What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2021-07-02 compared with 2021-04-02 · 97 added, 159 removed, 260 unchanged (50% of the section changed)

7 unchanged sentences

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.

We conduct our operations in facilities that are located worldwide, including but not limited to, China, Malaysia, Mexico, Singapore, the United States and Vietnam.

We derived a substantial majority, 84.7% and 84.1%, of net revenue from our international operations for the three months and six months ended February 28, 2021, respectively.

We conduct our operations in facilities that are located worldwide, including but not limited to, China, Malaysia, Mexico, Singapore, the United States and Hungary.

We derived a substantial majority, 82.7% and 83.6%, of net revenue from our international operations for the three months and nine months ended May 31, 2021, respectively.

Our global manufacturing production sites allow customers to manufacture products simultaneously in the optimal locations for their products.

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February 28, 2021

February 29, 2020

February 28, 2021

February 29, 2020

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Operating income

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February 28, 2021

November 30, 2020

February 29, 2020

Sales cycle (1)

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(3) Days in accounts receivable is calculated as accounts receivable, net, divided by net revenue multiplied by 90 days.

During the three months ended February 28, 2021, the increase in days in accounts receivable from the three months ended February 29, 2020 was primarily due to an increase in accounts receivable, primarily driven by higher sales and timing of collections.

During the three months ended May 31, 2021 and February 28, 2021, the increase in days in accounts receivable from the three months ended May 31, 2020 was primarily due to an increase in accounts receivable, primarily driven by higher sales and timing of collections.

(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 February 28, 2021, the increase in days in inventory from the prior sequential quarter was to support expected sales levels in the third quarter of fiscal year 2021.

During the three months ended February 28, 2021, the decrease in days in inventory from the three months ended February 29, 2020 was primarily due to idle capacity and supply chain constraints, largely in China due to COVID-19 during the three months ended February 29, 2020.

During the three months ended May 31, 2021, the increase in days in inventory from the prior sequential quarter was to support expected sales levels in the fourth quarter of fiscal year 2021.

(5) Days in accounts payable is calculated as accounts payable divided by cost of revenue multiplied by 90 days.

During the three months ended February 28, 2021, the increase in days in accounts payable from the three months ended February 29, 2020 was primarily due to an increase for material purchases and the timing of payments.

During the three months ended May 31, 2021, the increase in days in accounts payable from the three months ended February 28, 2021 and the three months ended May 31, 2021, respectively, was primarily due to an increase for material purchases and the timing of payments.

Critical Accounting Policies and Estimates

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however, actual results may vary from these estimates and assumptions under different future circumstances.

Operations – Critical Accounting Policies and Estimates” in our Annual Report on Form 10-K for the fiscal year ended August 31, 2020.

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 and “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Critical Accounting Policies and Estimates” in our Annual Report on Form 10-K for the fiscal year ended August 31, 2020.

Recent Accounting Pronouncements

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(dollars in millions)

February 28, 2021

February 29, 2020

February 28, 2021

February 29, 2020

Net revenue increased during the three months ended February 28, 2021, compared to the three months ended February 29, 2020.

Net revenue increased during the three months ended May 31, 2021, compared to the three months ended May 31, 2020.

Specifically, the DMS segment net revenue increased 21% due to:

(i) a 17% increase in revenues from existing customers within our mobility business as our ability to meet customer demand during the three months ended February 29, 2020, was greatly diminished due to COVID-19 containment efforts in China , (ii) a 6% increase in revenues from existing customers within our connected devices business and (iii) a 3% increase in revenues from existing customers in our automotive and transportation business.

The EMS segment net revenue decreased 1% primarily due to a decrease in revenues from existing customers within our cloud business, which began transitioning to a consignment model in fiscal year 2021.

Net revenue increased during the six months ended February 29, 2021, compared to the six months ended February 29, 2020.

(i) a 7% increase in revenues from existing customers in our automotive and transportation business, (ii) a 7% increase in revenues from existing customers within our connected devices business, (iii) a 6% increase in revenue from existing customers within our healthcare and packaging business and (iv) a 1% increase in revenues from existing customers within our mobility business.

The EMS segment net revenue increased 8% due to:

(i) a 3% increase from existing customers within our 5G, wireless and cloud business, (ii) a 2% increase from existing customers within our networking and storage business, (iii) a 2% increase from existing customers within our digital print and retail business, and (iv) a 1% increase from an existing customer within our industrial and capital equipment business.

Net revenue increased during the nine months ended May 31, 2021, compared to the nine months ended May 31, 2020.

Specifically, the DMS segment net revenue increased 19% due to:

(i) a 12% increase in revenues from existing customers within our mobility business as our ability to meet customer demand during the six months ended February 29, 2020, was greatly diminished due to COVID-19 containment efforts in China , (ii) a 5% increase in revenues from existing customers within our connected devices business and (iii) a 2% increase in revenues from existing customers in our automotive and transportation business.

The EMS segment net revenue decreased 3% primarily due to a decrease in revenues from existing customers within our cloud business, which began transitioning to a consignment model in fiscal year 2021.

(i) a 8% increase in revenues from existing customers within our mobility business as our ability to meet customer demand during the nine months ended May 31, 2020, was greatly diminished due to COVID-19 containment efforts in China, (ii) a 5% increase in revenues from existing customers within our connected devices business, (iii) a 4% increase in revenues from existing customers in our automotive and transportation business and (iv) a 2% increase in revenues from existing customers within our healthcare and packaging business.

The EMS segment net revenue remained relatively consistent.

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

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The following table sets forth, for the periods indicated, foreign source revenue expressed as a percentage of net revenue:

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February 29, 2020

February 28, 2021

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Foreign source revenue

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(dollars in millions)

February 28, 2021

February 29, 2020

February 28, 2021

February 29, 2020

Percent of net revenue

For the three months and six months ended February 28, 2021, gross profit as a percentage of net revenue increased as compared to the three months and six months ended February 29, 2020, primarily due to:

Gross profit as a percentage of net revenue increased as compared to the three months and nine months ended May 31, 2020, primarily due to:

(i) product mix and improved profitability across the various businesses and (ii) a decrease in incremental and idle labor costs associated with travel disruptions and governmental restrictions, largely related to the COVID-19 pandemic of $44.3 million and $72.1 million, for the three months ended and nine months ended May 31, 2021, respectively.

Selling, General and Administrative

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February 28, 2021

February 29, 2020

Selling, general and administrative

Selling, general and administrative expenses increased during the three months ended February 28, 2021, compared to the three months ended February 29, 2020.

Selling, general and administrative expenses increased during the three months ended May 31, 2021, compared to the three months ended May 31, 2020.

The increase is primarily due to:

(i) a $16.6 million increase due to higher salary and salary related expenses, partially offset by a decrease in travel expenses due to reduced travel as result of the COVID-19 pandemic and (ii) an $8.7 million increase in stock-based compensation expense due to a higher stock price for awards granted during fiscal year 2021 and anticipated achievement levels for certain performance-based stock awards.

The increase is partially offset by a $6.5 million decrease in acquisition and integration charges related to our strategic collaboration with a healthcare company.

Selling, general and administrative expenses decreased during the six months ended February 28, 2021, compared to the six months ended February 29, 2020.

The decrease is primarily due to:

(i) a $20.5 million decrease in acquisition and integration charges related to our strategic collaboration with a healthcare company (ii) a $7.8 million decrease due to lower travel expenses related to a reduction in travel due to the COVID-19 pandemic, partially offset by higher salary and salary related expenses.

The decrease is partially offset by (i) a $12.0 million increase in stock-based compensation expense due to a higher stock price for awards granted during fiscal year 2021 and anticipated achievement levels for certain performance-based stock awards and (ii) an $11.1 million increase in costs related to the COVID-19 pandemic for personal protection equipment for our employees globally.

(i) a $17.3 million increase due to higher salary and salary related expenses and (ii) a $1.9 million increase in stock-based compensation expense due to anticipated achievement levels for certain performance-based stock awards and a higher stock price for cash-settled awards.

The increase is partially offset by:

(i) a $10.4 million decrease in costs related to the COVID-19 pandemic, primarily for personal protection equipment for our employees globally, and (ii) a $6.1 million decrease in acquisition and integration charges related to our strategic collaboration with a healthcare company.

Selling, general and administrative expenses decreased during the nine months ended May 31, 2021, compared to the nine months ended May 31, 2020.

The decrease is primarily due to a $26.6 million decrease in acquisition and integration charges related to our strategic collaboration with a healthcare company.

The decrease is partially offset by (i) a $13.9 million increase in stock-based compensation expense due to anticipated achievement levels for certain performance-based stock awards, a higher stock price for awards granted during fiscal year 2021 and a higher stock price for cash-settled awards and (ii) a $10.2 million increase due to higher salary and salary related expenses.

Research and Development

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Research and development

Percent of net revenue

Research and development expenses remained relatively consistent as a percentage of net revenue during the three months and six months ended February 28, 2021, compared to the three months and six months ended February 29, 2020.

Research and development expenses remained relatively consistent as a percentage of net revenue during the three months and nine months ended May 31, 2021, compared to the three months and nine months ended May 31, 2020.

Amortization of Intangibles

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Amortization of intangibles

Amortization of intangibles decreased during the three months and six months ended February 28, 2021, compared to the three months and six months ended February 29, 2020, primarily due to certain intangible assets that were fully amortized during fiscal year 2020.

Amortization of intangibles decreased during the three months and nine months ended May 31, 2021, compared to the three months and nine months ended May 31, 2020, primarily due to certain intangible assets that were fully amortized during fiscal year 2020.

Restructuring, Severance and Related Charges

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Employee severance and benefit costs

1 unchanged sentence

Total restructuring, severance and related charges (1)

(1) Primarily relates to the 2020 Restructuring Plan, and includes $2.5 million and $14.7 million recorded in the EMS segment, $4.0 million and $14.5 million recorded in the DMS segment and $0.1 million and $0.4 million of non-allocated charges for the three months ended February 28, 2021 and February 29, 2020, respectively.

Includes $(0.5) million and $32.1 million recorded in the EMS segment, $5.0 million and $39.7 million recorded in the DMS segment and $0.4 million and $3.1 million of non-allocated charges for the six months ended February 28, 2021 and February 29, 2020, respectively.

(1) Primarily relates to the 2020 Restructuring Plan, and includes $0.0 million and $23.7 million recorded in the EMS segment, $0.6 million and $29.3 million recorded in the DMS segment and $0.1 million and $16.2 million of non-allocated charges for the three months ended May 31, 2021 and 2020, respectively.

Includes $(0.4) million and $55.8 million recorded in the EMS segment, $5.5 million and $69.0 million recorded in the DMS segment and $0.6 million and $19.2 million of non-allocated charges for the nine months ended May 31, 2021 and 2020, respectively.

Except for asset write-off costs, all restructuring, severance and related charges are cash costs.

See Note 12 – “Restructuring, Severance and Related Charges” to the Condensed Consolidated Financial Statements for further discussion of restructuring, severance and related charges for the 2020 Restructuring Plan.

Impairment on Securities

(Gain) Impairment on Securities

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Impairment on securities

The decrease in impairment on securities for the three months and six months ended February 28, 2021, compared to the three months and six months ended February 29, 2020 is due to a non-cash impairment charge in connection with the sale of an investment in the optical networking segment during the three months ended February 29, 2020.

(Gain) impairment on securities

The change in (gain) impairment on securities for the three months ended May 31, 2021 compared to the three months ended May 31, 2020 is due to cash proceeds received in connection with the sale of an investment.

For the nine months ended May 31, 2021 compared to the nine months ended May 31, 2020, the cash proceeds were partially offset by a non-cash impairment charge incurred in connection with the sale of an investment in the optical networking segment during fiscal year 2020.

Other (Income) Expense

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Other (income) expense

Other (income) expense increased for the three months ended February 28, 2021, compared to the three months ended February 29, 2020, primarily due to:

(i) $7.9 million related to a decrease in fees associated with lower utilization of the trade accounts receivable sales programs and (ii) $3.1 million related to lower net periodic benefit costs.

The decrease is partially offset by $0.9 million arising from an increase in other expense.

Other (income) expense increased during the six months ended February 28, 2021, compared to the six months ended February 29, 2020, primarily due to:

(i) $15.5 million related to a decrease in fees associated with lower utilization of the trade accounts receivable sales programs, (ii) $7.0 million related to lower net periodic benefit costs and (iii) $0.7 million arising from a reduction in other expense.

The change in other (income) expense for the three months ended May 31, 2021 compared to the three months ended May 31, 2020, is primarily due to:

(i) $5.3 million related to a decrease in fees associated with lower utilization of the trade accounts receivable sales programs, (ii) $2.9 million related to lower net periodic benefit costs and (iii) $0.8 million arising from an increase in other income.

The change in other (income) expense for the nine months ended May 31, 2021 compared to the nine months ended May 31, 2020, is primarily due to:

(i) $20.8 million related to a decrease in fees associated with lower utilization of the trade accounts receivable sales programs, (ii) $9.9 million related to lower net periodic benefit costs and (iii) $1.4 million arising from an increase in other income.

Interest Income

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Interest income

Interest income decreased during the three months and six months ended February 28, 2021, compared to the three months and six months ended February 29, 2020, primarily due to lower interest rates on cash equivalents (investments that are readily convertible to cash with maturity dates of 90 days or less).

Interest income decreased during the three months and nine months ended May 31, 2021, compared to the three months and nine months ended May 31, 2020, primarily due to lower interest rates on cash equivalents (investments that are readily convertible to cash with maturity dates of 90 days or less).

Interest Expense

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Interest expense

Interest expense decreased during the three months and six months ended February 28, 2021, compared to the three months and six months ended February 29, 2020 due to lower interest rates and lower borrowings on our credit facilities and commercial paper program.

Interest expense decreased during the three months and nine months ended May 31, 2021, compared to the three months and nine months ended May 31, 2020 due to lower interest rates and lower borrowings on our credit facilities and commercial paper program.

Income Tax Expense

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Effective income tax rate

The effective income tax rate decreased for the three months and six months ended February 28, 2021, compared to the three months and six months ended February 29, 2020, primarily due to increased income for the three months and six months ended February 28, 2021, driven in part by decreased restructuring charges in tax jurisdictions with minimal related income tax benefit.

The effective income tax rate decreased for the three months and nine months ended May 31, 2021, compared to the three months and nine months ended May 31, 2020, primarily due to:

(i) increased income for the three months and nine months ended May 31, 2021, driven in part by decreased restructuring charges in tax jurisdictions with minimal related income tax benefit and (ii) a $21.2 million income tax expense associated with the re-measurement of deferred tax assets related to an extension of a non-U.S.

tax incentive recorded during the three months ended May 31, 2020.

Non-GAAP (Core) Financial Measures

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Also, our “core” financial measures should not be construed as an indication by us that our future results will be unaffected by those items that are excluded from our “core” financial measures.

Management believes that the non-GAAP “core” financial measures set forth below are useful to facilitate evaluating the past and future performance of our ongoing manufacturing operations over multiple periods on a comparable basis by excluding the effects of the amortization of intangibles, stock-based compensation expense and related charges, restructuring, 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.

Management believes that the non-GAAP “core” financial measures set forth below are useful to facilitate evaluating the past and future performance of our ongoing manufacturing operations over multiple periods on a comparable basis by excluding the effects of the amortization of intangibles, stock-based compensation expense and related charges, restructuring, 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, (gain) impairment on securities, income (loss) from discontinued operations, gain (loss) on sale of discontinued operations and certain other expenses, net of tax and certain deferred tax valuation allowance charges.

Among other uses, management uses non-GAAP “core” financial measures to make operating decisions, assess business performance and as a factor in determining certain employee performance when evaluating incentive compensation.

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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.

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(in thousands, except for per share data)

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February 29, 2020

Operating income (U.S.

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Adjustments to operating income

Impairment on securities

(Gain) impairment on securities

Net periodic benefit cost (2)

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Diluted weighted average shares outstanding (Non-GAAP)

(1) Relates to accounts receivable and inventory charges for certain distressed customers in the renewable energy sector during the six months ended February 29, 2020.

(1) Relates to accounts receivable and inventory charges for certain distressed customers in the renewable energy sector during the nine months ended May 31, 2020.

(2) 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.

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Adjusted Free Cash Flow

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Net cash provided by operating activities (U.S.

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On October 26, 2020, under the terms of the framework agreement, we completed the fourth closing of our acquisition of certain assets of JJMD.

The preliminary aggregate purchase price paid for the fourth closing was approximately $18.4 million in cash, which remains subject to certain post-closing adjustments based on conditions within the Framework Agreement.

The aggregate purchase price paid for the fourth closing was approximately $18.9 million in cash.

Total assets acquired of $29.8 million and total liabilities assumed of $10.9 million were recorded at their estimated fair values as of the acquisition date.

The acquisition of the JJMD assets was accounted for as a business combination using the acquisition method of accounting.

We are currently evaluating the fair value of the assets and liabilities related to the fourth closing.

The Company is currently evaluating the fair value of the assets and liabilities related to the fourth closing.

The preliminary estimates and measurements are, therefore, subject to change during the measurement period for assets acquired, liabilities assumed and tax adjustments.

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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 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 North American asset-backed securitization program 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.

Cash and Cash Equivalents

As of February 28, 2021, we had approximately $838.1 million in cash and cash equivalents.

As of May 31, 2021, 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.

Most of our cash and cash equivalents as of February 28, 2021 could be repatriated to the United States without potential tax expense.

Most of our cash and cash equivalents as of May 31, 2021 could be repatriated to the United States without potential tax expense.

Notes Payable and Credit Facilities

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3.000% Senior Notes

1.700% Senior Notes (1)

facilities (2)(3)

Balance as of August 31, 2020

Balance as of February 28, 2021

Balance as of May 31, 2021

Maturity Date

Apr 23, 2021, Jan 22, 2023 and Jan 22, 2025

Jan 22, 2024 and Jan 22, 2026

Original Facility/ Maximum Capacity

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$600.0 million

$500.0 million

$3.8 billion (2)(3)

$51.9 million (1)

(1) As of February 28, 2021, we had $3.8 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.

(1) On April 14, 2021, we issued $500.0 million of publicly registered 1.700% Senior Notes due 2026 (the “1.700% Senior Notes”).

We used the net proceeds for general corporate purposes, including repayment of the prior $300.0 million Term Loan Facility.

(2) On April 28, 2021, we entered into an amendment (the “Amendment”) to our senior unsecured credit agreement dated as of January 22, 2020 (the “Credit Facility”).

The Amendment, among other things, (i) increased the commitments available under the three-year revolving credit facility (the “Three-Year Revolving Credit Facility”) from

$700.0 million to $1.2 billion, (ii) instituted certain sustainability-linked adjustments to the interest rates applicable to borrowings under the Credit Facility and (iii) primarily extended the termination date of the Three-Year Revolving Credit Facility to January 22, 2024, and of the Five-Year Revolving Credit Facility of $2.0 billion to January 22, 2026.

(3) As of May 31, 2021, we had $3.8 billion in available unused borrowing capacity under our revolving credit facilities.

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.

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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 February 28, 2021 and August 31, 2020, we were in compliance with our debt covenants.

As of May 31, 2021 and August 31, 2020, we were in compliance with our debt covenants.

Refer to Note 4 – “Notes Payable and Long-Term Debt” to the Condensed 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 February 28, 2021.

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 February 28, 2021.

We continuously sell designated pools of trade accounts receivable, at a discount, under our North American asset-backed securitization program to a special purpose entity, which in turn sells certain of the receivables to conduits administered by an unaffiliated financial institution on a monthly basis.

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

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November 22, 2021

September 30, 2021

(1) Maximum amount available at any one time.

In connection with our asset-backed securitization programs, during the three months and six months ended February 28, 2021, we sold $1.1 billion and $2.3 billion, respectively, of trade accounts receivable and we received cash proceeds of $1.1 billion and $2.3 billion, respectively.

As of February 28, 2021, we had up to $53.3 million in available liquidity under our asset-backed securitization programs.

(2) We terminated the foreign asset-backed securitization program on June 28, 2021.

In connection with the termination, we paid approximately $167.0 million in cash, which consisted of a remittance of collections received prior to that date in our role as servicer of sold receivables, and a repurchase at fair value of all previously sold receivables that remained outstanding as of that date.

We expect to receive payment on the repurchased receivables from the related customers during the fourth quarter of fiscal year 2021.

In connection with our asset-backed securitization programs, during the three months and nine months ended May 31, 2021, we sold $1.1 billion and $3.4 billion, respectively, of trade accounts receivable and we received cash proceeds of $1.1 billion and $3.4 billion, respectively.

As of May 31, 2021, we had up to $148.5 million in available liquidity under our asset-backed securitization programs, of which all available liquidity related to the foreign asset-backed securitization program.

Our asset-backed securitization programs contain various financial and nonfinancial covenants.

As of February 28, 2021 and August 31, 2020, we were in compliance with all covenants under our asset-backed securitization programs.

As of May 31, 2021 and August 31, 2020, we were in compliance with all covenants under our asset-backed securitization programs.

Refer to Note 5 – “Asset-Backed Securitization Programs” to the Condensed Consolidated Financial Statements for further details on the programs.

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(9) The program will be automatically extended through April 11, 2025 unless either party provides 30 days notice of termination.

During the three months and six months ended February 28, 2021, we sold $1.3 billion and $2.6 billion, respectively, of trade accounts receivable under these programs and we received cash proceeds of $1.3 billion and $2.6 billion, respectively.

As of February 28, 2021, we had up to $2.0 billion in available liquidity under our trade accounts receivable sale programs.

During the three months and nine months ended May 31, 2021, we sold $1.0 billion and $3.6 billion, respectively, of trade accounts receivable under these programs and we received cash proceeds of $1.0 billion and $3.6 billion, respectively.

As of May 31, 2021, we had up to $1.6 billion in available liquidity under our trade accounts receivable sale programs.

Capital Expenditures

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

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Net cash provided by operating activities

Net cash used in investing activities

Net cash (used in) provided by financing activities

Net cash used in financing activities

Effect of exchange rate changes on cash and cash equivalents

1 unchanged sentence

Operating Activities

Net cash provided by operating activities during the six months ended February 28, 2021 was primarily due to net income and a decrease in contract assets, partially offset by:

(i) an increase in inventories, accounts receivable and prepaid expenses and other current assets and (ii) a decrease in accounts payable, accrued expenses and other liabilities.

The decrease in contract assets is primarily due to timing of revenue recognition for over time customers.

The increase in inventories is primarily to support expected sales levels in the third quarter of fiscal year 2021.

Net cash provided by operating activities during the nine months ended May 31, 2021 was primarily due to non-cash expenses, an increase in accounts payable, accrued expenses and other liabilities and net income, partially offset by:

an increase in inventories, accounts receivable and prepaid expenses and other current assets.

The increase in accounts payable, accrued expenses and other liabilities is primarily due to the timing of purchases and cash payments.

The increase in inventories is primarily to support expected sales levels in the fourth quarter of fiscal year 2021.

The increase in accounts receivable is primarily driven by higher sales and the timing of collections.

The increase in prepaid expenses and other current assets is primarily due to an increase in forward contract assets driven by normal hedging activity.

The decrease in accounts payable, accrued expenses and other liabilities is primarily due the timing of purchases and cash payments.

The increase in prepaid expenses and other current assets is primarily due to the timing of payments.

Investing Activities

Net cash used in investing activities during the six months ended February 28, 2021 consisted primarily of capital expenditures, principally to support ongoing business in the DMS and EMS segments and expenditures in connection with the acquisition of certain assets of JJMD and the acquisition of Ecologic, partially offset by proceeds and advances from the sale of property, plant and equipment.

Net cash used in investing activities during the nine months ended May 31, 2021 consisted primarily of capital expenditures, principally to support ongoing business in the DMS and EMS segments and expenditures in connection with the acquisition of certain assets of JJMD and the acquisition of Ecologic, partially offset by proceeds and advances from the sale of property, plant and equipment.

Financing Activities

Net cash used in financing activities during the six months ended February 28, 2021 was primarily due to (i) payments for debt agreements, (ii) the repurchase of our common stock under our share repurchase authorization and (iii) the purchase of treasury stock under employee stock plans.

Net cash used in financing activities during the nine months ended May 31, 2021 was primarily due to (i) payments for debt agreements, (ii) the repurchase of our common stock under our share repurchase authorization, (iii) dividend payments and (iv) the purchase of treasury stock under employee stock plans.

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.

Contractual Obligations

During the first quarter of fiscal year 2021, we entered into new finance leases that are primarily due in fiscal year 2023.

As of February 28, 2021, we have $95.3 million of contractual obligations related to these new leases.

As of the date of this report, there were no other material changes outside the ordinary course of business since August 31, 2020 to our contractual obligations and commitments.

As of the date of this report, other than the borrowings on the 1.700% Senior Notes, the amended Credit Facility, (see Note 4 - “Notes Payable and Long-Term Debt” to the Condensed Consolidated Financial Statements) and the new operating and finance leases, (see Note 17 – “Commitments and Contingencies” to the Condensed Consolidated Financial Statements), there were no other material changes outside the ordinary course of business since August 31, 2020 to our contractual obligations and commitments.

Dividends and Share Repurchases

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In September 2019, the Board of Directors authorized the repurchase of up to $600.0 million of our common stock as a part of a two-year capital allocation framework (the “2020 Share Repurchase Program”).

As of February 28, 2021, 9.4 million shares had been repurchased for $345.9 million and $254.1 million remains available under the 2020 Share Repurchase Program.

As of May 31, 2021, 11.9 million shares had been repurchased for $475.6 million and $124.4 million remains available under the 2020 Share Repurchase Program.

The 2020 Share Repurchase Program expires at the end of fiscal year 2021.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis