What changed in this filing

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Item 2. Management’s Discussion and Analysis

2022-01-07 compared with 2021-07-02 · 122 added, 184 removed, 173 unchanged (64% of the section changed)

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We serve our customers primarily through dedicated business units that combine highly automated, continuous flow manufacturing with advanced electronic design and design for manufacturability.

We depend, and expect to continue to depend, upon a relatively small number of customers for a significant percentage of our net revenue, which in turn depends upon their growth, viability and financial stability.

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.

We currently depend, and expect to continue to depend for the foreseeable future, upon a relatively small number of customers for a significant percentage of our net revenue, 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, Ireland, Malaysia, Mexico, Singapore and the United States.

We derived a substantial majority, 84.8% of net revenue, from our international operations for the three months ended November 30, 2021.

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

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Our DMS segment is focused on providing engineering solutions, with an emphasis on material sciences, technologies and healthcare.

Our DMS includes customers primarily in the automotive and transportation, connected devices, healthcare and packaging, and mobility industries.

As of September 1, 2020, certain customers have been realigned within our operating segments.

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

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 DMS segment includes customers primarily in the automotive and transportation, connected devices, healthcare and packaging, and mobility industries.

We monitor the current economic environment and its potential impact on both the customers we serve as well as our end-markets and closely manage our costs and capital resources so that we can respond appropriately as circumstances change.

Refer to Item 7.

"Management's Discussion and Analysis of Financial Condition and Results of Operations" section contained in our Annual Report on Form 10-K for the fiscal year ended August 31, 2021 for further discussion of the items disclosed in Item 2.

"Management's Discussion and Analysis of Financial Condition and Results of Operations" section as of November 30, 2021 contained herein.

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.

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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):

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November 30, 2021

November 30, 2020

Operating income

Net income (loss) attributable to Jabil Inc.

Earnings (loss) per share—basic

Earnings (loss) per share—diluted

Net income attributable to Jabil Inc.

Earnings per share—basic

Earnings per share—diluted

Key Performance Indicators

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February 28, 2021

November 30, 2021

August 31, 2021

November 30, 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 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.

During the three months ended November 30, 2021, 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.

(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 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.

During the three months ended November 30, 2021, the decrease in days in inventory from the prior sequential quarter was due to increased sales activity during the quarter.

During the three months ended November 30, 2021, the increase in days in inventory from the three months ended November 30, 2020 was primarily due to supply chain constraints and increased materials purchases to support expected sales levels in the second quarter of fiscal year 2022.

(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, 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.

During the three months ended November 30, 2021, the decrease in days in accounts payable from the prior sequential quarter was primarily due to timing of purchases and cash payments during the quarter.

During the three months ended November 30, 2021, the increase in days in accounts payable from the three months ended November 30, 2020 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.

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.

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, 2021.

Recent Accounting Pronouncements

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(dollars in millions)

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

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November 30, 2020

Net revenue increased during the three months ended November 30, 2021, compared to the three months ended November 30, 2020.

Specifically, the DMS segment net revenue increased 11% due to:

(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.

(i) a 6% increase in revenues from existing customers within our mobility business, (ii) a 4% increase in revenues from existing customers in our automotive and transportation business, and (iii) a 3% increase in revenue from existing customers within our healthcare and packaging business.

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

The EMS segment net revenue increased 7% 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 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.

(i) a 4% increase from existing customers within our industrial and capital equipment business, (ii) a 4% increase from existing customers within our 5G, wireless and cloud business, and (iii) a 2% increase from existing customers within our digital print and retail business.

The increase is partially offset by a 3% decrease from existing customers within our networking and storage business.

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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Foreign source revenue

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(dollars in millions)

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November 30, 2020

Percent of net revenue

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.

Gross profit as a percentage of net revenue decreased for the three months ended November 30, 2021 compared to the three months ended November 30, 2020, primarily due to product mix for the DMS segment.

Selling, General and Administrative

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Selling, general and administrative

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 $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.

Selling, general and administrative expenses remained relatively consistent during the three months ended November 30, 2021, compared to the three months ended November 30, 2020.

Research and Development

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November 30, 2020

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 nine months ended May 31, 2021, compared to the three months and nine months ended May 31, 2020.

Research and development expenses remained relatively consistent as a percentage of net revenue during the three months ended November 30, 2021, compared to the three months ended November 30, 2020.

Amortization of Intangibles

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Amortization of intangibles

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.

Amortization of intangibles remained relatively consistent during the three months ended November 30, 2021, compared to the three months ended November 30, 2020.

Restructuring, Severance and Related Charges

Following is a summary of the Company’s restructuring, severance and related charges (in millions):

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Employee severance and benefit costs

Asset write-off costs

Total restructuring, severance and related charges (1)

(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.

(Gain) Impairment on Securities

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(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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Restructuring, severance and related charges

Restructuring, severance and related charges remained relatively consistent during the three months ended November 30, 2021, compared to the three months ended November 30, 2020.

The 2021 Restructuring Plan was complete as of August 31, 2021.

Other Expense (Income)

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Other (income) 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.

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Other expense (income)

Other expense (income) remained relatively consistent during the three months ended November 30, 2021 compared to the three months ended November 30, 2020.

Interest Income

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Interest income

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 income remained relatively consistent during the three months ended November 30, 2021, compared to the three months ended November 30, 2020.

Interest Expense

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Interest expense

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.

Interest expense remained relatively consistent during the three months ended November 30, 2021, compared to the three months ended November 30, 2020.

Income Tax Expense

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Effective income tax rate

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.

The effective income tax rate decreased for the three months ended November 30, 2021, compared to the three months ended November 30, 2020, primarily due to decreased losses in tax jurisdictions with existing valuation allowances for the three months ended November 30, 2021.

Non-GAAP (Core) Financial Measures

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Non-GAAP financial measures should not be considered a substitute for, or superior to, measures of financial performance prepared in accordance with U.S.

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, (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.

We determine the tax effect of the items excluded from “core” earnings and “core” diluted earnings per share based upon evaluation of the statutory tax treatment and the applicable tax rate of the jurisdiction in which the pre-tax items were incurred, and for which realization of the resulting tax benefit, if any, is expected.

In certain jurisdictions where we do not expect to realize a tax benefit (due to existing tax incentives or a history of operating losses or other factors resulting in a valuation allowance related to deferred tax assets), a reduced or 0% tax rate is applied.

We are reporting “core” operating income, “core” earnings and cash flow to provide investors with an additional method for assessing operating income and earnings, by presenting what we believe are our “core” manufacturing operations.

A significant portion (based on the respective values) of the items that are excluded for purposes of calculating “core” operating income and “core” earnings also impacted certain balance sheet assets, resulting in a portion of an asset being written off without a corresponding recovery of cash we may have previously spent with respect to the asset.

In the case of restructuring, severance and related charges, we may make associated cash payments in the future.

In addition, although, for purposes of calculating “core” operating income and “core” earnings, we exclude stock-based compensation expense (which we anticipate continuing to incur in the future) because it is a non-cash expense, the associated stock issued may result in an increase in our outstanding shares of stock, which may result in the dilution of our stockholders’ ownership interest.

We encourage you to consider these matters when evaluating the utility of these non-GAAP financial measures.

Adjusted free cash flow is defined as net cash provided by (used in) operating activities plus cash receipts on sold receivables less net capital expenditures (acquisition of property, plant and equipment less proceeds and advances from the sale of property, plant and equipment).

We report adjusted free cash flow as we believe this non-GAAP financial measure is useful to investors in measuring our ability to generate cash internally and fund future growth and to provide a return to shareholders.

Included in the tables below are reconciliations of the non-GAAP financial measures to the most directly comparable U.S.

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(in thousands, except for per share data)

(in millions, except for per share data)

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Operating income (U.S.

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Restructuring, severance and related charges

Distressed customer charge (1)

Net periodic benefit cost (1)

Business interruption and impairment charges, net

Acquisition and integration charges (2)

1 unchanged sentence

Core operating income (Non-GAAP)

Net income (loss) attributable to Jabil Inc.

Net income attributable to Jabil Inc.

Adjustments to operating income

(Gain) impairment on securities

Net periodic benefit cost (1)

1 unchanged sentence

Core earnings (Non-GAAP)

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

Diluted earnings per share (U.S.

Diluted core earnings per share (Non-GAAP)

Diluted weighted average shares outstanding (U.S.

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 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.

GAAP and Non-GAAP)

(1) We are reclassifying the pension components in other expense to core operating income as we assess operating performance, inclusive of all components of net periodic benefit cost, with the related revenue.

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Adjusted Free Cash Flow

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Net cash provided by operating activities (U.S.

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November 30, 2020

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

Acquisition of property, plant and equipment

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Adjusted free cash flow (Non-GAAP)

Acquisitions and Expansion

During fiscal year 2018, the Company and JJMD entered into a framework agreement to form a strategic collaboration and expand our existing relationship.

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

On 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 $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.

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.

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 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 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 access to the capital markets, will be adequate to fund our cash requirements, including 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 and beyond.

We continue to assess our capital structure and evaluate the merits of redeploying available cash.

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 May 31, 2021 could be repatriated to the United States without potential tax expense.

As of November 30, 2021, we had approximately $1.2 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 November 30, 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)

3.600% Senior Notes

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Balance as of August 31, 2021

Balance as of May 31, 2021

Balance as of November 30, 2021

Maturity Date

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Original Facility/ Maximum Capacity

$500.0 million

$300.0 million

$500.0 million

$600.0 million

$500.0 million

$3.8 billion (1)

$51.9 million (1)

(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.

(1) As of November 30, 2021, we had $3.8 billion in available unused borrowing capacity under our revolving credit facilities.

The senior unsecured credit agreement dated as of January 22, 2020 and amended on April 28, 2021 (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.

We have a shelf registration statement with the SEC registering the potential sale of an indeterminate amount of debt and equity securities in the future to augment our liquidity and capital resources.

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

As of November 30, 2021 and August 31, 2021, we were in compliance with our debt covenants.

Refer to Note 5 – “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 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.

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 May 31, 2021.

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

(1) Maximum amount available at any one time.

(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 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.

Global Asset-Backed Securitization Program

Certain Jabil 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, a 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.

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

Servicing fees related to the asset-backed securitization programs recognized during the three months ended November 30, 2021 and 2020 were not material.

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

The special purpose entity in the global asset-backed securitization program is a wholly-owned subsidiary of the Company and is included in our Condensed 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 the global asset-backed securitization program are pledged as collateral to the unaffiliated financial institution as of November 30, 2021.

The global asset-backed securitization program expires on November 25, 2024 and the maximum amount of net cash proceeds available at any one time is $600 million.

During the three months ended November 30, 2021, we sold $1.0 billion of trade accounts receivable and we received cash proceeds of $1.0 billion.

As of November 30, 2021, we had no available liquidity under our global asset-backed securitization program.

The global asset-backed securitization program requires compliance with several covenants including compliance with the interest ratio and debt to EBITDA ratio of the Credit Facility.

As of November 30, 2021 and August 31, 2021, we were in compliance with all covenants under our global asset-backed securitization program.

Refer to Note 6 – “Asset-Backed Securitization Program” to the Condensed Consolidated Financial Statements for further details on the program.

Trade Accounts Receivable Sale Programs

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

Under the programs we may elect to sell receivables and the unaffiliated financial institutions may elect to purchase, at a discount, on an ongoing basis:

(in millions) (1)

December 5, 2021 (2)

November 30, 2021

August 31, 2023

May 4, 2023 (3)

January 25, 2022 (4)

February 23, 2023 (5)

August 10, 2021 (6)

July 21, 2021 (7)

December 4, 2021 (8)

April 11, 2022 (9)

December 5, 2021 (2)

(1) Maximum amount of trade accounts receivable that may be sold under a facility at any one time.

(2) The program will be automatically extended through December 5, 2025 unless either party provides 30 days notice of termination.

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

(4) The program will be automatically extended through January 25, 2023 unless either party provides 30 days notice of termination.

(5) Any party may elect to terminate the agreement upon 15 days prior notice.

(6) The program will be automatically extended through August 10, 2023 unless either party provides 30 days notice of termination.

(7) The program will be automatically extended through August 21, 2023 unless either party provides 30 days notice of termination.

(8) The program will be automatically extended through December 5, 2024 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 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.

As of November 30, 2021, we may elect to sell receivables and the unaffiliated financial institution may elect to purchase specific accounts receivable at any one time up to a:

(i) maximum aggregate amount available of $2.0 billion under nine trade accounts receivable sale programs, (ii) maximum amount available of 400 million CNY under one trade accounts receivable sale program and (iii) maximum amount available of 100 million CHF under one trade accounts receivable sale program.

The trade accounts receivable sale programs expire on various dates through 2025.

During the three months ended November 30, 2021, we sold $2.0 billion of trade accounts receivable under these programs and we received cash proceeds of $2.0 billion.

As of November 30, 2021, we had up to $1.4 billion in available liquidity under our trade accounts receivable sale programs.

Capital Expenditures

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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):

Nine months ended

Net cash provided by operating activities

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

Three months ended

November 30, 2021

November 30, 2020

Net cash (used in) provided by operating activities

Net cash used in investing activities

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Operating Activities

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.

Net cash used in operating activities during the three months ended November 30, 2021 was primarily due to an increase in accounts receivable, inventories, contract assets, prepaid expenses and other current assets;

partially offset by:

an increase in accounts payable, accrued expenses and other liabilities, non-cash expenses and net income.

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

The increase in inventories is primarily due to supply chain constraints and higher materials purchases to support expected sales levels in the second quarter of fiscal year 2022.

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

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

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

Investing Activities

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.

Net cash used in investing activities during the three months ended November 30, 2021 consisted primarily of capital expenditures, principally to support ongoing business in the DMS and EMS segments, partially offset by proceeds and advances from the sale of property, plant and equipment.

Financing Activities

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.

Net cash used in financing activities during the three months ended November 30, 2021 was primarily due to (i) payments for debt agreements, (ii) the repurchase of our common stock under our share repurchase authorization, (iii) the purchase of treasury stock under employee stock plans and (iv) dividend payments.

Net cash used in financing activities was partially offset by borrowings under debt agreements.

Contractual Obligations

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.

As of the date of this report, other than the new operating and finance leases, (see Note 4 – “Leases” to the Condensed Consolidated Financial Statements), there were no material changes outside the ordinary course of business, since August 31, 2021 to our contractual obligations and commitments and the related cash requirements.

Dividends and Share Repurchases

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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 $600.0 million of our common stock as a part of a two-year capital allocation framework (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.

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 November 30, 2021, 2.8 million shares had been repurchased for $169 million and $831 million remains available under the 2022 Share Repurchase Program.

Quantitative and Qualitative Disclosures About Market Risk

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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