What changed in this filing

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Item 7. Management’s Discussion and Analysis

2021-10-22 compared with 2020-10-22 · 140 added, 239 removed, 329 unchanged (54% of the section changed)

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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 EMS segment is a high volume business that produces product at a quicker rate (i.e.

cycle time) and in larger quantities and includes customers primarily in the 5G, wireless and cloud, digital print and retail, industrial and semi-cap, and networking and storage 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 DMS segment includes customers primarily in the automotive and transportation, connected devices, healthcare and packaging, and mobility industries.

As of September 1, 2020, certain customers were 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.

Customers within the automotive and transportation and smart home and appliances industries are now presented within the DMS segment.

Prior period disclosures are restated to reflect the realignment.

Our cost of revenue includes the cost of electronic components and other materials that comprise the products we manufacture;

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This requires us to commit significant working capital to our operations and to manage the purchasing, receiving, inspecting and stocking of materials.

At times, we collect deposits from our customers related to the purchase of inventory in order to effectively manage our working capital.

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.

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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.

in the fair market value of such hedging instruments are reflected within the Consolidated Statement of Operations and the Consolidated Statement of Comprehensive Income.

See Note 13 – “Concentration of Risk and Segment Data” to the Consolidated Financial Statements.

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.

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.

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.

Essential activity exceptions from these restrictions have allowed us to continue to operate but virus containment efforts have resulted in additional direct costs.

During the fiscal year ended August 31, 2020, we incurred approximately $142 million in direct costs associated with the COVID-19 outbreak, primarily due to incremental and idle labor costs 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.

The impact on our suppliers has led to supply chain constraints, including difficulty sourcing materials necessary to fulfill customer production requirements and challenges in transporting completed products to our end customers.

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):

The following table sets forth, for the periods indicated, certain key operating results and other financial information (in millions, except per share data):

Fiscal Year Ended August 31,

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August 31, 2021

February 29, 2020

November 30, 2019

Sales cycle (1)

Inventory turns (annualized) (2)

Days in accounts receivable (3)

Days in inventory (4)

Days in accounts payable (5)

Three Months Ended

August 31, 2020

February 28, 2019

November 30, 2018

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 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.

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

During the three months ended August 31, 2021, the decrease in days in accounts receivable from the prior sequential quarter was driven primarily by the 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 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.

During the three months ended August 31, 2021, the increase in days in inventory from the three months ended August 31, 2020 was primarily to support expected sales levels in the first quarter of fiscal year 2022 and supply-chain constraints as a result of the COVID-19 pandemic.

During the three months ended August 31, 2021, the increase in days in inventory from the prior sequential quarter was primarily driven by supply-chain constraints as a result of the COVID-19 pandemic.

(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

to lower materials purchases during the quarter and timing of purchases and cash payments for purchases during the quarter.

During the three months ended August 31, 2021, the increase in days in accounts payable from the three months ended May 31, 2021 and August 31, 2020 was primarily due to an increase in materials purchases and timing of payments.

Critical Accounting Policies and Estimates

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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

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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.

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.

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The fair value of acquired amortizable intangible assets impacts the amounts recorded as goodwill.

We perform a goodwill impairment analysis using the two-step method on an annual basis and whenever events or changes in circumstances indicate that the carrying value may not be recoverable.

We perform a goodwill 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 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.

If the carrying amount of the reporting unit exceeds its fair value, goodwill is considered impaired and a loss is recognized in the amount equal to that excess.

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.

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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.

We completed our annual impairment analysis for goodwill and indefinite-lived intangible assets during the fourth quarter of fiscal year 2021.

The qualitative assessment was used for all reporting units and we determined that it is more likely than not 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 analysis.

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.

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(dollars in millions)

(1) As of September 1, 2020, certain customers were realigned within our operating segments.

Our operating segments, which are the reporting segments, continue to consist of the DMS and EMS segments.

Customers within the automotive and transportation and smart home and appliances industries are now presented within the DMS segment.

Prior period disclosures are restated to reflect the realignment.

Net revenue increased during the fiscal year ended August 31, 2021 compared to the fiscal year ended August 31, 2020.

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.

Specifically, the DMS segment net revenue increased 17% due to:

(i) a 6% increase in revenues from existing customers within our mobility business as our ability to meet customer demand during the fiscal year ended August 31, 2020, was greatly diminished due to COVID-19 containment efforts in China, (ii) a 4% 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 3% increase in revenues from existing customers within our healthcare and packaging businesses.

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

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 9% primarily due to (i) a 10% increase in revenues from existing customers within our 5G, wireless and cloud business and (ii) a 3% increase in revenues from existing customers within our industrial and capital equipment business.

The increase is partially offset by (i) a 2% decrease from existing customers within our networking and storage business and (ii) a 2% decrease in revenues from existing customers within our digital print and retail business.

DMS segment revenues increased 7% due to (i) an 8% increase in revenues from new and existing customers in our healthcare and packaging businesses and (ii) a 1% increase in revenues from existing customers in our automotive and transportation business.

The increase is partially offset by a 2% decrease in revenue from customers within our connected devices business.

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

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Percent of net revenue

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.

Gross profit as a percentage of net revenue increased for the fiscal year ended August 31, 2021 compared to the fiscal year ended August 31, 2020, primarily due to:

(i) product mix and improved profitability across various businesses and (ii) a decrease of $72 million in incremental and idle labor costs associated with travel disruptions and governmental restrictions, largely related to the COVID-19 pandemic.

Selling, General and Administrative

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Selling, general and administrative expenses increased during the fiscal year ended August 31, 2021 compared to the fiscal year ended August 31, 2020.

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.

The increase is predominantly due to (i) a $48 million increase due to higher salary and salary related expenses and (ii) a $19 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.

The increase is partially offset by a $29 million decrease primarily due to lower acquisition and integration charges related to our strategic collaboration with a healthcare company.

Research and Development

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Percent of net revenue

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 .

Research and development expenses remained relatively consistent as a percent of net revenue during the fiscal year ended August 31, 2021 compared to the fiscal year ended August 31, 2020.

Amortization of Intangibles

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Amortization of intangibles

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.

Amortization of intangibles decreased during the fiscal year ended August 31, 2021 compared to the fiscal year ended August 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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Total restructuring, severance and related charges (3)

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.

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.

(1) As the Company continued to optimize its cost structure and improve operational efficiencies, $57 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, which was complete as of August 31, 2021.

(2) 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.

(3) Includes $0 million, $62 million and $21 million recorded in the EMS segment, $9 million, $76 million and $3 million recorded in the DMS segment and $1 million, $19 million and $2 million of non-allocated charges for the fiscal years ended August 31, 2021, 2020 and 2019, respectively.

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

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

(Gain) Loss on Securities

Fiscal Year Ended August 31,

(dollars in millions)

Loss on securities

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:

(Gain) loss on securities

The change in (gain) loss on securities during the fiscal year ended August 31, 2021 compared to the fiscal year ended August 31, 2020, is due to cash proceeds received in connection with the sale of an investment partially offset by:

(i) an impairment charge of $36 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

(“iQor”) as a result of iQor’s bankruptcy filing and (ii) an impairment charge of $12 million during the fiscal year ended August 31, 2020 in connection with the sale of an investment in the optical networking segment.

Other (Income) Expense

Fiscal Year Ended August 31,

(dollars in millions)

Other expense

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.

Other (income) expense

The change in other (income) expense during the fiscal year ended August 31, 2021 compared to the fiscal year ended August 31, 2020, is primarily due to:

(i) $24 million related to a decrease in fees associated with lower utilization of both our trade accounts receivable sales and securitization programs during fiscal year 2021, (ii) $10 million primarily related to lower net periodic benefit costs in fiscal year 2021, (iii) $7 million of costs incurred during the fiscal year ended August 31, 2020 related to the redemption of the 5.625% Senior Notes due 2020 and (iv) $1 million arising from an increase in other income.

Interest Income

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Interest income

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 income decreased during the fiscal year ended August 31, 2021 compared to the fiscal year ended August 31, 2020, due to lower interest rates, partially offset by increased interest income on higher 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 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.

Interest expense decreased during the fiscal year ended August 31, 2021, compared to the fiscal year ended August 31, 2020, primarily due to lower interest rates and lower borrowings on our credit facilities, partially offset by additional borrowings on our commercial paper program and senior debt issuances.

Income Tax Expense

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Effective income tax rate

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.

The effective income tax rate decreased for the fiscal year ended August 31, 2021, compared to the fiscal year ended August 31, 2020, primarily due to:

(i) higher income before income tax for the fiscal year ended August 31, 2021, driven in part by decreased restructuring charges in tax jurisdictions with minimal related income tax benefit and (ii) a $21 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

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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.

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) 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.

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Fiscal Year Ended August 31,

(in thousands, except for per share data)

(in millions, except for per share data)

Operating income (U.S.

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Adjustments to operating income

Loss on securities (6)

(Gain) loss on securities (6)

Net periodic benefit cost (3)

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GAAP and Non-GAAP)

The remaining amount primarily relates to the 2020 Restructuring Plan.

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.

The remaining amount primarily related to the 2020 Restructuring Plan.

(2) Relates to accounts receivable and inventory charges for certain distressed customers.

(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.

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There is no impact to core earnings or diluted core earnings per share for this adjustment.

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.

(4) Charges, net of insurance proceeds, for the fiscal years ended August 31, 2021 and 2020, relate to a flood that impacted our facility in Huangpu, China.

(5) Charges related to our strategic collaboration with Johnson & Johnson Medical Devices Companies (“JJMD”).

(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.

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.

(6) Relates to an impairment of an investment with iQor and the sale of an investment in the optical networking segment during fiscal year 2020.

(7) The fiscal year ended August 31, 2019 includes a $13 million income tax benefit for the effects of the Tax Cuts and Jobs Act of 2017 (“Tax Act”) recorded during the three months ended November 30, 2018.

Adjusted Free Cash Flow

Fiscal Year Ended August 31,

(in thousands)

Net cash provided by (used in) operating activities (U.S.

(in millions)

Net cash provided by operating activities (U.S.

Cash receipts on sold receivables

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Adjusted free cash flow (Non-GAAP)

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.

(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.

The following table sets forth certain unaudited quarterly financial information for the three months ended August 31, 2021 and 2020.

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.

Fiscal Year 2020

Three Months Ended

(in thousands, except for per share data)

(in millions, except for per share data)

August 31, 2021

February 29, 2020

November 30, 2019

Gross profit (1)

Operating income (1)(2)(3)(4)

Net income (loss) (1)(2)(3)(4)(5)

Net income (loss) attributable to Jabil Inc.

(1)(2)(3)(4)(5)

Earnings (loss) per share attributable to the stockholders of Jabil Inc.

Fiscal Year 2019

Three Months Ended

(in thousands, except for per share data)

August 31, 2020

February 28, 2019

November 30, 2018

Gross profit (1)

Operating income (1)

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Earnings per share attributable to the stockholders of Jabil Inc.

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.

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.

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

February 29, 2020

November 30, 2019

Acquisition and integration charges

Three Months Ended

August 31, 2019

February 28, 2019

November 30, 2018

Acquisition and integration charges

(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.

Includes $13.3 million of income tax benefit for the three months ended November 30, 2018 related to the Tax Act.

(1) Includes direct costs related to the COVID-19 pandemic of $23 million and $22 million for the three months ended August 31, 2021 and 2020, respectively.

(2) Includes the impairment of an investment with iQor during the three months ended August 31, 2020.

Acquisitions and Expansion

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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.

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.

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 aggregate purchase price paid for the fourth closing was approximately $19 million in cash.

Total assets acquired of $30 million and total liabilities assumed of $11 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.

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.

The results of operations were included in our condensed consolidated financial results beginning on October 26, 2020 for the fourth closing.

We believe it is impracticable to provide pro forma information for the acquisition 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 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 global asset-backed securitization program and under our uncommitted trade accounts receivable sale programs, cash on hand, cash flows provided by operating activities 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.

Certain of our trade accounts receivable sale programs expire or are subject to termination provisions within fiscal year 2022.

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.

As of August 31, 2021, we had approximately $1.6 billion in cash and cash equivalents, of which a significant portion was held by our foreign subsidiaries.

Most of our foreign cash and cash equivalents as of August 31, 2021 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:

(in thousands)

(in millions)

1.700% Senior Notes (1)

facilities (2)(3)

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Maturity Date

Apr 23, 2021, Jan 22, 2023 and Jan 22, 2025 (3)(4)(5)

Jan 22, 2025 (3)

Jan 22, 2024 and Jan 22, 2026 (2)(3)

Original Facility/ Maximum Capacity

$400.0 million

$500.0 million

$300.0 million

$500.0 million

$600.0 million

billion (2)(3)

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.

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.

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.

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

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.

(1) On April 14, 2021, we issued $500 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 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 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 August 31, 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.

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.

Borrowings with an original maturity of 90 days or less are recorded net within the statement of cash flows, and have been excluded from the table above.

In the ordinary course of business, we have letters of credit and surety bonds with banks and insurance companies outstanding of $75 million as of August 31, 2021.

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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)

North American

November 22, 2021

September 30, 2021

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.

Global asset-backed securitization program - Effective August 20, 2021, the global asset-backed securitization program (formerly referred to as the North American asset-backed securitization program) terms were amended to:

(i) add a foreign

entity to the program, (ii) increase the maximum amount of net cash proceeds available at any one time from $390 million to $600 million and (iii) extend the expiration date of the program to November 25, 2024.

As of August 31, 2021, we had up to $24 million in available liquidity under our global asset-backed securitization program.

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

In addition, the foreign entity participating in the global asset-backed securitization program sells certain receivables at a discount to conduits administered by an unaffiliated financial institution on a daily basis.

The special purpose entity in the global asset-backed securitization program is a wholly-owned subsidiary of the Company and is included in our Consolidated Financial Statements.

Certain unsold receivables covering up to the maximum amount of net cash proceeds available under the domestic, or U.S., portion of our global asset-backed securitization program are pledged as collateral to the unaffiliated financial institution as of August 31, 2021.

Foreign asset-backed securitization program - We terminated the foreign asset-backed securitization program on June 28, 2021.

In connection with the termination, we paid approximately $167 million in cash, which consisted of:

(i) $68 million for the remittance of collections received prior to June 28, 2021, in our role as servicer of sold receivables and (ii) a repurchase of $99 million of all previously sold receivables, at fair value, that remained outstanding as of June 28, 2021.

As of August 31, 2021, we have substantially collected the repurchased receivables from customers.

The special purpose entity in the foreign asset-backed securitization program is a separate bankruptcy-remote entity that is winding down as a result of the termination of the foreign-asset backed securitization program.

We are deemed the primary beneficiary of this special purpose entity as we have both the power to direct the activities of the entity that most significantly impact the entity’s economic performance and the obligation to absorb losses or the right to receive the benefits that could potentially be significant to the entity from the transfer of the trade accounts receivable into the special purpose entity.

Accordingly, the special purpose entity associated with the foreign asset-backed securitization program is included in our Consolidated Financial Statements.

The foreign asset-backed securitization program contained a guarantee of payment by the special purpose entity, in an amount approximately equal to the net cash proceeds under the program.

As a result of the termination of the foreign asset-backed securitization program, all outstanding amounts have been settled with the unaffiliated financial institution as of August 31, 2021.

As such, no liability has been recorded for obligations under the guarantee.

Global and foreign asset-backed securitization programs - We continue servicing the receivables sold and in exchange receive a servicing fee under the global asset-backed securitization program.

Servicing fees related to each of the asset-backed securitization programs recognized during the fiscal years ended August 31, 2021, 2020 and 2019 were not material.

We do not record a servicing asset or liability on the Consolidated Balance Sheets as we estimate that the fee received to service these receivables approximates the fair market compensation to provide the servicing activities.

Refer to Note 8 – “Asset-Backed Securitization Programs” to the Consolidated Financial Statements for further details on the programs.

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December 5, 2021

January 23, 2022

(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.

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

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

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(8) The program will be automatically extended through December 5, 2024 unless either party provides 30 days notice of termination.

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

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

During the fiscal year ended August 31, 2021, we sold $4.7 billion of trade accounts receivable under these programs and we received cash proceeds of $4.7 billion.

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The amount of actual capital expenditures may be affected by general economic, financial, competitive, legislative and regulatory factors, among other things.

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

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

Fiscal Year Ended August 31,

Net cash provided by (used in) operating activities

Net cash (used in) provided by investing activities

Net cash provided by operating activities

Net cash used in investing activities

Net cash used in financing activities

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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.

Net cash provided by operating activities during the fiscal year ended August 31, 2021 was primarily due to increased accounts payable, accrued expenses and other liabilities, non-cash expenses, net income, and decreased contract assets, partially offset by increased 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 decrease in contract assets is primarily due to the timing of billings to our customers.

The increase in inventories is primarily to support expected sales levels in the first quarter of fiscal year 2022 and supply chain constraints due to the COVID-19 pandemic.

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.

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

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.

Net cash used in investing activities during the fiscal year ended August 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 Brands, Inc., partially offset by proceeds and advances from the sale of property, plant and equipment.

Financing Activities

Net cash used in financing activities during the fiscal year ended August 31, 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 during the fiscal year ended August 31, 2021 was primarily due to (i) payments for debt agreements, (ii) the repurchase of our common stock, (iii) dividend payments, (iv) the purchase of the noncontrolling interests, and (v) 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):

Following is a summary of the dividends and share repurchases for the fiscal years indicated below (in millions):

Dividends Paid (1)

Share Repurchases (2)

Fiscal year 2016

Fiscal year 2017

Fiscal year 2018

Fiscal years 2016 – 2019

Fiscal year 2020

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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.

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”).

However, the declaration and payment of future dividends are discretionary and will be subject to determination by our Board of Directors each quarter following its review of our financial performance and global economic conditions.

In September 2019, the Board of Directors authorized the repurchase of up to $600 million of our common stock as part of a two-year capital allocation framework (“the 2020 Share Repurchase Program”).

As of August 31, 2021, 14.1 million shares had been repurchased for $600 million and no authorization remains under the 2020 Share Repurchase Program.

In July 2021, the Board of Directors approved an authorization for the repurchase of up to $1.0 billion of our common stock (“the 2022 Share Repurchase Program”).

As of August 31, 2021, 0.7 million shares had been repurchased for $42 million and $958 million remains available under the 2022 Share Repurchase Program.

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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)

Purchase orders beyond this time frame are typically cancellable.

Payments due by period (in millions)

After 5 years

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Additionally, certain leases signed but not yet commenced contain residual value guarantees and purchase options not deemed probable.

The amount payable after five years includes $75.1 million in purchase requirements at the end of the respective leases.

(3) As of August 31, 2021, the future minimum lease payments exclude $155 million of residual value guarantees that could potentially come due in future periods.

The Company does not believe it is probable that any amounts will be owed under these guarantees.

Therefore, no amounts related to the residual value guarantees are included in the lease payments used to measure the right-of-use assets and lease liabilities.

(4) Consists of purchase commitments entered into as of August 31, 2021 primarily for property, plant and equipment and software pursuant to legally enforceable and binding agreements.

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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-K

Item 7. Management’s Discussion and Analysis