on plan assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Employer contributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Benefits paid from plan assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Plan participants’ contributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Effect of conversion to U.S. dollars . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

151,715
19,784
1,717
(5,435)
35
(9,715)

146,698
8,146
1,811
(4,758)
31
(213)

Ending fair value of plan assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$158,101 $151,715

Unfunded status . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ (16,589) $ (9,389)

Amounts recognized in the Consolidated Balance Sheets
Accrued benefit liability, current
Accrued benefit liability, noncurrent
Accumulated other comprehensive loss(1)

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Actuarial loss, before tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Prior service cost, before tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$
$
368
$ 16,221 $

428
8,961

$ 24,343 $ 22,387
719
$

690

$

(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 2020.

91

Net Periodic Benefit Cost

The following table provides information about the net periodic benefit cost for the plans for fiscal years

2019, 2018 and 2017 (in thousands):

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Service cost
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest cost
Expected long-term return on plan assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Recognized actuarial loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amortization of prior service credit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net settlement loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2019

$ 1,437
3,715
(5,291)
741
(44)
634

Pension

2018

$ 1,063
3,807
(5,954)
1,127
(88)
116

2017

$ 1,068
2,942
(4,206)
1,929
(138)
1,472

Net periodic benefit cost

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 1,192

$

71

$ 3,067

On September 1, 2018, the Company adopted a new accounting standard, which changes the presentation of

net periodic benefit cost in the Consolidated Statements of Operation. The Company adopted the standard on a
retrospective basis which results 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. Prior periods have not been reclassified due to
immateriality.

Assumptions

Weighted-average actuarial assumptions used to determine net periodic benefit cost and projected benefit

obligation for the plans for the fiscal years 2019, 2018 and 2017 were as follows:

Pension

2019

2018

2017

Net periodic benefit cost:

Expected long-term return on plan assets(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Rate of compensation increase . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Discount rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

3.6% 3.8% 3.3%
4.4% 3.3% 2.7%
2.2% 2.1% 1.9%

Projected benefit obligation:

Expected long-term return on plan assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Rate of compensation increase . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Discount rate(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2.0% 3.6% 4.0%
4.3% 4.4% 4.4%
1.7% 2.2% 2.3%

(1)

(2)

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.
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 appropriate liquidity in order to

92

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 2020.

Fair Value

The fair values of the plan assets held by the Company by asset category are as follows (in thousands):

Asset Category
Cash and cash equivalents(1) . . . . . . . . . . . . . . . . . . . . . .
Equity Securities:

August 31, 2019

August 31, 2018

Fair Value
Hierarchy

Fair Value

Asset
Allocation

Fair Value

Asset
Allocation

Level 1

$

7,705

5% $

6,682

4%

Global equity securities(2)(3)

. . . . . . . . . . . . . . . . . .

Level 2

20,215

13%

35,932

24%

Debt Securities:

Corporate bonds(3) . . . . . . . . . . . . . . . . . . . . . . . . . .
Government bonds(3) . . . . . . . . . . . . . . . . . . . . . . . .

Level 2
Level 2

42,522
69,880

27%
44%

41,088
51,597

Other Investments:

Insurance contracts(4)

. . . . . . . . . . . . . . . . . . . . . . .

Level 3

17,779

11%

16,416

Fair value of plan assets . . . . . . . . . . . . . . . . . . . . .

$158,101

100% $151,715

27%
34%

11%

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.
Investments in global equity securities, corporate bonds, government securities and government bonds are
valued using the quoted prices of securities with similar characteristics.

(3)

(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.

93

Accumulated Benefit Obligation

The following table provides information for the plans with an accumulated benefit obligation for fiscal

years 2019 and 2018 (in thousands):

August 31,

2019

2018

Projected benefit obligation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accumulated benefit obligation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fair value of plan assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$174,690 $161,104
$161,729 $152,380
$158,101 $151,715

Cash Flows

The Company expects to make cash contributions between $0.4 million and $0.6 million to its funded
pension plans during fiscal year 2020. The estimated future benefit payments, which reflect expected future
service, are as follows (in thousands):

Fiscal Year Ended August 31,

2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2021 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2022 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2023 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2024 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2025 through 2029 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Amount

$ 5,017
4,788
5,365
5,877
6,274
40,828

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 $49.0 million, $40.5 million and $33.6 million for defined contribution plans for the fiscal years
ended August 31, 2019, 2018 and 2017, 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, 2019
were as follows (in thousands):

Fiscal Year Ending August 31,

2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2021 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2022 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2023 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2024 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Thereafter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Amount

$118,312
102,915
84,729
63,206
51,091
182,932

Total minimum lease payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$603,185

94

Total operating lease expense was approximately $125.4 million, $130.2 million and $117.2 million for

fiscal years 2019, 2018 and 2017, respectively.

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,

2019

2018

2017

Restricted stock units . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Employee stock purchase plan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other (1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$53,766 $84,082 $42,122
6,334
6,891
88
7,538

7,580
—

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$61,346 $98,511 $48,544

(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.

Following is a reconciliation of the shares available to be issued under the 2011 Plan as of August 31, 2019:

Balance as of August 31, 2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . .

Restricted stock units granted, net of forfeitures(1)

Balance as of August 31, 2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

12,837,158
(796,577)

12,040,581

Shares Available for Grant

(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, 2018 through August 31, 2019:

Outstanding as of August 31, 2018 . . . . . . . . . . . . . . . . . . . . .
SARS exercised . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

156,801
(33,300)

SARS
Outstanding

Average
Intrinsic Value
(in thousands)

$1,748

Outstanding and exercisable as of August 31, 2019 . . . . . . . .

123,501

$1,278

Weighted-
Average
Exercise
Price

$18.41
$18.24

$18.46

Weighted-
Average
Remaining
Contractual
Life (years)

3.10

2.11

95

Restricted Stock Units

Certain key employees have been granted time-based, performance-based and market-based restricted stock
units. 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 performance-based restricted stock units granted in fiscal year 2015. As a result of the modification,
0.8 million awards vested during the first quarter of fiscal year 2018, which resulted in approximately
$24.9 million of stock-based compensation expense recognized.

The following table summarizes restricted stock units activity from August 31, 2018 through August 31,

2019:

Outstanding as of August 31, 2018 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Changes during the period

Weighted-
Average
Grant-Date
Fair Value

Shares

8,352,307

$24.34

Shares granted(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Shares vested . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Shares forfeited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

3,144,205
(1,983,411)
(2,347,628)

$25.25
$25.07
$24.78

Outstanding as of August 31, 2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

7,165,473

$26.27

(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, 2019, the
Company awarded approximately 1.6 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 units and SARS stock-based compensation information

for the periods indicated (in thousands):

Fiscal Year Ended August 31,

2019

2018

2017

Intrinsic value of SARS exercised . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fair value of restricted stock units vested . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Tax benefit for stock compensation expense(1) . . . . . . . . . . . . . . . . . . . . . . . . . . .
Unrecognized stock-based compensation expense — restricted stock units . . . .
Remaining weighted-average period for restricted stock units expense . . . . . . .

$

335

909

$
$ 5,053
$ 49,725 $62,592 $44,010
560
611
$
$ 41,778
1.3 years

$ 1,122 $

(1) Classified as income tax expense within the Consolidated Statements of Operations.

96

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, 2019, 3,397,019 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:

Expected dividend yield . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Risk-free interest rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Expected volatility(1)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Expected life . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

0.6%
2.3%
28.6%

0.6%
1.4%
23.0%

0.8%
0.5%
33.0%

0.5 years

0.5 years

0.5 years

(1)

The expected volatility was estimated using the historical volatility derived from the Company’s common
stock.

Fiscal Year Ended August 31,

2019

2018

2017

Dividends

The following table sets forth certain information relating to the Company’s cash dividends declared to

common stockholders during fiscal years 2019 and 2018:

Dividend
Declaration Date

Dividend
per Share

Total of Cash
Dividends
Declared

Date of Record for
Dividend Payment

Dividend Cash
Payment Date

(in thousands, except for per share data)

Fiscal Year 2019:

Fiscal Year 2018:

. . . . October 18, 2018
January 24, 2019
April 18, 2019
July 18, 2019
. . . . October 19, 2017
January 25, 2018
April 19, 2018
July 18, 2018

$0.08
$0.08
$0.08
$0.08
$0.08
$0.08
$0.08
$0.08

$13,226
$12,706
$12,681
$12,724
$14,588
$14,272
$13,991
$13,677

February 15, 2019
May 15, 2019

November 15, 2018 December 3, 2018
March 1, 2019
June 3, 2019
August 15, 2019 September 3, 2019
November 15, 2017 December 1, 2017
March 1, 2018
June 1, 2018
August 15, 2018 September 4, 2018

February 15, 2018
May 15, 2018

Share Repurchases

In September 2019, the Company’s Board of Directors (“the Board”) authorized the repurchase of up to

$600.0 million of the Company’s common stock as part of a two-year capital allocation framework (“the 2020
Share Repurchase Program”). From September 24, 2019 through October 14, 2019, the Company repurchased
874,475 shares, utilizing a total of $30.8 million of the $600.0 million authorized by the Board.

97

Common Stock Outstanding

The following represents the common stock outstanding for the fiscal year ended:

Fiscal Year Ended August 31,

2019

2018

2017

Common stock outstanding:

Beginning balances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Shares issued upon exercise of stock options . . . . . . . . . . .
Shares issued under employee stock purchase plan . . . . . .
Vesting of restricted stock . . . . . . . . . . . . . . . . . . . . . . . . . .
Purchases of treasury stock under employee stock plans . .
Treasury shares purchased(1) . . . . . . . . . . . . . . . . . . . . . . . .

164,588,172
11,348
1,282,042
1,983,261
(489,836)
(13,854,607)

177,727,653
30,832
1,105,400
2,727,229
(793,052)
(16,209,890)

186,998,472
172,620
1,228,316
2,102,049
(550,096)
(12,223,708)

Ending balances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

153,520,380

164,588,172

177,727,653

(1) During fiscal years 2018, 2017 and 2016, the Company’s Board of Directors authorized the repurchase of
$350.0 million, $450.0 million and $400.0 million, respectively, of the Company’s common stock under
share repurchase programs, which were repurchased during fiscal years 2019, 2018 and 2017, respectively.

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 2019, the

Company’s five largest customers accounted for approximately 42% of its net revenue and 85 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,

Apple, Inc.(1)

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

22%

28%

24%

*
(1)

Amount was less than 10% of total.
Sales to this customer were reported in the DMS operating segment.

2019

2018

2017

2019

*

2018

*

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

98

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 a 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, cloud, computing and storage, defense and aerospace,
industrial and energy, networking and telecommunications, print and retail, and smart home and appliances
industries.

The DMS segment is focused on providing engineering solutions, with an emphasis on material sciences,

technologies and healthcare. The DMS segment includes customers primarily in the edge devices and
accessories, healthcare, mobility and packaging industries.

Net revenue for the operating segments is attributed to the segment in which the service is performed. An
operating segment’s performance is evaluated based on its pre-tax operating contribution, or segment income.
Segment income is defined as net revenue less cost of revenue, segment selling, general and administrative
expenses, segment research and development expenses and an allocation of corporate manufacturing expenses
and selling, general and administrative expenses. Segment income does not include amortization of intangibles,
stock-based compensation expense and related charges, restructuring and related charges, distressed customer
charges, acquisition and integration charges, loss on disposal of subsidiaries, settlement of receivables and
related charges, impairment of notes receivable and related charges, restructuring of securities loss, 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.

99

The following tables set forth operating segment information (in thousands):

Net revenue
EMS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
DMS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Fiscal Year Ended August 31,

2019

2018

2017

$15,430,529
9,851,791

$12,268,600
9,826,816

$11,077,622
7,985,499

$25,282,320

$22,095,416

$19,063,121

Fiscal Year Ended August 31,

2019

2018

2017

Segment income and reconciliation of income before tax
EMS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
DMS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 480,047 $ 451,149
316,998

396,564

$ 436,110
230,893

Total segment income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 876,611 $ 768,147

$ 667,003

Reconciling items:

Amortization of intangibles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Stock-based compensation expense and related charges . . . . . . . . . . . .
Restructuring and related charges . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Distressed customer charges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Business interruption and impairment charges, net (1)
. . . . . . . . . . . . . .
Acquisition and integration charges . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Loss on disposal of subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Restructuring of securities loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(31,923)
(61,346)
(25,914)
(6,235)
2,860
(52,697)
—
(29,632)
(53,750)
21,460
(188,730)

(38,490)
(98,511)
(36,902)
(32,710)
(11,299)
(8,082)
—
—
(37,563)
17,813
(149,002)

(35,524)
(48,544)
(160,395)
(10,198)
—
—
(2,112)
—
(28,448)
12,525
(138,074)

Income before income tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 450,704 $ 373,401

$ 256,233

(1) Charges, net of insurance proceeds of $2.9 million and $24.9 million, for the fiscal years ended August 31,
2019 and 2018, respectively, relate to business interruption and asset impairment costs associated with
damage from Hurricane Maria, which impacted 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.

Total assets
EMS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
DMS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other non-allocated assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

August 31, 2019 August 31, 2018

$ 4,353,465
4,988,198
3,628,812

$ 3,456,866
5,378,436
3,210,339

$12,970,475

$12,045,641

100

The Company operates in 30 countries worldwide. Sales to unaffiliated customers are based on the

Company location that maintains the customer relationship and transacts the external sale. The following 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,

2019

2018

2017

External net revenue:

Singapore . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
China . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Mexico . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Malaysia . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Hungary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 6,718,495
4,958,462
4,526,456
1,681,911
809,031
3,489,398

$ 7,193,414
4,585,355
3,533,437
1,389,851
897,033
2,651,632

$ 5,585,837
4,012,950
3,207,059
1,119,384
944,448
2,547,750

Foreign source revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

22,183,753

20,250,722

17,417,428

U.S.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

3,098,567

1,844,694

1,645,693

Total

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$25,282,320

$22,095,416

$19,063,121

August 31,

2019

2018

Long-lived assets:

China . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Mexico . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Singapore . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Malaysia . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Taiwan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Hungary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Spain . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Poland . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$1,579,904
418,641
156,028
154,386
123,608
85,809
77,855
57,794
412,498

$1,770,732
256,086
191,506
113,011
130,062
91,063
79,991
60,847
334,466

Long-lived assets related to foreign operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

3,066,523

3,027,764

U.S.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1,146,335

1,077,128

Total

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$4,212,858

$4,104,892

13. Derivative Financial Instruments and Hedging Activities

The Company is directly and indirectly affected by changes in certain market conditions. These changes in

market conditions may adversely impact the Company’s financial performance and are referred to as market
risks. The Company, where deemed appropriate, uses derivatives as risk management tools to mitigate the
potential impact of certain market risks. The primary market risks managed by the Company through the use of
derivative instruments are foreign currency risk and interest rate risk.

Foreign Currency Risk Management

Forward contracts are put in place to manage the foreign currency risk associated with the anticipated
foreign currency denominated revenues and expenses. A hedging relationship existed with an aggregate notional
amount outstanding of $334.1 million and $293.4 million as of August 31, 2019 and 2018, 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

101

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, 2019 and August 31, 2020.

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, 2019 and 2018,
was $2.5 billion and $2.3 billion, respectively.

Refer to Note 16 – “Fair Value Measurements” for the fair values and classification of the Company’s

derivative instruments.

The gains and losses recognized in earnings due to hedge ineffectiveness and the amount excluded from

effectiveness testing were not material for all periods presented and are included as components of net revenue,
cost of revenue and selling, general and administrative expense, which are the same line items in which the
hedged items are recorded.

The following table presents the net losses from forward contracts recorded in the Consolidated Statements

of Operations for the periods indicated (in thousands):

Derivatives Not Designated as Hedging Instruments Under ASC 815

Location of Loss on
Derivatives Recognized
in Net Income

Fiscal Year Ended August 31

2019

2018

2017

Amount of Loss Recognized in
Net Income on Derivatives

Forward foreign exchange contracts(1) . . . . . . . . . . . . . . .

Cost of revenue

$(29,557) $(27,774) $(95,665)

(1)

For the fiscal years ended August 31, 2019, 2018, and 2017, the Company recognized $14.9 million,
$36.7 million, and $90.3 million, respectively, of foreign currency gains in cost of revenue, which are offset
by the losses from the forward foreign exchange contracts.

Interest Rate Risk Management

The Company periodically enters into interest rate swaps to manage interest rate risk associated with the

Company’s borrowings.

Cash Flow Hedges

The following table presents the interest rate swaps outstanding as of August 31, 2019, which have been

designated as hedging instruments and accounted for as cash flow hedges:

Interest Rate Swap Summary

Forward Interest Rate Swap

Hedged Interest
Rate Payments

Aggregate Notional
Amount (in millions)

Effective Date

Expiration Date (1)

Anticipated Debt Issuance . .

Fixed

$200.0

October 22, 2018 December 15, 2020(2)

Interest Rate Swaps(3)

2017 Term Loan Facility . . .
2018 Term Loan Facility . . .

Variable
Variable

$200.0
$350.0

October 11, 2018
August 24, 2018

August 31, 2020
August 24, 2020

(1)

(2)

The contracts will be settled with the respective counterparties on a net basis at the expiration date for the
forward interest rate swap and at each settlement date for the interest rate swaps.
If the anticipated debt issuance occurs before December 15, 2020, the contracts will be terminated
simultaneously with the debt issuance.

102

(3)

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 for the 2017 Term Loan Facility
and the three-month LIBOR for the 2018 Term Loan Facility.

14. Restructuring and Related Charges

Following is a summary of the Company’s restructuring and related charges (in thousands):

Fiscal Year Ended August 31,

2019

2018

2017(2)

Employee severance and benefit costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Lease costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Asset write-off costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$16,029 $16,269 $ 56,834
3,966
1,596
94,346
16,264
5,249
2,773

(41)
(3,566)
13,492

Total restructuring and related charges(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$25,914 $36,902 $160,395

(1)

(2)

Includes $21.5 million, $16.3 million and $51.3 million recorded in the EMS segment, $2.6 million,
$16.6 million and $82.4 million recorded in the DMS segment and $1.8 million, $4.0 million and
$26.7 million of non-allocated charges for the fiscal years ended August 31, 2019, 2018 and 2017,
respectively. Except for asset write-off costs, all restructuring and related charges are cash settled.
Fiscal year ended August 31, 2017, includes expenses related to the 2017 and 2013 Restructuring Plans.

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”).

The 2017 Restructuring Plan, totaling $195.0 million in restructuring and other related costs, is complete as

of August 31, 2019.

The table below sets forth the cumulative restructuring and related charges incurred through August 31,

2019 for the 2017 Restructuring Plan (in thousands):

2017
Restructuring Plan(1)

Employee severance and benefit costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Lease costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Asset write-off costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other related costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total restructuring and related charges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 74,656
5,521
106,974
7,395

$194,546

(1)

Includes $62.3 million allocated to the EMS segment, $101.6 million allocated to the DMS segment and
$30.7 million of unallocated costs.

103

The tables below summarize the Company’s liability activity, primarily associated with the 2017

Restructuring Plan (in thousands):

Employee Severance
and Benefit Costs

Balance as of August 31, 2017 . . . . . . .
Restructuring related charges . . . .
Asset write-off charge and other

non-cash activity . . . . . . . . . . .
Cash payments . . . . . . . . . . . . . . .

Balance as of August 31, 2018 . . . . . . .
Restructuring related charges . . . .
Asset write-off charge and other

non-cash activity . . . . . . . . . . .
Cash payments . . . . . . . . . . . . . . .

$ 33,580
16,269

(127)
(31,591)

18,131
16,029

(494)
(30,504)

Lease Costs

$ 1,665
1,596

Asset Write-off
Costs

Other
Related Costs

$ —
16,264

$ 3,143
2,773

Total

$ 38,388
36,902

525
(1,102)

2,684
(41)

—
(663)

(16,264)
—

—
(3,566)

3,566
—

25
(5,419)

522
2,071

(18)
(1,786)

(15,841)
(38,112)

21,337
14,493

3,054
(32,953)

Balance as of August 31, 2019 . . . . . . .

$ 3,162

$ 1,980

$ —

$

789

$ 5,931

2020 Restructuring Plan

On September 20, 2019, the Company’s Board of Directors formally approved a restructuring plan to
realign the Company’s global capacity support infrastructure, particularly in the Company’s mobility footprint in
China, in order to optimize organizational effectiveness. This action includes headcount reductions and capacity
realignment (the “2020 Restructuring Plan”). The 2020 Restructuring Plan reflects the Company’s intention only
and restructuring decisions, and the timing of such decisions, at certain locations are still subject to consultation
with the Company’s employees and their representatives.

The Company currently expects to recognize approximately $85.0 million in pre-tax restructuring and other
related costs primarily over the course of the Company’s fiscal year 2020. This information will be subject to the
finalization of timetables for the transition of functions, consultation with employees and their representatives as
well as the statutory severance requirements of the particular jurisdictions impacted, and the amount and timing
of the actual charges may vary due to a variety of factors. The Company’s estimates for the charges discussed
above exclude any potential income tax effects.

15. Business Acquisitions

Fiscal year 2019

Acquisitions

During fiscal year 2018, the Company and Johnson & Johnson Medical Devices Companies (“JJMD”)
entered into a Framework Agreement to form a strategic collaboration and expand its existing relationship. The
strategic collaboration expands the Company’s medical device manufacturing portfolio, diversification and
capabilities.

On February 25, 2019 and April 29, 2019, under the terms of the Framework Agreement, the Company

completed the initial closing and second closing, respectively, of its acquisition of certain assets of JJMD. The
preliminary aggregate purchase price paid for both the initial closing and second closing was approximately
$153.2 million in cash, which remains subject to certain post-closing adjustments. The acquisition of the JJMD
assets has been accounted for as a business combination using the acquisition method of accounting. Total assets
acquired of $167.6 million and total liabilities assumed of $14.4 million were recorded at their estimated fair
values as of the acquisition dates. The final closing, which is subject to customary closing conditions, is expected
to occur during fiscal year 2020.

104

The Company is currently evaluating the fair values of the assets and liabilities related to this business

combination. The preliminary estimates and measurements are, therefore, subject to change during the
measurement period for assets acquired, liabilities assumed and tax adjustments. The results of operations were
included in the Company’s consolidated financial results beginning on February 25, 2019 for the initial closing
and April 29, 2019 for the second closing. The Company believes it is impracticable to provide pro forma
information for the acquisition of the JJMD assets.

On September 30, 2019 the Company completed the third closing of its acquisition of certain assets of
JJMD for a cash payment of $117.1 million, primarily for inventory and the assumption of certain employee
liabilities. The purchase price for the third closing is subject to certain post-closing adjustments based on
conditions within the Framework Agreement.

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 was 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 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 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.

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 was accounted for as a business combination using the acquisition method of accounting.
Assets acquired of $32.3 million, including $8.2 million in goodwill and $14.6 million in intangible assets, and
liabilities assumed of $0.9 million were recorded at their estimated fair values as of the acquisition date. The
excess of the purchase price over the fair value of the acquired assets and assumed liabilities of $8.2 million was
recorded to goodwill and was fully allocated to the DMS segment. The majority of the goodwill is currently
expected to be deductible for income tax purposes. The Company expensed transaction costs in connection with
the acquisition of approximately $0.8 million during the fiscal year ended August 31, 2017. The results of
operations of the acquired business were included in the Company’s consolidated financial results beginning on
the date of the acquisition. Pro forma information has not been provided as the acquisition is not deemed to be
significant.

105

16. Fair Value Measurements

Fair Value Measurements on a Recurring Basis

The following table presents the fair value of the Company’s financial assets and liabilities measured at fair

value by hierarchy level on a recurring basis as of the periods indicated:

(in thousands)

Assets:

Cash and cash equivalents:

Fair Value
Hierarchy August 31, 2019 August 31, 2018

Cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Level 1(1)

$27,804

$ 21,412

Prepaid expenses and other current assets:

Short-term investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred purchase price receivables (Note 2) . . . . . . . . . . . .
Forward foreign exchange contracts:

Derivatives designated as hedging instruments

Level 1
Level 3(2)

14,088
—

—

533,113

(Note 13) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Level 2(3)

904

Derivatives not designated as hedging instruments

(Note 13) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Level 2(3)

6,878

Other assets:

Senior Non-Convertible Preferred Stock . . . . . . . . . . . . . . .

Level 3(4)

33,102

225

10,125

47,300

Liabilities:

Accrued expenses:

Forward foreign exchange contracts:

Derivatives designated as hedging instruments

(Note 13) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Level 2(3)

$15,999

$ 13,364

Derivatives not designated as hedging instruments

(Note 13) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest rate swaps: . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Derivatives designated as hedging instruments

Level 2(3)

55,391

46,171

(Note 13) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Level 2(5)

5,918

117

Other liabilities:

Forward interest rate swaps:

Derivatives designated as hedging instruments

(Note 13) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Level 2(5)

35,045

—

(1) Consist of investments that are readily convertible to cash with original maturities of 90 days or less.
(2) Recorded initially at fair value using unobservable inputs, determined primarily using discounted cash

flows, and due to its credit quality and short-term maturity, the fair value 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 calculation.
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.
(4) During the fourth quarter of fiscal year 2019, the Company exchanged its investment in the Senior

(3)

Non-Convertible Preferred Stock of iQor Holdings, Inc. (“iQor”) in association with iQor’s previously
announced sale of its international logistics and product service assets. Prior to the restructuring, the Senior
Non-Convertible Preferred Stock had a face value of $50.0 million, accumulated dividends at an annual rate
of 8 percent and was redeemable on March 31, 2023 or upon a change in control. The restructured Senior
Non-Convertible Preferred Stock has a face value of $55.0 million and is redeemable at iQor’s option or
upon change of control for $55.0 million until December 31, 2023, $65.0 million during calendar year 2024
and is mandatorily redeemable for $75.0 million on April 1, 2025.

106

As a result of the restructuring, the Company recognized a restructuring of securities loss of $29.6 million,
which primarily consisted of a credit loss. The credit loss was estimated utilizing a probability-weighted
discounted cash flow model incorporating the concessions and modifications made as part of the
restructuring, discounted at the loan’s effective interest rate. The Senior Non-Convertible Preferred Stock is
valued each reporting period using unobservable inputs based on a discounted cash flow model and is
classified as an available for sale debt security with any unrealized loss recorded to AOCI. As of August 31,
2019, the unobservable inputs have an immaterial impact on the fair value calculation. As of August 31,
2019, the amortized cost basis approximates fair value.
Fair value measurements are based on the contractual terms of the derivatives and use observable market-
based inputs. The interest rate swaps are valued using a discounted cash flow analysis on the expected cash
flows of each derivative using observable inputs including interest rate curves and credit spreads.

(5)

Fair Value of Financial Instruments

The carrying amounts of cash and cash equivalents, trade accounts receivable, prepaid expenses and other

current assets, accounts payable and accrued expenses approximate fair value because of the short-term nature of
these financial instruments. The carrying amounts of borrowings under credit facilities and under loans
approximates fair value as interest rates on these instruments approximates current market rates.

Notes payable and long-term debt is carried at amortized cost; however, the Company estimates the fair
value of notes payable and long-term debt for disclosure purposes. The following table presents the carrying
amounts and fair values of the Company’s notes payable and long-term debt, by hierarchy level as of the periods
indicated:

(in thousands)

Notes payable and long-term debt: (Note 8)

5.625% Senior Notes . . . . . . . . . . . . . . . . . . . . . .
4.700% Senior Notes . . . . . . . . . . . . . . . . . . . . . .
4.900% Senior Notes . . . . . . . . . . . . . . . . . . . . . .
3.950% Senior Notes . . . . . . . . . . . . . . . . . . . . . .

August 31, 2019

August 31, 2018

Fair Value
Hierarchy

Carrying
Amount

Fair Value

Carrying
Amount

Fair Value

Level 2(1) $398,886 $416,000 $397,995 $415,704
503,545
525,890
Level 2(1)
306,535
318,704
Level 3(2)
476,010
509,845
Level 2(1)

497,350
298,814
494,208

498,004
299,057
494,825

(1)

(2)

The fair value estimates are based upon observable market data.
This fair value estimate is based on the Company’s indicative borrowing cost derived from discounted cash
flows.

Refer to Note 9 – “Postretirement and Other Employee Benefits” for disclosure surrounding the fair value of

the Company’s pension plan assets.

17. New Accounting Guidance

Recently Adopted Accounting Guidance

During fiscal year 2014, the Financial Accounting Standards Board (“FASB”) issued an accounting
standard, which 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 became effective for the
Company in the first quarter of fiscal year 2019. The Company implemented changes to its processes, policies
and internal controls to meet the impact of the new standard and disclosure requirements. Refer to Note 18 –
“Revenue” to the Consolidated Financial Statements for further details.

During fiscal year 2016, the FASB issued a new accounting standard to address certain aspects of

recognition, measurement, presentation and disclosure of financial instruments. This guidance became effective

107

for the Company in the first quarter of fiscal year 2019, and was applied prospectively by means of a cumulative-
effect adjustment to the Consolidated Balance Sheet as of September 1, 2018 to equity investments that existed
as of the date of adoption of the standard. The adoption of this standard did not have a material impact on the
Company’s Consolidated Financial Statements; however, the impact on future periods will depend on the facts
and circumstances of future transactions.

During fiscal year 2016, the FASB issued a new accounting standard to address the presentation of certain
transactions within the statement of cash flows with the objective of reducing the existing diversity in practice.
This standard was adopted on September 1, 2018 on a retrospective basis and resulted in a reclassification of cash
flows from operating activities to investing activities in the Company’s Consolidated Statement of Cash Flows
for cash receipts related to collections on the deferred purchase price receivable (i.e. beneficial interest) on asset-
backed securitization transactions. The increase in cash flow from investing activities and the corresponding
decrease to cash flow from operating activities upon adoption of the standard was $96.8 million, $2.0 billion, and
$2.7 billion for the fiscal years ended August 31, 2019, 2018 and 2017, respectively.

During fiscal year 2017, the FASB issued a new accounting standard to improve the accounting for the
income tax consequences of intra-entity transfers of assets other than inventory. The new standard eliminates the
exception for an intra-entity transfer of an asset other than inventory and requires an entity to recognize the
income tax consequences when the transfer occurs. This guidance became effective for the Company beginning
in the first quarter of fiscal year 2019. This guidance was adopted on a modified retrospective basis and an
immaterial cumulative-effect adjustment was recorded, which reduced retained earnings as of September 1, 2018.

During fiscal year 2017, the FASB issued a new accounting standard which clarifies the scope of accounting

for asset derecognition and adds further guidance for recognizing gains and losses from the transfer
of non-financial assets in contracts with non-customers. This guidance became effective for the Company
beginning in the first quarter of fiscal year 2019 coincident with the new revenue recognition guidance. The
adoption of this standard did not have a material impact on the Company’s Consolidated Financial Statements;
however, the impact on future periods will depend on the facts and circumstances of future transactions.

During the second quarter of fiscal year 2018, the Securities and Exchange Commission (“SEC”) staff
issued SAB 118, which provides guidance on accounting for the tax effects of the Tax Act. SAB 118 provides a
measurement period that should not extend beyond one year from the Tax Act enactment date for companies to
complete the accounting under ASC 740. In accordance with SAB 118, a company must reflect the income tax
effects of those aspects of the Tax Act for which the accounting under ASC 740 is complete. To the extent that a
company’s accounting for certain income tax effects of the Tax Act is incomplete, but it is able to determine a
reasonable estimate, it must record a provisional estimate in its financial statements. If a company cannot
determine a provisional estimate to be included in the financial statements, it should continue to apply ASC 740
on the basis of the provisions of the tax laws that were in effect immediately before the enactment of the Tax Act.
The Company applied SAB 118 and provided required disclosures in Note 4 – “Income Taxes.”

Recently Issued Accounting Guidance

During fiscal year 2016, the FASB issued a new accounting standard revising lease accounting. The new

guidance requires organizations to recognize lease assets and lease liabilities on the Consolidated Balance Sheet
and disclose key information regarding leasing arrangements. This guidance is effective for the Company
beginning in the first quarter of fiscal year 2020. The standard must be adopted using a modified retrospective
approach. The Company intends to elect the package of practical expedients offered, which allows entities to not
reassess: i) whether any contracts prior to the adoption date are or contain leases, ii) lease classification, and
iii) whether capitalized initial direct costs continue to meet the definition of initial direct costs under the new
guidance. In preparation for the adoption, the Company is implementing a new lease accounting system. Upon
adoption, the Company expects to recognize right-of-use assets and lease liabilities, respectively, in the range of
approximately $350.0 million to $500.0 million. The Company is continuing to assess implementation of

108

changes to its processes, policies and internal controls to meet the requirements of the new standard. The
adoption of this standard is not expected to have a material impact on the Consolidated Statements of Operations
or the Consolidated Statements of Cash Flows.

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. 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 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 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. 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.

18. Revenue

Effective September 1, 2018, the Company adopted ASU 2014-09, Revenue Recognition (Topic 606). The

new standard is a comprehensive new revenue recognition model that requires the Company to recognize revenue
in a manner which depicts the transfer of goods or services to its customers at an amount that reflects the
consideration the Company expects to receive in exchange for those goods or services.

Prior to the adoption of the new standard, the Company recognized substantially all of its revenue from
contracts with customers at a point in time, which was generally when the goods were shipped to or received by
the customer, title and risk of ownership had passed, the price to the buyer was fixed or determinable and
collectability was reasonably assured (net of estimated returns). Under the new standard, the Company
recognizes revenue over time for the majority of its contracts with customers which results in revenue for those
customers being recognized earlier than under the previous guidance. Revenue for all other contracts with
customers continues to be recognized at a point in time, similar to recognition prior to the adoption of the
standard.

Additionally, the new standard impacts the Company’s accounting for certain fulfillment costs, which
include upfront costs to prepare for manufacturing activities that are expected to be recovered. Under the new
standard, such upfront costs are recognized as an asset and amortized on a systematic basis consistent with the
pattern of the transfer of control of the products or services to which to the asset relates.

The Company adopted ASU 2014-09 using the modified retrospective method by applying the guidance to

all open contracts upon adoption and recorded a cumulative effect adjustment as of September 1, 2018, net of tax,

109

of $42.6 million. No adjustments have been made to prior periods. Following is a summary of the cumulative
effect adjustment (in thousands):

Balance as of
August 31, 2018

Adjustments due to
adoption of ASU 2014-09

Balance as of
September 1, 2018

Assets

. . . . . . . . . . . . . . . . . . . . . . . . . .
Contract assets(1)
Inventories, net(1)
. . . . . . . . . . . . . . . . . . . . . . . . . .
Prepaid expenses and other current assets(1)(2) . . . .
Deferred income taxes(1)(2) . . . . . . . . . . . . . . . . . . .

Liabilities

Contract liabilities(2)(3)
. . . . . . . . . . . . . . . . . . . . . .
Deferred income(2)(3)(4) . . . . . . . . . . . . . . . . . . . . . .
Other accrued expenses(3)(4) . . . . . . . . . . . . . . . . . .
Deferred income taxes(1)
. . . . . . . . . . . . . . . . . . . .

Equity

Retained earnings(1)(2) . . . . . . . . . . . . . . . . . . . . . . .

$
$
$
$

$
$
$
$

$

—
3,457,706
1,141,000
218,252

—
691,365
1,000,979
114,385

$
591,616
$ (461,271)
(37,271)
$
(8,325)
$

$
690,142
$ (691,365)
40,392
$
2,977
$

1,760,097

$

42,602

$
$
$
$

$
$
$
$

$

591,616
2,996,435
1,103,729
209,927

690,142
—
1,041,371
117,362

1,802,699

(1) Differences primarily relate to the timing of revenue recognition for over time customers and certain

balance sheet reclassifications.

(2) Differences primarily relate to the timing of recognition and recovery of fulfillment costs and certain

balance sheet reclassifications.
Included within accrued expenses on the Consolidated Balance Sheets.

(3)

(4) Differences included in contract liabilities as of September 1, 2018.

The following table presents the effect of the adoption of the new revenue guidance on the Consolidated

Balance Sheets as of August 31, 2019 (in thousands):

August 31, 2019

As reported

Balance without the adoption of
ASU 2014-09

Assets

Contract assets(1)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Inventories, net(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Prepaid expenses and other current assets(1)(2) . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred income taxes(1)

Liabilities

Contract liabilities(2)(3)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred income(2)(3)(4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other accrued expenses(3)(4) . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred income taxes(1)

Equity

Retained earnings(1)(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$
$
$
$

$
$
$
$

$

911,940
3,023,003
501,573
198,827

511,329
—

1,877,908
115,818

2,037,037

$
$
$
$

$
$
$
$

$

—

3,761,591
514,769
202,791

—

521,035
1,868,201
111,304

1,885,360

(1) Differences primarily relate to the timing of revenue recognition for over time customers and certain

balance sheet reclassifications.

(2) Differences primarily relate to the timing of recognition and recovery of fulfillment costs and certain

balance sheet reclassifications.
Included within accrued expenses on the Consolidated Balance Sheets.

(3)

(4) Differences included in contract liabilities as of September 1, 2018.

110

The following table presents the effect of the adoption of the new revenue guidance on the Consolidated

Statement of Operations for the fiscal year ended August 31, 2019 (in thousands):

Fiscal Year Ended

August 31, 2019

As reported

Balance without the adoption
of ASU 2014-09

Net revenue(1)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cost of revenue(2)
Operating income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income tax expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$
$
$
$
$

25,282,320
23,368,919
701,356
161,230
289,474

$
$
$
$
$

24,864,754
23,057,603
595,105
164,054
180,399

(1) Differences primarily relate to the timing of revenue recognition for over-time customers and to the

recovery of fulfillment costs.

(2) Differences primarily relate to the timing of cost recognition for over-time customers and the recognition of

fulfillment costs.

The following table presents the Company’s revenues disaggregated by segment (in thousands):

Fiscal Year Ended

August 31, 2019

EMS

DMS

Total

Timing of transfer

Point in time . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Over time . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$
$

$

2,877,082
12,553,447

15,430,529

$
$

$

6,055,716
3,796,075

9,851,791

$
$

$

8,932,798
16,349,522

25,282,320

Contract Balances

No impairment costs related to contract assets were recognized during the fiscal year ended August 31,
2019. Revenue recognized during the fiscal year ended August 31, 2019 that was included in the contract liability
balance as of September 1, 2018 was $404.0 million.

Fulfillment Costs

As of August 31, 2019, capitalized costs to fulfill are $67.1 million. Amortization of fulfillment cost was
$48.6 million during the fiscal year ended August 31, 2019. No impairments related to fulfillments costs were
recognized during the fiscal year ended August 31, 2019.

Remaining Performance Obligations

The Company applied the practical expedient and did not disclose the value of unsatisfied performance

obligations for contracts with an original expected length of one year or less.

Item 16. Form 10-K Summary

Not applicable.

111

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.

SIGNATURES

JABIL INC.
Registrant

By:

/s/ MARK T. MONDELLO
Mark T. Mondello
Chief Executive Officer

Date: October 22, 2019

112

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 Form 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:

By:

By:

By:

By:

By:

By:

By:

By:

By:

By:

/s/ TIMOTHY L. MAIN
Timothy L. Main

/s/ THOMAS A. SANSONE
Thomas A. Sansone

/s/ MARK T. MONDELLO
Mark T. Mondello

/s/ MICHAEL DASTOOR
Michael Dastoor

/s/ ANOUSHEH ANSARI
Anousheh Ansari

/s/ MARTHA F. BROOKS
Martha F. Brooks

/s/ CHRISTOPHER S. HOLLAND
Christopher S. Holland

/s/ JOHN C. PLANT
John C. Plant

/s/ STEVEN A. RAYMUND
Steven A. Raymund

/s/ DAVID M. STOUT
David M. Stout

/s/ KATHLEEN A. WALTERS
Kathleen A. Walters

Chairman of the Board of Directors

October 22, 2019

Vice Chairman of the Board of Directors

October 22, 2019

Chief Executive Officer and Director
(Principal Executive Officer)

October 22, 2019

Chief Financial Officer (Principal
Financial and Accounting Officer)

October 22, 2019

Director

Director

Director

Director

Director

Director

Director

113

October 22, 2019

October 22, 2019

October 22, 2019

October 22, 2019

October 22, 2019

October 22, 2019

October 22, 2019

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

$(13,827)

$ 17,221

$(11,498)

$ 15,181

$ (3,215)

$ 14,134

Allowance for uncollectible accounts

receivable:

Fiscal year ended August 31, 2019 . . . . . $ 15,181

$15,867

Fiscal year ended August 31, 2018 . . . . . $ 14,134

$12,545

Fiscal year ended August 31, 2017 . . . . . $ 11,094

$ 6,255

Balance at
Beginning
of Period

Additions and
Adjustments
Charged to Costs
and Expenses

$ —

$ —

$ —

Additions/
(Reductions)
Charged

to Other Accounts Write-offs

Balance at
End of Period

Reserve for excess and obsolete

inventory:

Fiscal year ended August 31, 2019 . . . . . $ 60,940

$34,091

Fiscal year ended August 31, 2018 . . . . . $ 46,013

$35,538

Fiscal year ended August 31, 2017 . . . . . $ 32,221

$46,030

$ —

$ —

$ —

$(25,478)

$ 69,553

$(20,611)

$ 60,940

$(32,238)

$ 46,013

Balance at
Beginning
of Period

Additions
Charged to
Costs and
Expenses(1)

Additions/
(Reductions)
Charged
to Other Accounts(2)

Reductions
Charged to
Costs and
Expenses(3)

Balance at
End of Period

Valuation allowance for deferred

taxes:

Fiscal year ended August 31, 2019 . . . . . $223,487

$22,750

$ 58,117

$(16,750)

$287,604

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

(1) During the fiscal years ended August 31, 2019, 2018 and 2017, 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, 2019, the additions charged to other accounts primarily relate to the
increase of net operating loss carry forwards due to the release of a non-U.S. unrecognized tax benefit.
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.

(3) During the fiscal years ended August 31, 2019 and 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, 2019,
an additional reduction charged to costs and expenses relates to the $17.5 million income tax benefit for the
reversal of a U.S. valuation allowance due to an intangible asset reclassification from indefinite-life to
finite-life. 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.

114

DESCRIPTION OF CAPITAL STOCK
OF JABIL INC.

EXHIBIT 4.8

Under our certificate of incorporation, as amended (the “charter”), the total number of shares of all classes

of stock which we are authorized to issue is 510,000,000, consisting of two classes: 500,000,000 shares of
common stock, $0.001 par value per share (“common stock”), and 10,000,000 shares of preferred stock, $0.001
par value per share (“preferred stock”). As of October 14, 2019, there were 152,656,443 shares of our common
stock issued and outstanding and no shares of our preferred stock issued and outstanding.

The following is a description of some of the terms of our common stock and preferred stock, our charter,

our amended and restated bylaws (the “bylaws”) and certain provisions of the Delaware General Corporation
Law (the “DGCL”). The following description is not complete and is subject to, and qualified in its entirety by
reference to, our charter and bylaws, which have been incorporated by reference as exhibits to this Form 10-K.
Our charter and bylaws may be obtained as described below under the heading “Where You Can Find More
Information.” You should read our charter and bylaws and the applicable provisions of the DGCL for a complete
description of the provisions described in this section and for other provisions that may be important to you.

Common Stock

Voting Rights. Each share of our common stock is entitled to one vote per share on all matters submitted to a

vote of our stockholders. Our charter does not entitle the holders of our common stock to cumulative voting
rights with respect to the election of our directors. Unless otherwise provided by applicable law, the rules or
regulations of any applicable stock exchange, or our charter or bylaws, every matter to be voted on by our
stockholders, other than the election of directors, shall be decided by the affirmative vote of the majority of the
shares present in person or represented by proxy at the applicable meeting and actually cast on such subject
matter at the applicable meeting.

Election of Directors. Each director shall hold office until the next annual meeting of stockholders following

his or her election and until a successor has been elected and qualified, or until his or her earlier death,
resignation or removal. Pursuant to our bylaws and subject to the rights of any series of our preferred stock that
may be outstanding, each director to be elected by stockholders shall be elected by the vote of the majority of the
votes of the shares present in person or represented by proxy at the meeting and actually cast with respect to the
director; provided, however, that if our board of directors determines that the election is contested then directors
shall be elected by a plurality of the votes of the shares present in person or represented by proxy at the meeting
and entitled to vote on the election of directors. As provided in our bylaws, a “majority of the votes of the shares
present in person or represented by proxy at the meeting and actually cast” shall mean that the number of shares
voted “for” a director’s election exceeds 50% of the number of votes actually cast with respect to that director’s
election. Votes actually cast shall include votes where the authority to cast a vote for the director’s election is
explicitly withheld and exclude abstentions with respect to that director’s election. If a nominee for director who
is an incumbent director is not elected and no successor has been elected at such meeting, the director shall
promptly tender his or her conditional resignation following certification of the stockholder vote, and our
nominating and corporate governance committee shall consider such incumbent director’s resignation and
recommend to the board of directors whether to accept or reject such resignation. The nominating and corporate
governance committee and the board of directors may consider any factors they deem relevant in deciding
whether to accept a director’s resignation.

Dividends and Distributions. Subject to any preferential rights of any outstanding shares of our preferred
stock to receive dividends before any dividends may be paid on our common stock, the holders of our common
stock will be entitled to share ratably in any dividends payable on our common stock that may be declared by our
board of directors out of funds legally available for the payment of dividends. Upon our voluntary or involuntary
liquidation, dissolution or winding-up, the holders of our common stock will be entitled to share ratably in any of
our assets remaining for distribution to our common stockholders after payment of or provision for our debts and

other liabilities and subject to any preferential rights of any outstanding shares of our preferred stock to receive
distributions in the event of our liquidation, dissolution or winding-up before distributions are made to holders of
our common stock.

Preemptive Rights, Redemption and Conversion. Our common stock is not entitled to preemptive rights and

holders of common stock have no rights to redeem their common stock or convert their common stock into any
other securities.

Preferred Stock

Under our charter, the board of directors is authorized, without vote or other action by our stockholders, to

cause the issuance of up to 10,000,000 shares of our preferred stock in one or more series from time to time. Our
board of directors is further authorized to determine or alter the rights, preferences, privileges and restrictions
granted to or imposed upon any wholly unissued series of preferred stock and to fix the number of shares of any
series of preferred stock and the designation of any such series of preferred stock. Pursuant to any restrictions
stated in any resolution or resolutions of the board of directors originally fixing the number of shares constituting
any series of preferred stock, the board of directors may increase or decrease the number of shares of any series
subsequent to the issue of shares of that series.

Anti-Takeover Provisions of Delaware Law

We are subject to Section 203 of the DGCL (“Section 203”). In general, Section 203 prohibits a publicly

held Delaware corporation from engaging in “business combination” transactions with any “interested
stockholder” for a period of three years following the time that the stockholder became an interested stockholder,
unless:

•

•

•

prior to the time the stockholder became an interested stockholder, the corporation’s board of directors
approved either the applicable business combination or the transaction which resulted in the
stockholder becoming an interested stockholder;

upon consummation of the transaction which resulted in the stockholder becoming an interested
stockholder, the interested stockholder owned at least 85% of the voting stock of the corporation
outstanding at the time the transaction commenced, excluding for purposes of determining the voting
stock outstanding (but not the voting stock owned by the interested stockholder) shares owned by
directors who are also officers of the corporation and shares owned by employee stock plans in which
the employee participants do not have the right to determine confidentially whether shares held subject
to the plan will be tendered in a tender or exchange offer; or

at or subsequent to the time that the stockholder became an interested stockholder, the business
combination is approved by the corporation’s board of directors and authorized at an annual or special
meeting of stockholders by the affirmative vote of at least 66-2/3% of the outstanding voting stock
which is not owned by the interested stockholder.

A “business combination” is defined to include, among other things and in general and subject to
exceptions, a merger of the corporation with the interested stockholder; a sale of 10% or more of the market
value of the corporation’s consolidated assets to the interested stockholder; certain transactions that result in the
issuance of the corporation’s stock to the interested stockholder; a transaction that has the effect of increasing the
proportionate share of the corporation’s stock owned by the interested stockholder; and any receipt by the
interested stockholder of loans, guarantees or other financial benefits provided by the corporation. An “interested
stockholder” is defined to include, in general and subject to exceptions, a person that (1) owns 15% or more of
the outstanding voting stock of the corporation or (2) is an “affiliate” or “associate” (as defined in Section 203)
of the corporation and was the owner of 15% or more of the corporation’s outstanding voting stock at any time
within the prior three year period.

A Delaware corporation may opt out of Section 203 with an express provision in its original certificate of

incorporation or by an amendment to its certificate of incorporation or bylaws expressly electing not to be
governed by Section 203 and approved by a majority of its outstanding voting shares. We have not opted out of
Section 203. As a result, Section 203 could delay, deter or prevent a merger, change of control or other takeover of
the Company that our stockholders might consider to be in their best interests, including transactions that might
result in a premium being paid over the market price of our common stock, and may also adversely affect the
market price of our common stock and any other securities that we may issue as contemplated by this prospectus.

Anti-Takeover Provisions of Our Charter and Bylaws

Certain provisions of our charter and bylaws could have the effect of delaying, deterring or preventing
another party from acquiring or seeking to acquire control of the Company. For example, our charter and bylaws
include anti-takeover provisions that:

•

•

•

•

•

•

authorize our board of directors, without the vote of or other action by our stockholders, to cause the
issuance of preferred stock in one or more series from time to time and, with respect to each series, to
establish the number of shares constituting that series and to fix the rights and other terms of that
series, which may include, without limitation, voting rights, dividend rights and preferences,
liquidation rights and preferences and rights to convert the preferred stock of such series into other
securities;

provide that vacancies on our board of directors or newly created directorships resulting from an
increase in the number of our authorized directors may be filled only by a majority of directors then in
office, even if such directors then in office constitute less than a quorum;

provide that the number of directors constituting our board of directors shall be fixed from time to time
and determined by our board of directors;

establish advance notice procedures and other requirements for stockholders to submit nominations of
candidates for election to our board of directors and other proposals to be brought before a stockholders
meeting;

provide that, subject to applicable law and our charter, special meetings of stockholders for any proper
purpose may be called only by the board of directors, or by the chairman of the board, or by the chief
executive officer, or by one or more stockholders holding shares in the aggregate entitled to cast not
less than a majority of the votes at that meeting, and stockholders may not take action by written
consent; and

do not give the holders of our common stock cumulative voting rights with respect to the election of
directors, which means that the holders of a majority of our outstanding shares of common stock can
elect all directors standing for election by our common stockholders.

The provisions described above are intended to discourage certain types of coercive takeover practices and
inadequate takeover bids and to encourage anyone seeking to acquire control of us to negotiate first with our board
of directors. However, these provisions may also delay, deter or prevent a merger, change of control or other
takeover of our Company that our stockholders might consider to be in their best interests, including transactions
that might result in a premium being paid over the market price of our common stock, and may also adversely affect
the market price of our common stock and any other securities that we may issue as contemplated by this
prospectus. These provisions may also have the effect of preventing changes in our management.

Limitation on Liability of Directors; Indemnification of Directors and Officers

Our charter provides that, to the fullest extent permitted by law, none of our directors shall be personally
liable for monetary damages to the Company or its stockholders for breach of fiduciary duty as a director, and
provides that we will indemnify our directors and officers to the fullest extent permitted by the DGCL. We
believe that these limitations of liability and indemnification provisions are useful to attract and retain qualified
directors and officers.

Transfer Agent and Registrar

The transfer agent and registrar for our common stock is Computershare Investor Services.

NYSE Listing

Our common stock is listed on the New York Stock Exchange under the symbol “JBL.”

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 (US)
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) 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 Technology (Shenzhen) Co., Ltd. (China)
Green Point Technology (Wuxi) Co., Ltd. (China)
Green Prosperity Co., Ltd. (British Virgin Islands)
Greenam Electricity (Proprietary) Limited (Namibia) (Jabil indirectly owns 79% of this entity)
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 Capital Equipment Manufacturing (Taicang) Co., Ltd. (China)
Jabil Cayman Holding Limited (Cayman Islands)
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. (Bermuda)
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. de R.L. 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 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 Electronics (Weihai) Co., Ltd. (China)
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 Monterrey 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 Pension Trustees Limited (United Kingdom)
Jabil Poland Sp. z.o.o. (Poland)
Jabil Precision Industry (Guangzhou) Co., Ltd. (China)
Jabil Sdn Bhd (Malaysia)
Jabil Services Korea Limited (Republic of Korea)
Jabil Silver Creek, Inc. (US)
Jabil South Africa (Pty) LTD (South Africa)
Jabil Switzerland Manufacturing GmbH (Switzerland)
Jabil Technology (Chengdu) Co., Ltd (China)
Jabil Technology and Trading (Wuxi) Co., Ltd. (China)
Jabil Torres S. de R.L. de C.V. (Mexico)
Jabil Tuttlingen Manufacturing GmbH (Germany)
Jabil Umkirch Manufacturing GmbH (Germany)
Jabil Vietnam Company Limited (Vietnam)
Jabil, Limited Liability Company (Russian Federation)
JN Global Holdings C.V. (Netherlands)
JP Danshui Holding (BVI) Inc. (British Virgin Islands)
Kasalis Inc. (US)
Manna Renewable Energy Investments Two (Pty) Ltd (Namibia
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 DR, LLC (US)
Nypro France SAS (France)
Nypro Germany Holdings GmbH (Germany)
Nypro Germany Verwaltungs B.V. & Co. KG (Germany)
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 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 Developments Limited (Ireland)
Nypro Spain Holding, S.L.U. (Spain)
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. (Cayman Islands)
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)
Yen Investments 140 (Proprietary) Limited (Namibia)

*

Jabil Inc. subsidiaries list as of August 31, 2019

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 22, 2019, 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, 2019.

/s/ ERNST & YOUNG LLP

Tampa, Florida
October 22, 2019

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 defined in Exchange Act Rules 13a – 15(f) and 15d – 15(f)) for the
registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to

be designed under our supervision, to ensure that material information relating to the registrant,
including its consolidated subsidiaries, is made known to us by others within those entities, particularly
during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial

reporting to be designed under our supervision, to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements for external purposes in
accordance with generally accepted accounting principles;

c)

Evaluated the effectiveness of the 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 22, 2019

/s/ MARK T. MONDELLO

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 defined in Exchange Act Rules 13a – 15(f) and 15d – 15(f)) for the
registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to

be designed under our supervision, to ensure that material information relating to the registrant,
including its consolidated subsidiaries, is made known to us by others within those entities, particularly
during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial

reporting to be designed under our supervision, to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements for external purposes in
accordance with generally accepted accounting principles;

c)

Evaluated the effectiveness of the 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 22, 2019

/s/ MICHAEL DASTOOR

Michael Dastoor
Chief Financial Officer

CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO SECTION 906
OF THE SARBANES-OXLEY ACT OF 2002

EXHIBIT 32.1

In connection with the Annual Report of Jabil Inc. (the “Company”) on Form 10-K for the fiscal year ended
August 31, 2019 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 22, 2019

/s/ MARK T. MONDELLO

Mark T. Mondello
Chief Executive Officer

CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO SECTION 906
OF THE SARBANES-OXLEY ACT OF 2002

EXHIBIT 32.2

In connection with the Annual Report of Jabil Inc. (the “Company”) on Form 10-K for the fiscal year ended
August 31, 2019 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 22, 2019

/s/ MICHAEL DASTOOR

Michael Dastoor
Chief Financial Officer

CHRISTOPHER S. HOLLANDDirector since 2018Age 53DAVID M.  STOUTDirector since 2009Age 65MARTHA F. BROOKSDirector since 2011Age 60KATHLEEN A. WALTERSDirector since 2019 Age 68JOHN C. PLANTDirector since 2016 Age 66STEVEN A.  RAYMUNDDirector since 1996Age 64ANOUSHEH  ANSARIDirector since 2016 Age 53TIMOTHY L. MAINChairman of the BoardDirector since 1999Age 62THOMAS A. SANSONEVice Chairman of  the Board Director since 1983Age 70MARK T.  MONDELLOChief Executive OfficerDirector since 2013Age 55Jabil’s Board of Directors has standing Audit, Compensation and Nominating & Corporate Governance Committees. AUDIT: Raymund (Chair), Ansari, HollandCOMPENSATION: Stout (Chair), Brooks, PlantNOMINATING & CORPORATE GOVERNANCE: Sansone (Chair), Brooks, StoutJabil’s Corporate Governance Guidelines, the charters of these committees and the Jabil Code of Conduct can be found on Jabil’s website: www.jabil.comINVESTOR INQUIRIES & INFORMATIONInvestor RelationsJabil Inc.10560 Dr. Martin Luther King Jr. Street N.St. Petersburg, Florida 33716Phone: 727.803.3349E-mail: investor_relations@jabil.comOur Form 10-K for our fiscal year ended August 31, 2019 has been filed with the Securities and Exchange Commission and is included as a part of this Annual Report.An online version of the 2019 Annual Report is available at: https://investors.jabil.comANNUAL MEETINGJanuary 23, 2020 10:00 AM ET Jabil Headquarters10560 Dr. Martin Luther King Jr. Street N.St. Petersburg, Florida 33716The 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, 2019. A representative of Ernst & Young LLP is expected to be present at the Annual Meeting and available to respond to questions.TRANSFER AGENT AND REGISTRARThe 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 INFORMATION2019 ANNUAL REPORT10560 Dr. Martin Luther King Jr. Street NorthSt. Petersburg, Florida 33716 USAwww.jabil.com2019 ANNUAL REPORT