JABIL INC 10-K

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, 2020 . 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 44 Table of Contents 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, Malaysian ringgit, Mexican pesos and Swiss francs. Based on our overall currency rate exposures as of August 31, 2020 , 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 11 — “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 Credit Facility. There were $349.5 million in borrowings outstanding under debt facilities with variable interest rates as of August 31, 2020 . We utilize valuation models to estimate the effects of sudden interest rate changes. Primarily due to the current low interest rates, the impact of a hypothetical change of 10.0% in variable interest rates would not have a material effect on our Consolidated Financial Statements. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources” and Note 7 — “Notes Payable and Long-Term Debt” to the Consolidated Financial Statements for additional information regarding our outstanding debt obligations. To manage our exposure to market risk, we use derivative financial instruments and hybrid instruments when deemed appropriate. We have interest rate swap agreements with a notional value of $200.0 million, with mandatory termination dates from August 15, 2020 to February 15, 2022 (the “2020 Extended Interest Rate Swaps”). In addition, we have entered into interest rate swaps to offset future exposures of fluctuations in the fair value of the 2020 Extended Interest Rate Swaps. See Note 11 — “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 are monitoring developments related to LIBOR; see “Risk Factors” for additional information.