JABIL INC 10-K

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 includes customers primarily in the automotive and transportation, capital equipment, cloud, networking and storage, defense and aerospace, industrial and energy, 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 connected devices, healthcare, mobility and packaging industries. As of September 1, 2020, certain customers have been realigned within our operating segments. Our operating segments, which are the reporting segments, continue to consist of the DMS and EMS segments. Beginning in fiscal year 2021, customers within the automotive and transportation and smart home and appliances industries will be presented within the DMS segment. 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. 27 Table of Contents See Note 13 – “Concentration of Risk and Segment Data” to the Consolidated Financial Statements. COVID-19 The COVID-19 pandemic, which began to impact us in January 2020, has continued to affect our business and the businesses of our customers and suppliers into our fiscal fourth quarter. Travel and business operation restrictions arising from virus containment efforts of governments around the world have continued to impact our operations in Asia, Europe and the Americas. With the exception of certain jurisdictions, essential activity exceptions from these restrictions have allowed us to continue to operate. Nevertheless, virus containment efforts during the fiscal year ended August 31, 2020, led to a disruption in operations and certain facility or intermittent business closures in areas such as China, Malaysia, India, Mexico and California, which resulted in additional direct costs and a reduction in revenue in certain end markets. Our first priority has been the health and safety of our employees and so we have incurred additional costs in order to procure the necessary equipment, including face masks, thermometers, hand sanitizers and personal protection equipment, to keep our employees safe. We have implemented risk-mitigation activities including travel restrictions, social distancing practices, additional cleaning procedures within our facilities, contact tracing, COVID-19 testing, restricting the number of visitors to our sites and requiring employees and visitors to have their temperatures taken and wear masks when they are at our sites. During the fiscal year ended August 31, 2020, we incurred approximately $141.9 million in direct costs associated with the COVID-19 outbreak, primarily due to incremental and idle labor costs leading to a reduction in factory utilization as a result of the travel disruptions and governmental restrictions and the procurement of personal protection equipment for our employees globally. This increase in costs was partially offset by governmental subsidies, such as lower payroll taxes or social insurance in certain countries, related to COVID-19 incentives. Additionally, certain of the Company’s suppliers were similarly impacted by the COVID-19 pandemic, leading to supply chain constraints, including difficulty sourcing materials necessary to fulfill customer production requirements and challenges in transporting completed products to our end customers. We have implemented efforts across the organization to enhance our financial position, increase liquidity and reduce costs. During the fiscal year ended August 31, 2020, we added incremental short-term committed revolving credit agreements of $625.0 million. We also issued $600.0 million of 10-year Senior Notes in July 2020, which was used to: (i) pay $400.0 million of Senior Notes due in December 2020 and (ii) increase our cash on hand. In addition, we have taken aggressive steps to reduce expenses, including suspending base salary increases for Fiscal Year 2021. Our Chief Executive Officer, Chief Financial Officer and other executive vice presidents will reduce their base salaries by 25% from June 1, 2020 through November 30, 2020 and will forego any bonus that would otherwise be due to them under Jabil’s Fiscal Year 2020 short-term incentive program. Members of Jabil’s Board of Directors will also reduce by 25% their annual cash retainers that would otherwise be payable during the period from June 1, 2020 through November 30, 2020. In order to further decrease operating expenses and better align with the needs of the business, we have reduced our worldwide workforce and implemented voluntary early retirement programs. In connection with reducing our worldwide workforce, we incurred $56.6 million of severance and benefit costs during the fiscal year ended August 31, 2020. Following this reduction in headcount, we expect annual savings beginning in Fiscal Year 2021 of approximately $40.0 million to $50.0 million. We continue to focus on prioritizing spending related to future business. We do not expect any material impairments or adjustments to the fair value of our assets as a result of the COVID-19 pandemic. In addition, we completed our annual impairment test for goodwill and indefinite-lived intangible assets during the fourth quarter of fiscal year 2020 and determined there was no impairment of our goodwill, intangible assets or long-lived assets. Our performance is subject to global economic conditions, as well as their impacts on levels of consumer spending and the production of goods. These current conditions are significantly impacted by COVID-19, have had a negative impact on our results of operations during the fiscal year ended August 31, 2020 and will continue to have a negative impact on our operations over the next fiscal year and likely beyond. 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): 28 Table of Contents Fiscal Year Ended August 31, 2020 2019 2018 Net revenue $ 27,266,438 $ 25,282,320 $ 22,095,416 Gross profit $ 1,930,813 $ 1,913,401 $ 1,706,792 Operating income $ 499,846 $ 701,356 $ 542,153 Net income attributable to Jabil Inc. $ 53,912 $ 287,111 $ 86,330 Earnings per share – basic $ 0.36 $ 1.85 $ 0.50 Earnings per share – diluted $ 0.35 $ 1.81 $ 0.49 Key Performance Indicators Management regularly reviews financial and non-financial performance indicators to assess the Company’s operating results. Changes in our operating assets and liabilities are largely affected by our working capital requirements, which are dependent on the effective management of our sales cycle as well as timing of payments. Our sales cycle measures how quickly we can convert our manufacturing services into cash through sales. We believe the metrics set forth below are useful to investors in measuring our liquidity as future liquidity needs will depend on fluctuations in levels of inventory, accounts receivable and accounts payable. The following table sets forth, for the quarterly periods indicated, certain of management’s key financial performance indicators: Three Months Ended August 31, 2020 May 31, 2020 February 29, 2020 November 30, 2019 Sales cycle (1) 16 days 27 days 30 days 23 days Inventory turns (annualized) (2) 6 turns 5 turns 5 turns 6 turns Days in accounts receivable (3) 35 days 37 days 34 days 43 days Days in inventory (4) 56 days 67 days 70 days 57 days Days in accounts payable (5) 75 days 77 days 74 days 77 days Three Months Ended August 31, 2019 May 31, 2019 February 28, 2019 November 30, 2018 Sales cycle (1) 19 days 27 days 25 days 16 days Inventory turns (annualized) (2) 6 turns 6 turns 6 turns 6 turns Days in accounts receivable (3) 38 days 39 days 38 days 38 days Days in inventory (4) 58 days 64 days 65 days 60 days Days in accounts payable (5) 77 days 76 days 78 days 82 days (1) The sales cycle is calculated as the sum of days in accounts receivable and days in inventory, less the days in accounts payable; accordingly, the variance in the sales cycle quarter over quarter is a direct result of changes in these indicators. (2) Inventory turns (annualized) are calculated as 360 days divided by days in inventory. (3) Days in accounts receivable is calculated as accounts receivable, net, divided by net revenue multiplied by 90 days. During the three months ended May 31, 2020 and November 30, 2019, the increase in days in accounts receivable from the prior sequential quarter was primarily due to an increase in accounts receivable, primarily driven by higher sales and timing of collections. During the three months ended February 29, 2020, the decrease in days in accounts receivable from the prior sequential quarter is primarily driven by lower sales and the timing of collections in the second quarter. (4) Days in inventory is calculated as inventory and contract assets divided by cost of revenue multiplied by 90 days. During the three months ended August 31, 2020, May 31, 2020 and August 31, 2019, 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 29, 2020, the increase in days in inventory from the prior sequential quarter is primarily driven by idle capacity and supply chain constraints, largely in China due to COVID-19. 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. (5) Days in accounts payable is calculated as accounts payable divided by cost of revenue multiplied by 90 days. 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 29 Table of Contents to lower materials purchases during the quarter and 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 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 periodic cost of materials adjustments, 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. 30 Table of Contents 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 Company may elect to perform a qualitative assessment to determine whether it is more likely than not that a reporting unit is impaired. If the qualitative assessment is not performed or if the Company determines that it is not more likely than not that the fair value of the reporting unit exceeds the carrying value, 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 Company may elect to perform a qualitative assessment to determine whether it is more likely than not that an indefinite-lived intangible is impaired. If the qualitative assessment is not performed or if the Company determines that it is not more likely than not that the fair value of an indefinite-lived intangible exceeds the carrying value, the recoverability 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 2020 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 15 — “Income Taxes” to the Consolidated Financial Statements. Recent Accounting Pronouncements See Note 19 – “New Accounting Guidance” to the Consolidated Financial Statements for a discussion of recent accounting guidance. 31 Table of Contents 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, 2019 for the results of operations discussion for the fiscal year ended August 31, 2019 compared to the fiscal year ended August 31, 2018 . Net Revenue Generally, we assess revenue on a global customer basis regardless of whether the growth is associated with organic growth or as a result of an acquisition. Accordingly, we do not differentiate or separately report revenue increases generated by acquisitions as opposed to existing business. In addition, the added cost structures associated with our acquisitions have historically been relatively insignificant when compared to our overall cost structure. 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. Fiscal Year Ended August 31, Change (dollars in millions) 2020 2019 2018 2020 vs. 2019 2019 vs. 2018 Net revenue $ 27,266.4 $ 25,282.3 $ 22,095.4 7.8 % 14.4 % 2020 vs. 2019 Net revenue increased during the fiscal year ended August 31, 2020 compared to the fiscal year ended August 31, 2019 . Specifically, the EMS segment revenues increased 8% primarily due to (i) a 10% increase in revenues from existing customers within our cloud business and (ii) a 2% increase in revenues from existing customers within our capital equipment business. The increase is partially offset by (i) a 3% decrease from existing customers within our networking and telecommunications business and (ii) a 1% decrease in revenues from existing customers within our print and retail business. DMS segment revenues increased 8% due to an 11% increase in revenues from new and existing customers in our healthcare business. The increase is partially offset by a 3% decrease in revenue from customers within our edge devices and accessories businesses. During fiscal year 2021, we expect lower revenue than fiscal year 2020 as approximately $1.0 billion in components that we procure and integrate for our cloud business will shift from a purchase and resale model to a consignment service model. As a result of this transition, we expect higher gross margins and lower cash used in this business. The following table sets forth, for the periods indicated, revenue by segment expressed as a percentage of net revenue: Fiscal Year Ended August 31, 2020 2019 2018 EMS 61 % 61 % 56 % DMS 39 % 39 % 44 % 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, 2020 2019 2018 Foreign source revenue 82.6 % 87.7 % 91.7 % Gross Profit Fiscal Year Ended August 31, (dollars in millions) 2020 2019 2018 Gross profit $ 1,930.8 $ 1,913.4 $ 1,706.8 Percent of net revenue 7.1 % 7.6 % 7.7 % 2020 vs. 2019 32 Table of Contents Gross profit as a percentage of net revenue decreased for the fiscal year ended August 31, 2020 compared to the fiscal year ended August 31, 2019 , primarily due to an increase of $108.8 million in incremental and idle labor costs associated with travel disruptions and governmental restrictions, largely related to the COVID-19 outbreak. This increase in costs was partially offset by governmental subsidies, such as lower payroll taxes or social insurance in certain countries, related to COVID-19 incentives. Additionally, gross profit as a percent of revenue decreased for the EMS segment largely due to product mix. The decrease was partially offset by an increase in the DMS segment due to improved profitability across the various businesses. Selling, General and Administrative Fiscal Year Ended August 31, Change (dollars in millions) 2020 2019 2018 2020 vs. 2019 2019 vs. 2018 Selling, general and administrative $ 1,174.7 $ 1,111.3 $ 1,050.7 $ 63.4 $ 60.6 2020 vs. 2019 Selling, general and administrative expenses increased during the fiscal year ended August 31, 2020 compared to the fiscal year ended August 31, 2019 . The increase is predominantly due to (i) $33.1 million in costs related to the COVID-19 outbreak, including personal protection equipment for our employees globally, (ii) a $41.6 million increase in salary and salary related expenses and other costs primarily due to our strategic collaboration with a healthcare company and (iii) a $21.7 million increase in stock-based compensation expense due to a higher stock price for awards granted during fiscal year 2020. The increase is partially offset by (i) a $20.5 million decrease in acquisition and integration charges related to our strategic collaboration with a healthcare company and (ii) a $12.5 million decrease due to lower salary and salary related expense across the Company and lower travel expenses related to the pandemic. Research and Development Fiscal Year Ended August 31, (dollars in millions) 2020 2019 2018 Research and development $ 44.1 $ 42.9 $ 38.5 Percent of net revenue 0.2 % 0.2 % 0.2 % 2020 vs. 2019 Research and development expenses remained consistent as a percent of net revenue during the fiscal year ended August 31, 2020 compared to the fiscal year ended August 31, 2019 . Amortization of Intangibles Fiscal Year Ended August 31, Change (dollars in millions) 2020 2019 2018 2020 vs. 2019 2019 vs. 2018 Amortization of intangibles $ 55.5 $ 31.9 $ 38.5 $ 23.6 $ (6.6 ) 2020 vs. 2019 Amortization of intangibles increased during the fiscal year ended August 31, 2020 compared to the fiscal year ended August 31, 2019 primarily driven by amortization related to the Nypro trade name, which was reclassified to a definite-lived intangible asset during fiscal year 2019 as a result of our decision that the indefinite-lived trade name of $72.5 million acquired during the acquisition of Nypro would be phased out by 2023. As such, this trade name was assigned a four-year estimated useful life and is being amortized on an accelerated basis. Restructuring, Severance and Related Charges Following is a summary of our restructuring, severance and related charges: 33 Table of Contents Fiscal Year Ended August 31, (dollars in millions) 2020 (2) 2019 (3) 2018 (3) Employee severance and benefit costs $ 94.0 $ 16.0 $ 16.3 Lease costs 7.7 — 1.6 Asset write-off costs 32.9 (3.6 ) 16.2 Other costs 22.0 13.5 2.8 Total restructuring, severance and related charges (1) $ 156.6 $ 25.9 $ 36.9 (1) Includes $61.9 million , $21.5 million and $16.3 million recorded in the EMS segment, $75.6 million , $2.6 million and $16.6 million recorded in the DMS segment and $19.1 million , $1.8 million and $4.0 million of non-allocated charges for the fiscal years ended August 31, 2020 , 2019 and 2018 , respectively. Except for asset write-off costs, all restructuring, severance and related charges are cash settled. (2) As the Company continues to optimize its cost structure and improve operational efficiencies, $56.6 million of employee severance and benefit costs was incurred in connection with a reduction in the worldwide workforce during the fiscal year ended August 31, 2020 . The remaining amount primarily relates to the 2020 Restructuring Plan. (3) Primarily relates to the 2017 Restructuring Plan, which was 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. Upon completion of the 2020 Restructuring Plan, the Company expects to recognize approximately $85.0 million in restructuring and other related costs. The Company incurred $76.9 million of costs during fiscal year 2020 and anticipates incurring the remaining costs during fiscal year 2021 for employee severance and benefit costs, asset write-off costs, and other related costs. The 2020 Restructuring Plan, once complete, is expected to yield annualized cost savings beginning in fiscal year 2021 of approximately $40.0 million. During fiscal year 2020, we realized cost savings of approximately $25.0 million. See Note 14 – “Restructuring, Severance and Related Charges” to the Consolidated Financial Statements for further discussion of restructuring, severance and related charges for the 2020 Restructuring Plans. Loss on Securities Fiscal Year Ended August 31, Change (dollars in millions) 2020 2019 2018 2020 vs. 2019 2019 vs. 2018 Loss on securities $ 48.6 $ 29.6 $ — $ 19.0 $ 29.6 2020 vs. 2019 The increase in loss on securities during the fiscal year ended August 31, 2020 compared to the fiscal year ended August 31, 2019 , is due to: (i) an impairment charge of $36.4 million during the fiscal year ended August 31, 2020, related to our investment in the Senior Non-Convertible Preferred Stock of iQor Holdings, Inc. (“iQor”) as a result of iQor’s bankruptcy filing; (ii) an impairment charge of $12.2 million during the fiscal year ended August 31, 2020, in connection with the sale of an investment in the optical networking segment; partially offset by (iii) a $29.6 million due to the restructuring of securities during the fiscal year ended August 31, 2019 due to the exchange of preferred stock of iQor in association with iQor’s previously announced sale of its international logistics and product service assets. Other Expense Fiscal Year Ended August 31, Change (dollars in millions) 2020 2019 2018 2020 vs. 2019 2019 vs. 2018 Other expense $ 31.2 $ 53.8 $ 37.6 $ (22.6 ) $ 16.2 34 Table of Contents 2020 vs. 2019 Other expense decreased during the fiscal year ended August 31, 2020 compared to the fiscal year ended August 31, 2019 , primarily due to: (i) an $18.2 million decrease in fees associated with the utilization of trade accounts receivable sales programs during fiscal year 2020 and fees incurred for the amended and new asset-backed securitization programs in fiscal year 2019 and (ii) a $14.6 million decrease driven primarily by the expected return on plan assets and actuarial gain related to the Company's pension plans. The decrease was partially offset by $7.3 million of costs incurred during the fiscal year ended August 31, 2020 as a result of the early redemption of the 5.250% Senior Notes due 2020. Interest Income Fiscal Year Ended August 31, Change (dollars in millions) 2020 2019 2018 2020 vs. 2019 2019 vs. 2018 Interest income $ 14.6 $ 21.5 $ 17.8 $ (6.9 ) $ 3.7 2020 vs. 2019 Interest income decreased during the fiscal year ended August 31, 2020 compared to the fiscal year ended August 31, 2019 , due to lower interest rates, partially offset by increased interest income on cash equivalents (investments that are readily convertible to cash with maturity dates of 90 days or less). Interest Expense Fiscal Year Ended August 31, Change (dollars in millions) 2020 2019 2018 2020 vs. 2019 2019 vs. 2018 Interest expense $ 173.9 $ 188.7 $ 149.0 $ (14.8 ) $ 39.7 2020 vs. 2019 Interest expense decreased during the fiscal year ended August 31, 2020 , compared to the fiscal year ended August 31, 2019 , due to lower interest rates, partially offset by additional borrowings on our credit facilities, commercial paper program and senior debt issuances. Income Tax Expense Fiscal Year Ended August 31, Change 2020 2019 2018 2020 vs. 2019 2019 vs. 2018 Effective income tax rate 78.2 % 35.8 % 76.6 % 42.4 % (40.8 )% 2020 vs. 2019 The effective income tax rate increased for the fiscal year ended August 31, 2020 , compared to the fiscal year ended August 31, 2019 , primarily due to: (i) lower income before income tax for the fiscal year ended August 31, 2020 , driven in part by increased restructuring charges with minimal related tax benefit; (ii) a $21.2 million income tax expense associated with the re-measurement of deferred tax assets related to the extension of a non-U.S. tax incentive recorded during the fiscal year ended August 31, 2020 ; and (iii) a $19.1 million income tax benefit related to the Tax Cuts and Jobs Act of 2017 (the “Tax Act”) adjustments for the fiscal year ended August 31, 2019 . 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 35 Table of Contents excluding the effects of the amortization of intangibles, stock-based compensation expense and related charges, restructuring, severance 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, loss on securities, income (loss) from discontinued operations, gain (loss) on sale of discontinued operations and certain other expenses, net of tax and certain deferred tax valuation allowance charges. Among other uses, management uses non-GAAP “core” financial measures to make operating decisions, assess business performance and as a factor in determining certain employee performance when evaluating incentive compensation. We determine the tax effect of the items excluded from “core” earnings and “core” 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 cash flows 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, severance 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. Adjusted free cash flow is defined as net cash provided by (used in) operating activities plus cash receipts on sold receivables less net capital expenditures (acquisition of property, plant and equipment less proceeds and advances from the sale of property, plant and equipment). We report adjusted free cash flow as we believe this non-GAAP financial measure is useful to investors in measuring our ability to generate cash internally and fund future growth and to provide a return to shareholders. 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: 36 Table of Contents Reconciliation of U.S. GAAP Financial Results to Non-GAAP Measures Fiscal Year Ended August 31, (in thousands, except for per share data) 2020 2019 2018 Operating income (U.S. GAAP) $ 499,846 $ 701,356 $ 542,153 Amortization of intangibles 55,544 31,923 38,490 Stock-based compensation expense and related charges 83,084 61,346 98,511 Restructuring, severance and related charges (1) 156,586 25,914 36,902 Distressed customer charge (2) 14,963 6,235 32,710 Net periodic benefit cost (3) 16,078 — — Business interruption and impairment charges, net (4) 5,785 (2,860 ) 11,299 Acquisition and integration charges (5) 32,167 52,697 8,082 Adjustments to operating income 364,207 175,255 225,994 Core operating income (Non-GAAP) $ 864,053 $ 876,611 $ 768,147 Net income attributable to Jabil Inc. (U.S. GAAP) $ 53,912 $ 287,111 $ 86,330 Adjustments to operating income 364,207 175,255 225,994 Loss on securities (6) 48,625 29,632 — Net periodic benefit cost (3) (16,078 ) — — Adjustment for taxes (7) (1,093 ) (18,633 ) 146,206 Core earnings (Non-GAAP) $ 449,573 $ 473,365 $ 458,530 Diluted earnings per share (U.S. GAAP) $ 0.35 $ 1.81 $ 0.49 Diluted core earnings per share (Non-GAAP) $ 2.90 $ 2.98 $ 2.62 Diluted weighted average shares outstanding (U.S. GAAP and Non-GAAP) 155,274 158,647 175,044 (1) As the Company continues to optimize its cost structure and improve operational efficiencies, $56.6 million of employee severance and benefit costs was incurred in connection with a reduction in the worldwide workforce during fiscal year 2020. The remaining amount primarily relates to the 2020 Restructuring Plan. (2) Relates to accounts receivable and inventory charges for certain distressed customers in the: (i) renewable energy sector during fiscal year 2020 and (ii) networking and consumer wearables sectors during fiscal years 2019 and 2018. (3) Following the adoption of Accounting Standards Update 2017-07, Compensation - Retirement Benefits (Topic 715) (“ASU 2017-07”), pension service cost is recognized in cost of revenue and all other components of net periodic benefit cost, including return on plan assets, are presented in other expense. We are reclassifying the pension components in other expense to core operating income as we assess operating performance, inclusive of all components of net periodic benefit cost, with the related revenue. There is no impact to core earnings or diluted core earnings per share for this adjustment. (4) Charges for the fiscal year ended August 31, 2020, relate to a flood that impacted our facility in Huangpu, China. 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 costs associated with damage from Hurricane Maria, which impacted our operations in Cayey, Puerto Rico. (5) Charges related to our strategic collaboration with Johnson & Johnson Medical Devices Companies (“JJMD”). (6) Relates to: (i) an impairment of an investment with iQor and the sale of an investment in the optical networking segment during fiscal year 2020 and (ii) a restructuring of securities loss on the exchange of an investment with iQor during fiscal year 2019. (7) 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. Adjusted Free Cash Flow Fiscal Year Ended August 31, (in thousands) 2020 2019 (1) 2018 Net cash provided by (used in) operating activities (U.S. GAAP) $ 1,257,275 $ 1,193,066 $ (1,105,448 ) Cash receipts on sold receivables — 96,846 2,039,298 Acquisition of property, plant and equipment (983,035 ) (1,005,480 ) (1,036,651 ) Proceeds and advances from sale of property, plant and equipment 186,655 218,708 350,291 Adjusted free cash flow (Non-GAAP) $ 460,895 $ 503,140 $ 247,490 (1) In fiscal year 2019, the adoption of Accounting Standards Update ("ASU") 2016-15, "Classification of Certain Cash Receipts and Cash Payments" resulted in a reclassification of cash flows from operating activities to investing activities for cash receipts for the deferred purchase price receivable on asset-backed securitization transactions. The adoption of this standard does not reflect a change in the underlying business or activities. The effects of this change are applied retrospectively to all prior periods. Quarterly Results (Unaudited) The following table sets forth certain unaudited quarterly financial information for the 2020 and 2019 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. 37 Table of Contents Fiscal Year 2020 Three Months Ended (in thousands, except for per share data) August 31, 2020 May 31, 2020 February 29, 2020 November 30, 2019 Net revenue $ 7,300,015 $ 6,335,642 $ 6,125,083 $ 7,505,698 Gross profit (1) 490,701 456,148 430,125 553,839 Operating income (1)(2)(3)(4) 197,053 59,384 90,630 152,779 Net income (loss) (1)(2)(3)(4)(5) 68,909 (50,263 ) (2,581 ) 40,714 Net income (loss) attributable to Jabil Inc. (1)(2)(3)(4)(5) $ 67,731 $ (50,958 ) $ (3,283 ) $ 40,422 Earnings (loss) per share attributable to the stockholders of Jabil Inc. Basic $ 0.45 $ (0.34 ) $ (0.02 ) $ 0.26 Diluted $ 0.44 $ (0.34 ) $ (0.02 ) $ 0.26 Fiscal Year 2019 Three Months Ended (in thousands, except for per share data) August 31, 2019 May 31, 2019 February 28, 2019 November 30, 2018 Net revenue $ 6,573,453 $ 6,135,602 $ 6,066,990 $ 6,506,275 Gross profit (1) 495,078 443,799 454,874 519,650 Operating income (1)(4) 189,745 140,918 153,983 216,710 Net income (1)(4)(5)(6) 53,761 44,032 67,607 124,074 Net income attributable to Jabil Inc. (1)(4)(5)(6) $ 52,675 $ 43,482 $ 67,354 $ 123,600 Earnings per share attributable to the stockholders of Jabil Inc. Basic $ 0.34 $ 0.28 $ 0.44 $ 0.77 Diluted $ 0.34 $ 0.28 $ 0.43 $ 0.76 (1) Includes a distressed customer charge of $15.0 million and $6.2 million during the three months ended November 30, 2019 and August 31, 2019, respectively. (2) Includes direct costs related to the COVID-19 pandemic of $21.5 million, $67.4 million and $53.0 million for the three months ended August 31, 2020, May 31, 2020, and February 29, 2020, respectively. (3) Includes employee severance and benefit costs incurred in connection with a reduction in the worldwide workforce of $4.3 million and $52.3 million for the three months ended August 31, 2020 and May 31, 2020, respectively. (4) Includes acquisition and integration charges related to our strategic collaboration with JJMD as follows (in millions): Three Months Ended August 31, 2020 May 31, 2020 February 29, 2020 November 30, 2019 Acquisition and integration charges $ 2.2 $ 6.1 $ 7.8 $ 16.1 Three Months Ended August 31, 2019 May 31, 2019 February 28, 2019 November 30, 2018 Acquisition and integration charges $ 17.6 $ 13.4 $ 12.8 $ 8.9 (5) Relates to: (i) an impairment of an investment with iQor during the three months ended August 31, 2020 and the sale of an investment in the optical networking segment during the three months ended February 29, 2020 and (ii) a restructuring of securities loss on the exchange of an investment with iQor during the three months ended August 31, 2019. (6) Includes $13.3 million of income tax benefit for the three months ended November 30, 2018 related to the Tax Act. 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 and second closings, respectively, of our acquisition of certain assets of JJMD. The aggregate purchase price paid for both the initial and second closings was approximately $167.4 million in cash. For the initial and second closings, total assets acquired of $173.5 million and total liabilities assumed of $6.1 million were recorded at their estimated fair values as of the acquisition dates. 38 Table of Contents On September 30, 2019, under the terms of the Framework Agreement, the Company completed the third closing of its acquisition of certain assets of JJMD. The aggregate purchase price paid for the third closing was approximately $113.1 million in cash. For the third closing, total assets acquired of $196.2 million , including $80.7 million in contract assets, $34.0 million in inventory and $56.0 million in goodwill, and total liabilities assumed of $83.1 million , including $73.5 million of pension obligations, were recorded at their estimated fair values as of the acquisition date. There were no intangible assets identified in this acquisition and the goodwill is primarily attributable to the assembled workforce. The majority of the goodwill is currently not expected to be deductible for income tax purposes. The acquisitions of the JJMD assets have been accounted for as separate business combinations for each closing using the acquisition method of accounting. The results of operations were included in the Company’s consolidated financial results beginning on February 25, 2019 for the initial closing, April 29, 2019 for the second closing and September 30, 2019 for the third closing. The Company believes it is impracticable to provide pro forma information for the acquisitions of the JJMD assets. Refer to Note 16 – “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, any share repurchases under the approved program, 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. Certain of our trade accounts receivable sale programs expire or are subject to termination provisions within the 2020 calendar year. While we expect to renew such trade accounts receivable sale programs, market conditions, including the implications of the COVID-19 pandemic, at the time our current programs expire may create challenges in doing so, such as incurring a higher cost of capital. Cash and Cash Equivalents As of August 31, 2020 , we had approximately $1.4 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. Most of our cash and cash equivalents as of August 31, 2020 could be repatriated to the United States without potential tax expense. Notes Payable and Credit Facilities Following is a summary of principal debt payments and debt issuance for our notes payable and credit facilities: 39 Table of Contents (in thousands) 5.625% Senior Notes 4.700% Senior Notes 4.900% Senior Notes 3.950% Senior Notes 3.600% Senior Notes (1) 3.000% Senior Notes (2) Borrowings under revolving credit facilities (3)(4)(5) Borrowings under commercial paper program (5) Borrowings under loans (3) Total notes payable and credit facilities Balance as of August 31, 2018 $ 397,995 $ 497,350 $ 298,814 $ 494,208 $ — $ — $ — $ — $ 830,332 $ 2,518,699 Borrowings — — — — — — 11,985,978 — — 11,985,978 Payments — — — — — — (11,985,259 ) — (25,134 ) (12,010,393 ) Other 891 654 243 617 — — (719 ) — 495 2,181 Balance as of August 31, 2019 398,886 498,004 299,057 494,825 — — — — 805,693 2,496,465 Borrowings — — — — 499,165 595,668 11,094,561 237,661 350,000 12,777,055 Payments (399,555 ) — — — — — (11,094,561 ) (237,661 ) (806,437 ) (12,538,214 ) Other 669 655 243 615 (4,409 ) (5,506 ) — — 909 (6,824 ) Balance as of August 31, 2020 $ — $ 498,659 $ 299,300 $ 495,440 $ 494,756 $ 590,162 $ — $ — $ 350,165 $ 2,728,482 Maturity Date Dec 15, 2020 Sep 15, 2022 Jul 14, 2023 Jan 12, 2028 Jan 15, 2030 Jan 15, 2031 Apr 23, 2021, Jan 22, 2023 and Jan 22, 2025 (3)(4)(5) (5) Jan 22, 2025 (3) Original Facility/ Maximum Capacity $400.0 million $500.0 million $300.0 million $500.0 million $500.0 million $600.0 million $3.7 billion (3)(4 )(5) (5) $351.9 million (3) (1) On January 15, 2020, we issued $500.0 million of publicly registered 3.600% Senior Notes due 2030 (the “3.600% Senior Notes”). The net proceeds from the offering were used for the repayment of term loan indebtedness. (2) On July 13, 2020, the Company issued $600.0 million of publicly registered 3.000% Senior Notes due 2031 (the “3.000% Senior Notes”). The net proceeds from the offering were used for general corporate purposes, including to redeem the $400.0 million aggregate principal amount of our 5.625% Senior Notes due 2020 and pay the applicable “make-whole” premium. (3) On January 22, 2020, we entered into a senior unsecured credit agreement which provides for: (i) a Revolving Credit Facility in the initial amount of $2.7 billion, of which $700.0 million expires on January 22, 2023 and $2.0 billion expires on January 22, 2025 and (ii) a $300.0 million Term Loan Facility which expires on January 22, 2025, (collectively the “Credit Facility”). Interest and fees on the Credit Facility advances are based on our non-credit enhanced long-term senior unsecured debt rating as determined by Standard & Poor’s Ratings Service, Moody’s Investors Service and Fitch Ratings. In connection with our entry into the Credit Facility, we terminated our amended and restated five-year credit agreement dated November 8, 2017 and the credit agreement dated August 24, 2018. During the fiscal year ended August 31, 2020 , the interest rates on the Revolving Credit Facility ranged from 1.2% to 4.3% and the Term Loan Facility ranged from 1.6% to 2.9% . Interest is charged at a rate equal to (a) for the Revolving Credit Facility, either 0.000% to 0.450% above the base rate or 0.975% to 1.450% above the Eurocurrency rate and (b) for the Term Loan Facility, either 0.125% to 0.750% above the base rate or 1.125% to 1.750% 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. Additionally, our foreign subsidiaries have various additional credit facilities that finance their future growth and any corresponding working capital needs. (4) On April 24, 2020, we entered into an unsecured 364-day revolving credit agreement up to an initial aggregate amount of $375.0 million, which was increased to $425.0 million on May 29, 2020 (the “364-Day Revolving Credit Agreement”). The 364-Day Revolving Credit Agreement expires on April 23, 2021. Interest and fees on the 364-Day 40 Table of Contents Revolving Credit Agreement advances are based on our non-credit enhanced long-term senior unsecured debt rating as determined by Standard & Poor’s Ratings Service, Moody’s Investors Service and Fitch Ratings. As of August 31, 2020 , no draws were made on the 364-Day Revolving Credit Agreement. Interest is charged at a rate equal to either (i) 0.450%, 0.525% or 0.800% above the base rate or (ii) 1.450%, 1.525% or 1.800% above the Eurodollar rate. The base rate represents the greatest of: (i) Mizuho’s base rate, (ii) 0.50% above the federal funds rate, and (iii) 1.0% above one-month LIBOR, subject to a floor of 0.75%. The Eurodollar rate represents adjusted LIBOR for the applicable interest period, subject to a floor of 0.75%. Fees include a facility fee based on the revolving credit commitments of the lenders. (5) As of August 31, 2020 , we had $3.7 billion in available unused borrowing capacity under our revolving credit facilities. The Revolving Credit Facility under the Credit Facility acts as the back-up facility for commercial paper outstanding, if any. We have a borrowing capacity of up to $1.8 billion under our commercial paper program. In the ordinary course of business, we have letters of credit and surety bonds with banks and insurance companies outstanding of $120.3 million as of August 31, 2020 . Unused letters of credit were $94.0 million as of August 31, 2020 . 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 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, 2020 and 2019 , we were in compliance with our debt covenants. Refer to Note 7 – “Notes Payable and Long-Term Debt” to the Consolidated Financial Statements for further details. Asset-Backed Securitization Programs We continuously sell designated pools of trade accounts receivable, at a discount, under our foreign asset-backed securitization program and our North American asset-backed securitization program to special purpose entities, which in turn sell certain of the receivables under the foreign program to an unaffiliated financial institution and a conduit administered by an unaffiliated financial institution and certain of the receivables under the North American program to conduits administered by an unaffiliated financial institution on a monthly basis. The foreign asset-backed securitization program contains a guarantee of payment by the special purpose entity, in an amount approximately equal to the net cash proceeds under the program. No liability has been recorded for obligations under the guarantee as of August 31, 2020 . Certain unsold receivables covering the maximum amount of net cash proceeds available under the North American asset-backed securitization program are pledged as collateral to the unaffiliated financial institution as of August 31, 2020 . 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 $ 390.0 November 22, 2021 Foreign $ 400.0 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, 2020 , we sold $4.3 billion of trade accounts receivable and we received cash proceeds of $4.3 billion . As of August 31, 2020 , we had up to $49.0 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, 2020 and 2019 , we were in compliance with all covenants under our asset-backed securitization programs. Refer to Note 8 – “Asset-Backed Securitization Programs” to the Consolidated Financial Statements for further details on the programs. Trade Accounts Receivable Sale Programs 41 Table of Contents 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 Maximum Amount (in millions) (1) Type of Facility Expiration Date A $ 600.0 Uncommitted December 5, 2020 (2) B $ 150.0 Uncommitted November 30, 2020 (3) C 400.0 CNY Uncommitted August 31, 2023 D $ 150.0 Uncommitted May 4, 2023 (4) E $ 150.0 Uncommitted January 25, 2021 (5) F $ 50.0 Uncommitted February 23, 2023 (6) G $ 100.0 Uncommitted August 10, 2021 (7) H $ 100.0 Uncommitted July 21, 2021 (8) I $ 650.0 Uncommitted December 4, 2020 (9) J $ 135.0 Uncommitted April 11, 2021 (10) K 100.0 CHF Uncommitted December 5, 2020 (2) (1) Maximum amount of trade accounts receivable that may be sold under a facility at any one time. (2) The program will be automatically extended through December 5, 2025 unless either party provides 30 days’ notice of termination. (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. (6) Any party may elect to terminate the agreement upon 15 days’ prior notice. (7) The program will be automatically extended through August 10, 2023 unless either party provides 30 days’ notice of termination. (8) The program will be automatically extended through August 21, 2023 unless either party provides 30 days’ notice of termination. (9) The program will be automatically extended through December 5, 2024 unless either party provides 30 days’ notice of termination. (10) 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, 2020 , we sold $8.5 billion of trade accounts receivable under these programs and we received cash proceeds of $8.4 billion . As of August 31, 2020 , we had up to $1.4 billion in available liquidity under our trade accounts receivable sale programs. Capital Expenditures For Fiscal Year 2021 , we anticipate our net capital expenditures will be approximately $800.0 million. In general, our capital expenditures support ongoing maintenance in our DMS and EMS segments and investments in capabilities and targeted end 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): 42 Table of Contents Fiscal Year Ended August 31, 2020 2019 2018 Net cash provided by (used in) operating activities $ 1,257,275 $ 1,193,066 $ (1,105,448 ) Net cash (used in) provided by investing activities (921,113 ) (872,454 ) 1,240,914 Net cash used in financing activities (65,123 ) (415,772 ) (47,044 ) Effect of exchange rate changes on cash and cash equivalents (40,825 ) 554 (20,392 ) Net increase (decrease) in cash and cash equivalents $ 230,214 $ (94,606 ) $ 68,030 Operating Activities Net cash provided by operating activities during the fiscal year ended August 31, 2020 was primarily due to increased accounts payable, accrued expenses and other liabilities, partially offset by increased prepaid expenses and other current assets, accounts receivable, contract assets and inventories. The increase in accounts payable, accrued expenses and other liabilities is primarily due to the timing of purchases and cash payments and the third closing of the acquisition of JJMD. The increase in prepaid expenses and other current assets is primarily due to an increase in value added tax receivables and forward contract assets. The increase in accounts receivable is primarily driven by higher sales and the timing of collections. The increase in contract assets is primarily driven by the third closing of the acquisition of JJMD and due to the timing of revenue recognition for over time customers. The increase in inventories is primarily to support expected sales levels in the first quarter of fiscal year 2021. Investing Activities Net cash used in investing activities during the fiscal year ended August 31, 2020 consisted primarily of: (i) capital expenditures principally to support ongoing business in the DMS and EMS segments, (ii) expenditures for assets acquired in connection with the third closing of the acquisition of certain assets of JJMD and (iii) purchase price adjustments for the first and second closing of certain assets of JJMD, partially offset by (iv) proceeds and advances from the sale of property, plant and equipment. Financing Activities Net cash used in financing activities during the fiscal year ended August 31, 2020 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 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 indicated below (in thousands): Dividends Paid (1) Share Repurchases (2) Total Fiscal year 2016 $ 62,436 $ 148,185 $ 210,621 Fiscal year 2017 $ 59,959 $ 306,397 $ 366,356 Fiscal year 2018 $ 57,833 $ 450,000 $ 507,833 Fiscal year 2019 $ 52,004 $ 350,000 $ 402,004 Fiscal year 2020 $ 50,462 $ 213,925 $ 264,387 Total $ 282,694 $ 1,468,507 $ 1,751,201 (1) The difference between dividends declared and dividends paid is due to dividend equivalents for unvested restricted stock units that are paid at the time the awards vest. (2) Excludes commissions. We currently expect to continue to declare and pay regular quarterly dividends of an amount similar to our past declarations. However, the declaration and payment of future dividends are discretionary and will be subject to determination by our Board each quarter following its review of our financial performance and global economic conditions. 43 Table of Contents 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 (“the 2020 Share Repurchase Program”). As of August 31, 2020 , 6.0 million shares had been repurchased for $213.9 million and $386.1 million remains available under the 2020 Share Repurchase Program. Contractual Obligations Our contractual obligations as of August 31, 2020 are summarized below. As disclosed below, while we have certain non-cancelable purchase order obligations for property, plant and equipment, we generally do not enter into non-cancelable purchase orders for materials until we receive a corresponding purchase commitment from our customer. Non-cancelable purchase orders do not typically extend beyond the normal lead time of several weeks, at most. Purchase orders beyond this time frame are typically cancelable. Payments due by period (in thousands) Total Less than 1 year 1-3 years 3-5 years After 5 years Notes payable and long-term debt $ 2,728,482 $ 50,194 $ 828,261 $ 269,667 $ 1,580,360 Future interest on notes payable and long-term debt (1) 609,607 98,544 171,639 116,964 222,460 Operating lease obligations (2) 457,167 121,196 157,095 93,077 85,799 Finance lease obligations (3) 194,411 12,383 25,227 55,690 101,111 Non-cancelable purchase order obligations (4) 529,307 425,335 72,464 31,508 — Pension and postretirement contributions and payments (5) 41,112 25,109 2,120 2,988 10,895 Other (6) 72,503 33,820 13,600 15,267 9,816 Total contractual obligations (7) $ 4,632,589 $ 766,581 $ 1,270,406 $ 585,161 $ 2,010,441 (1) Consists of interest on notes payable and long-term debt outstanding as of August 31, 2020 . 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) Excludes $137.8 million of payments related to leases signed but not yet commenced. Additionally, certain leases signed but not yet commenced contain residual value guarantees and purchase options not deemed probable. (3) The amount payable after five years includes $75.1 million in purchase requirements at the end of the respective leases. (4) Consists of purchase commitments entered into as of August 31, 2020 primarily for property, plant and equipment and software pursuant to legally enforceable and binding agreements. (5) Includes the estimated company contributions to funded pension plans during fiscal year 2021 and the expected benefit payments for unfunded pension and postretirement plans from fiscal years 2021 through 2030. These future payments are not recorded on the Consolidated Balance Sheets but will be recorded as incurred. (6) Includes (i) a $27.0 million capital commitment, (ii) a $12.5 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. (7) As of August 31, 2020 , we have $0.4 million and $118.8 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.