JABIL INC 10-Q

Item 1. Financial Statements JABIL INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (in millions, except for share data) May 31, 2023 (Unaudited) August 31, 2022 ASSETS Current assets: Cash and cash equivalents $ 1,480 $ 1,478 Accounts receivable, net of allowance for credit losses 3,599 3,995 Contract assets 1,173 1,196 Inventories, net 6,084 6,128 Prepaid expenses and other current assets 1,273 1,111 Total current assets 13,609 13,908 Property, plant and equipment, net of accumulated depreciation of $ 6,055 as of May 31, 2023 and $ 5,624 as of August 31, 2022 3,919 3,954 Operating lease right-of-use asset 484 500 Goodwill 737 704 Intangible assets, net of accumulated amortization of $ 497 as of May 31, 2023 and $ 471 as of August 31, 2022 150 158 Deferred income taxes 233 199 Other assets 304 294 Total assets $ 19,436 $ 19,717 LIABILITIES AND EQUITY Current liabilities: Current installments of notes payable and long-term debt $ 300 $ 300 Accounts payable 6,406 8,006 Accrued expenses 5,964 5,272 Current operating lease liabilities 126 119 Total current liabilities 12,796 13,697 Notes payable and long-term debt, less current installments 2,874 2,575 Other liabilities 311 272 Non-current operating lease liabilities 386 417 Income tax liabilities 205 182 Deferred income taxes 127 122 Total liabilities 16,699 17,265 Commitments and contingencies Equity: Jabil Inc. stockholders’ equity: Preferred stock, $ 0.001 par value, authorized 10,000,000 shares; no shares issued and no shares outstanding — — Common stock, $ 0.001 par value, authorized 500,000,000 shares; 273,536,549 and 270,891,715 shares issued and 131,351,864 and 135,493,980 shares outstanding as of May 31, 2023 and August 31, 2022, respectively — — Additional paid-in capital 2,758 2,655 Retained earnings 4,268 3,638 Accumulated other comprehensive loss ( 11 ) ( 42 ) Treasury stock at cost, 142,184,685 and 135,397,735 shares as of May 31, 2023 and August 31, 2022, respectively ( 4,279 ) ( 3,800 ) Total Jabil Inc. stockholders’ equity 2,736 2,451 Noncontrolling interests 1 1 Total equity 2,737 2,452 Total liabilities and equity $ 19,436 $ 19,717 See accompanying notes to Condensed Consolidated Financial Statements. 1 Table of Contents JABIL INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (in millions, except for per share data) (Unaudited) Three months ended Nine months ended May 31, 2023 May 31, 2022 May 31, 2023 May 31, 2022 Net revenue $ 8,475 $ 8,328 $ 26,244 $ 24,448 Cost of revenue 7,778 7,709 24,143 22,545 Gross profit 697 619 2,101 1,903 Operating expenses: Selling, general and administrative 307 282 911 870 Research and development 8 8 25 25 Amortization of intangibles 7 8 24 24 Restructuring, severance and related charges — — 45 — Operating income 375 321 1,096 984 Loss on debt extinguishment — 4 — 4 Other expense (income) 18 1 50 ( 2 ) Interest income ( 32 ) ( 1 ) ( 62 ) ( 2 ) Interest expense 83 39 216 105 Income before income tax 306 278 892 879 Income tax expense 73 60 229 198 Net income 233 218 663 681 Net income attributable to noncontrolling interests, net of tax — — — — Net income attributable to Jabil Inc. $ 233 $ 218 $ 663 $ 681 Earnings per share attributable to the stockholders of Jabil Inc.: Basic $ 1.76 $ 1.55 $ 4.96 $ 4.77 Diluted $ 1.72 $ 1.52 $ 4.86 $ 4.67 Weighted average shares outstanding: Basic 132.3 140.4 133.6 142.6 Diluted 135.1 143.3 136.4 145.8 See accompanying notes to Condensed Consolidated Financial Statements. 2 Table of Contents JABIL INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (in millions) (Unaudited) Three months ended Nine months ended May 31, 2023 May 31, 2022 May 31, 2023 May 31, 2022 Net income $ 233 $ 218 $ 663 $ 681 Other comprehensive income (loss): Change in foreign currency translation 3 ( 9 ) 21 ( 20 ) Change in derivative instruments: Change in fair value of derivatives ( 13 ) 6 ( 20 ) 31 Adjustment for net (gains) losses realized and included in net income ( 8 ) 9 36 6 Total change in derivative instruments ( 21 ) 15 16 37 Actuarial loss ( 3 ) ( 5 ) ( 8 ) ( 15 ) Prior service credit 1 1 2 3 Total other comprehensive (loss) income ( 20 ) 2 31 5 Comprehensive income $ 213 $ 220 $ 694 $ 686 Comprehensive income attributable to noncontrolling interests — — — — Comprehensive income attributable to Jabil Inc. $ 213 $ 220 $ 694 $ 686 See accompanying notes to Condensed Consolidated Financial Statements. 3 Table of Contents JABIL INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (in millions) (Unaudited) Three months ended Nine months ended May 31, 2023 May 31, 2022 May 31, 2023 May 31, 2022 Total stockholders' equity, beginning balances $ 2,674 $ 2,338 $ 2,452 $ 2,137 Common stock: — — — — Additional paid-in capital: Beginning balances 2,742 2,608 2,655 2,533 Shares issued under employee stock purchase plan — — 27 26 Recognition of stock-based compensation 16 14 76 63 Ending balances 2,758 2,622 2,758 2,622 Retained earnings: Beginning balances 4,046 3,127 3,638 2,688 Declared dividends ( 11 ) ( 12 ) ( 33 ) ( 36 ) Net income attributable to Jabil Inc. 233 218 663 681 Ending balances 4,268 3,333 4,268 3,333 Accumulated other comprehensive income (loss): Beginning balances 9 ( 22 ) ( 42 ) ( 25 ) Total other comprehensive (loss) income ( 20 ) 2 31 5 Ending balances ( 11 ) ( 20 ) ( 11 ) ( 20 ) Treasury stock: Beginning balances ( 4,124 ) ( 3,376 ) ( 3,800 ) ( 3,060 ) Purchases of treasury stock under employee stock plans — — ( 36 ) ( 44 ) Treasury shares purchased ( 154 ) ( 203 ) ( 442 ) ( 475 ) Excise taxes related to treasury shares purchased ( 1 ) — ( 1 ) — Ending balances ( 4,279 ) ( 3,579 ) ( 4,279 ) ( 3,579 ) Noncontrolling interests: Beginning balances 1 1 1 1 Net income attributable to noncontrolling interests — — — — Ending balances 1 1 1 1 Total stockholders' equity, ending balances $ 2,737 $ 2,357 $ 2,737 $ 2,357 See accompanying notes to Condensed Consolidated Financial Statements. 4 Table of Contents JABIL INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (in millions) (Unaudited) Nine months ended May 31, 2023 May 31, 2022 Cash flows provided by operating activities: Net income $ 663 $ 681 Depreciation, amortization, and other, net 752 768 Change in operating assets and liabilities, exclusive of net assets acquired ( 367 ) ( 704 ) Net cash provided by operating activities 1,048 745 Cash flows used in investing activities: Acquisition of property, plant and equipment ( 860 ) ( 1,068 ) Proceeds and advances from sale of property, plant and equipment 180 470 Cash paid for business and intangible asset acquisitions, net of cash ( 30 ) ( 18 ) Other, net ( 28 ) — Net cash used in investing activities ( 738 ) ( 616 ) Cash flows used in financing activities: Borrowings under debt agreements 3,556 2,621 Payments toward debt agreements ( 3,369 ) ( 2,707 ) Payments to acquire treasury stock ( 442 ) ( 475 ) Dividends paid to stockholders ( 34 ) ( 37 ) Net proceeds from exercise of stock options and issuance of common stock under employee stock purchase plan 27 26 Treasury stock minimum tax withholding related to vesting of restricted stock ( 36 ) ( 44 ) Other, net ( 6 ) ( 23 ) Net cash used in financing activities ( 304 ) ( 639 ) Effect of exchange rate changes on cash and cash equivalents ( 4 ) 13 Net increase (decrease) in cash and cash equivalents 2 ( 497 ) Cash and cash equivalents at beginning of period 1,478 1,567 Cash and cash equivalents at end of period $ 1,480 $ 1,070 See accompanying notes to Condensed Consolidated Financial Statements. 5 Table of Contents JABIL INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) 1. Basis of Presentation The accompanying unaudited Condensed Consolidated Financial Statements have been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) necessary to present fairly the information set forth therein have been included. The accompanying unaudited Condensed Consolidated Financial Statements should be read in conjunction with the Consolidated Financial Statements and footnotes included in the Annual Report on Form 10-K of Jabil Inc. (the “Company”) for the fiscal year ended August 31, 2022. Results for the nine months ended May 31, 2023 are not necessarily an indication of the results that may be expected for the full fiscal year ending August 31, 2023. 2. Trade Accounts Receivable Sale Programs The Company regularly sells designated pools of high credit quality trade accounts receivable, at a discount, under uncommitted trade accounts receivable sale programs to unaffiliated financial institutions without recourse. As these accounts receivable are sold without recourse, the Company does not retain the associated risks following the transfer of such accounts receivable to the respective financial institutions. As of May 31, 2023, the Company may elect to sell receivables and the unaffiliated financial institutions may elect to purchase specific accounts receivable at any one time up to a: (i) maximum aggregate amount available of $ 2.0 billion under eight trade accounts receivable sale programs, (ii) maximum amount available of 400 million CNY under one trade accounts receivable sale program, (iii) maximum amount available of 100 million CHF under one trade accounts receivable sale program, and (iv) maximum amount available of 8.1 billion INR under one trade accounts receivable sale program. The trade accounts receivable sale programs expire on various dates through 2028. The Company continues servicing the receivables sold and in exchange receives a servicing fee under each of the trade accounts receivable sale programs. Servicing fees related to the trade accounts receivable sale programs recognized during the three months and nine months ended May 31, 2023 and 2022 were not material. The Company does not record a servicing asset or liability on the Condensed Consolidated Balance Sheets as the Company estimates that the fee it receives to service these receivables approximates the fair market compensation to provide the servicing activities. In connection with the trade accounts receivable sale programs, the Company recognized the following (in millions): Three months ended Nine months ended May 31, 2023 May 31, 2022 May 31, 2023 May 31, 2022 Trade accounts receivable sold (1) $ 2,594 $ 2,575 $ 9,044 $ 6,509 Cash proceeds received $ 2,583 $ 2,572 $ 9,015 $ 6,504 Pre-tax losses on sale of receivables (2) $ 11 $ 3 $ 29 $ 5 (1) Receivables sold are excluded from accounts receivable on the Condensed Consolidated Balance Sheets and are reflected as cash provided by operating activities on the Condensed Consolidated Statements of Cash Flows. (2) Recorded to other expense within the Condensed Consolidated Statements of Operations. 3. Inventories Inventories consist of the following (in millions): May 31, 2023 August 31, 2022 Raw materials $ 5,214 $ 4,918 Work in process 472 687 Finished goods 471 605 Reserve for excess and obsolete inventory ( 73 ) ( 82 ) Inventories, net $ 6,084 $ 6,128 6 Table of Contents 4. Leases During fiscal year 2023, the Company entered into new operating and finance leases. The future minimum lease payments under these new leases as of May 31, 2023 were as follows (in millions): Payments due by period Total Less than 1 year 1-3 years 3-5 years After 5 years Operating lease obligations (1) $ 85 $ 25 $ 34 $ 17 $ 9 Finance lease obligations (1) $ 88 $ 47 $ 41 $ — $ — (1) Excludes $ 224 million of payments related to operating and finance leases signed but not yet commenced. Of these excluded payments, $ 163 million relates to a variable interest entity (“VIE”), for which the Company is not the primary beneficiary. This is also the Company’s maximum exposure to loss related to the VIE. The Company expects the lease related to the VIE to commence in fiscal year 2024. Additionally, certain leases signed but not yet commenced contain residual value guarantees and purchase options not deemed probable. 5. Notes Payable and Long-Term Debt Notes payable and long-term debt outstanding as of May 31, 2023 and August 31, 2022 are summarized below (in millions): Maturity Date May 31, 2023 August 31, 2022 4.900 % Senior Notes Jul 14, 2023 $ 300 $ 300 3.950 % Senior Notes Jan 12, 2028 497 497 3.600 % Senior Notes Jan 15, 2030 496 496 3.000 % Senior Notes Jan 15, 2031 593 592 1.700 % Senior Notes Apr 15, 2026 498 497 4.250 % Senior Notes May 15, 2027 495 493 5.450 % Senior Notes (1) Feb 1, 2029 295 — Borrowings under credit facilities (2)(3) Jan 22, 2025 and Jan 22, 2027 — — Borrowings under loans Jul 31, 2026 — — Total notes payable and long-term debt 3,174 2,875 Less current installments of notes payable and long-term debt 300 300 Notes payable and long-term debt, less current installments $ 2,874 $ 2,575 (1) On April 13, 2023, the Company issued $ 300 million of publicly registered 5.450 % Senior Notes due 2029 (the “ 5.450 % Senior Notes”). The Company intends to use the net proceeds for general corporate purposes, including, together with available cash, repayment of the $ 300 million aggregate principal amount of the Company’s 4.900 % Senior Notes due in July 2023. (2) On February 10, 2023, the Company entered into an amendment (the “Amendment”) to its senior unsecured credit agreement dated as of January 22, 2020 (as amended, the “Credit Facility”). The Amendment, among other things, (i) instituted certain amendments to the sustainability-linked adjustments to the interest rates applicable to borrowings under the three-year revolving credit facility (the “ Three-Year Revolving Credit Facility”) and the Company’s five-year revolving credit facility (the “ Five-Year Revolving Credit Facility”), (ii) established customary SOFR, CDOR, EURIBOR and TIBOR provisions, which replaced the LIBOR provisions set forth in the existing agreement, and (iii) extended the termination date of the Three-Year Revolving Credit Facility to January 22, 2025, and of the Five-Year Revolving Credit Facility to January 22, 2027. (3) As of May 31, 2023, the Company has $ 3.9 billion in available unused borrowing capacity under its revolving credit facilities. The Credit Facility acts as the back-up facility for commercial paper outstanding, if any. The Company has a borrowing capacity of up to $ 3.2 billion under its commercial paper program. 7 Table of Contents Debt Covenants Borrowings under the Company’s debt agreements are subject to various covenants that limit the Company’s ability to: incur additional indebtedness, sell assets, effect mergers and certain transactions, and effect certain transactions with subsidiaries and affiliates. In addition, the revolving credit facilities and the 4.900 % Senior Notes contain debt leverage and interest coverage covenants. The Company is also subject to certain covenants requiring the Company to offer to repurchase the 4.900 %, 3.950 %, 3.600 %, 3.000 %, 1.700 %, 4.250 % or 5.450 % Senior Notes upon a change of control. As of May 31, 2023 and August 31, 2022, the Company was in compliance with its debt covenants. Fair Value Refer to Note 16 – “Fair Value Measurements” for the estimated fair values of the Company’s notes payable and long-term debt. 6. 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. The Company continues servicing the receivables sold and in exchange receives a servicing fee under the global asset-backed securitization program. Servicing fees related to the global asset-backed securitization program recognized during the three months and nine months ended May 31, 2023 and 2022 were not material. The Company does not record a servicing asset or liability on the Condensed Consolidated Balance Sheets as the Company estimates that the fee it receives 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 the Company’s 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 May 31, 2023. 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. As of May 31, 2023, the Company had no available liquidity under its global asset-backed securitization program. In connection with the asset-backed securitization programs, the Company recognized the following (in millions): Three months ended Nine months ended May 31, 2023 May 31, 2022 May 31, 2023 May 31, 2022 Trade accounts receivable sold (1) $ 1,007 $ 947 $ 3,071 $ 2,979 Cash proceeds received (2) $ 996 $ 942 $ 3,043 $ 2,971 Pre-tax losses on sale of receivables (3) $ 11 $ 5 $ 28 $ 8 (1) Receivables sold are excluded from accounts receivable on the Condensed Consolidated Balance Sheets and are reflected as cash provided by operating activities on the Condensed Consolidated Statements of Cash Flows. (2) The amounts primarily represent proceeds from collections reinvested in revolving-period transfers. (3) Recorded to other expense within the Condensed Consolidated Statements of Operations. 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 May 31, 2023 and August 31, 2022, the Company was in compliance with all covenants under the global asset-backed securitization program. 8 Table of Contents 7. Accrued Expenses Accrued expenses consist of the following (in millions): May 31, 2023 August 31, 2022 Inventory deposits $ 1,879 $ 1,586 Contract liabilities (1) 1,067 796 Accrued compensation and employee benefits 786 806 Other accrued expenses 2,232 2,084 Accrued expenses $ 5,964 $ 5,272 (1) Revenue recognized during the nine months ended May 31, 2023 and 2022 that was included in the contract liability balance as of August 31, 2022 and 2021 was $ 353 million and $ 269 million , respectively. 8 . Postretirement and Other Employee Benefits Net Periodic Benefit Cost The following table provides information about the net periodic benefit cost for all plans for the three months and nine months ended May 31, 2023 and 2022 (in millions): Three months ended Nine months ended May 31, 2023 May 31, 2022 May 31, 2023 May 31, 2022 Service cost (1) $ 4 $ 7 $ 12 $ 19 Interest cost (2) 3 1 9 3 Expected long-term return on plan assets (2) ( 4 ) ( 5 ) ( 12 ) ( 13 ) Recognized actuarial gain (2) ( 2 ) ( 2 ) ( 6 ) ( 8 ) Amortization of actuarial gain (2)(3) ( 2 ) ( 2 ) ( 5 ) ( 6 ) Amortization of prior service cost (2) 1 1 3 3 Net periodic benefit cost (credit) $ — $ — $ 1 $ ( 2 ) (1) Service cost is recognized in cost of revenue in the Condensed Consolidated Statements of Operations. (2) Components are recognized in other expense in the Condensed Consolidated Statements of Operations. (3) Actuarial gains and losses are amortized using a corridor approach. The gain/loss corridor is equal to 10 percent of the greater of the projected benefit obligation and the fair value of plan assets. Gains and losses in excess of the corridor are generally amortized over the average future working lifetime of the plan participants. 9. Derivative Financial Instruments and Hedging Activities The Company is directly and indirectly affected by changes in certain market conditions. These changes in market conditions may adversely impact the Company’s financial performance and are referred to as market risks. The Company, where deemed appropriate, uses derivatives as risk management tools to mitigate the potential impact of certain market risks. The primary market risks managed by the Company through the use of derivative instruments are foreign currency risk and interest rate risk. Foreign Currency Risk Management Forward contracts are put in place to manage the foreign currency risk associated with the anticipated foreign currency denominated revenues and expenses. A hedging relationship existed with an aggregate notional amount outstanding of $ 640 million and $ 1.4 billion as of May 31, 2023 and August 31, 2022, respectively. The related forward foreign exchange contracts have been designated as hedging instruments and are accounted for as cash flow hedges. The forward foreign exchange contract transactions will effectively lock in the value of anticipated foreign currency denominated revenues and expenses against foreign currency fluctuations. The anticipated foreign currency denominated revenues and expenses being hedged are expected to occur between June 1, 2023 and November 30, 2023. 9 Table of Contents In addition to derivatives that are designated as hedging instruments and qualify for hedge accounting, the Company also enters into forward contracts to economically hedge transactional exposure associated with commitments arising from trade accounts receivable, trade accounts payable, fixed purchase obligations and intercompany transactions denominated in a currency other than the functional currency of the respective operating entity. The aggregate notional amount of these outstanding contracts as of May 31, 2023 and August 31, 2022, was $ 3.7 billion and $ 3.4 billion, respectively. The gains and losses on cash flow hedges recognized in earnings due to amounts excluded from effectiveness testing were not material for all periods presented and are included as components of net revenue, cost of revenue and selling, general and administrative expense, which are the same line items in which the hedged items are recorded. In addition, the Company has entered into forward foreign currency exchange contracts to hedge a portion of its net investment in foreign currency denominated operations, which are designated as net investment hedges. The maturity dates and aggregate notional amount outstanding of net investment hedges are as follows (in millions): Maturity date May 31, 2023 August 31, 2022 August 2023 $ 131 $ — September 2023 33 — October 2023 96 — January 2024 96 — April 2024 35 — Total $ 391 $ — The gains and losses on net investment hedges are included in change in foreign currency translation in OCI to offset the change in the carrying value of the net investment being hedged until the complete or substantially complete liquidation of the hedged foreign operation. The amounts excluded from effectiveness testing were not material for all periods presented and are recognized in interest expense. Refer to Note 16 – “Fair Value Measurements” for the fair values and classification of the Company’s derivative instruments. The following table presents the net losses from forward contracts recorded in the Condensed Consolidated Statements of Operations for the periods indicated (in millions): Derivatives Not Designated as Hedging Instruments Under ASC 815 Location of Loss on Derivatives Recognized in Net Income Amount of Loss Recognized in Net Income on Derivatives Three months ended Nine months ended May 31, 2023 May 31, 2022 May 31, 2023 May 31, 2022 Forward foreign exchange contracts (1) Cost of revenue $ ( 41 ) $ ( 66 ) $ ( 57 ) $ ( 6 ) (1) For the three months and nine months ended May 31, 2023, the Company recognized $ 24 million and $ 20 million, respectively, of foreign currency gains in cost of revenue, which are offset by the losses from the forward foreign exchange contracts. For the three months and nine months ended May 31, 2022, the Company recognized $ 64 million and $ 27 million, respectively, of foreign currency gains in cost of revenue, which are offset by the losses from the forward foreign exchange contracts. Interest Rate Risk Management The Company periodically enters into interest rate swaps to manage interest rate risk associated with the Company’s borrowings or anticipated debt issuances. Contemporaneously with the issuance of the 5.450 % Senior Notes in April 2023, the Company settled cash flow hedges with an aggregate notional amount of $ 150 million and $ 100 million, with effective dates of May 2021 and August 2022, respectively. The cash received for the cash flow hedges at settlement was $ 15 million. The settled cash flow hedges are recorded in the Condensed Consolidated Balance Sheets as a component of accumulated other comprehensive income (“AOCI”) and are amortized to interest expense in the Condensed Consolidated Statements of Operations. 10 Table of Contents 10. Accumulated Other Comprehensive Income The following table sets forth the changes in AOCI, net of tax, by component for the nine months ended May 31, 2023 (in millions): Foreign Currency Translation Adjustment Derivative Instruments Actuarial Gain (Loss) Prior Service (Cost) Credit Total Balance as of August 31, 2022 $ ( 88 ) $ ( 3 ) $ 65 $ ( 16 ) $ ( 42 ) Other comprehensive income (loss) before reclassifications 21 ( 20 ) 3 ( 1 ) 3 Amounts reclassified from AOCI — 36 ( 11 ) 3 28 Other comprehensive income (loss) (1) 21 16 ( 8 ) 2 31 Balance as of May 31, 2023 $ ( 67 ) $ 13 $ 57 $ ( 14 ) $ ( 11 ) (1) Amounts are net of tax, which are immaterial. The following table sets forth the amounts reclassified from AOCI into the Condensed Consolidated Statements of Operations, and the associated financial statement line item, net of tax, for the periods indicated (in millions): Three months ended Nine months ended Comprehensive Income Components Financial Statement Line Item May 31, 2023 May 31, 2022 May 31, 2023 May 31, 2022 Realized (gains) losses on derivative instruments: (1) Foreign exchange contracts Cost of revenue $ ( 7 ) $ 9 $ 37 $ 4 Interest rate contracts Interest expense ( 1 ) — ( 1 ) 2 Actuarial gains (2) ( 4 ) ( 4 ) ( 11 ) ( 14 ) Prior service costs (2) 1 1 3 3 Total amounts reclassified from AOCI (3) $ ( 11 ) $ 6 $ 28 $ ( 5 ) (1) The Company expects to reclassify $ 11 million into earnings during the next twelve months, which will primarily be classified as a component of cost of revenue. (2) Amounts are included in the computation of net periodic benefit cost. Refer to Note 8 – “Postretirement and Other Employee Benefits” for additional information. (3) Amounts are net of tax, which are immaterial for the three months and nine months ended May 31, 2023 and 2022. 11. Stockholders’ Equity The Company recognized stock-based compensation expense within selling, general and administrative expense as follows (in millions): Three months ended Nine months ended May 31, 2023 May 31, 2022 May 31, 2023 May 31, 2022 Restricted stock units $ 14 $ 13 $ 68 $ 57 Employee stock purchase plan 4 3 12 10 Total $ 18 $ 16 $ 80 $ 67 As of May 31, 2023 , the shares available to be issued under t he 2021 Equity Incentive Plan were 8,473,317 . Restricted Stock Units Certain key employees have been granted time-based, performance-based and market-based restricted stock unit awards (“restricted stock units”). The time-based restricted stock units generally vest on a graded vesting schedule over three years . T he performance-based restricted stock units generally vest on a cliff vesting schedule over three years and up to a maximum of 150 %, depending on the specified performance condition and the level of achievement obtained. The performance-based restricted stock units have a vesting condition that is based upon the Company’s cumulative adjusted core earnings per share during the performance period. The market-based restricted stock units generally vest on a cliff vesting schedule over three 11 Table of Contents years and up to a maximum of 200 % , depending on the specified performance condition and the level of achievement obtained. The market-based restricted stock units ha ve a vesting condition that is tied to the Company’s total shareholder return based on the Company’s stock performance in relation to the companies in the Standard and Poor’s (S&P) Super Composite Technology Hardware and Equipment Index excluding the Company. During the nine months ended May 31, 2023 and 2022, the Company awarded approximately 0.9 million and 0.7 million time-based restricted stock units, respectively, 0.2 million and 0.2 million performance-based restricted stock units, respectively, and 0.2 million and 0.2 million market-based restricted stock units, respectively. The following represents the stock-based compensation information as of the period indicated (in millions): May 31, 2023 Unrecognized stock-based compensation expense—restricted stock units $ 51 Remaining weighted-average period for restricted stock units expense 1.5 years Common Stock Outstanding The following represents the common stock outstanding for the periods indicated: Three months ended Nine months ended May 31, 2023 May 31, 2022 May 31, 2023 May 31, 2022 Common stock outstanding: Beginning balances 133,238,368 142,392,135 135,493,980 144,496,077 Shares issued under employee stock purchase plan 1,730 1,686 631,066 522,169 Vesting of restricted stock 3,372 13,609 2,013,768 2,467,324 Purchases of treasury stock under employee stock plans ( 700 ) ( 3,766 ) ( 571,349 ) ( 704,040 ) Treasury shares purchased (1)(2) ( 1,890,906 ) ( 3,552,475 ) ( 6,215,601 ) ( 7,930,341 ) Ending balances 131,351,864 138,851,189 131,351,864 138,851,189 (1) In July 2021, the Board of Directors approved an authorization for the repurchase of up to $ 1.0 billion of the Company’s common stock (the “2022 Share Repurchase Program”). As of February 28, 2023, 16.5 million shares had been repurchased for $ 1.0 billion and no authorization remained under the 2022 Share Repurchase Program. (2) In September 2022, the Board of Directors approved an authorization for the repurchase of up to $ 1.0 billion of the Company’s common stock (the “2023 Share Repurchase Program”). As of May 31, 2023, 2.2 million shares had been repurchased for $ 179 million, excluding excise tax, and $ 821 million remains available under the 2023 Share Repurchase Program. 12. Concentration of Risk and Segment Data Concentration of Risk Sales of the Company’s products are concentrated among specific customers. During the nine months ended May 31, 2023, the Company’s five largest customers accounted for approximately 43 % of its net revenue and 82 customers accounted for approximately 90 % of its net revenue. Sales to these customers were reported in the Electronics Manufacturing Services (“EMS”) and Diversified Manufacturing Services (“DMS”) operating segments. The Company procures components from a broad group of suppliers. Some of the products manufactured by the Company require one or more components that are available from only a single source. Segment Data Net revenue for the operating segments is attributed to the segment in which the service is performed. An operating segment’s performance is evaluated based on its pre-tax operating contribution, or segment income. Segment income is defined as net revenue less cost of revenue, segment selling, general and administrative expenses, segment research and development expenses and an allocation of corporate manufacturing expenses and selling, general and administrative expenses. Certain items are excluded from the calculation of segment income. Transactions between operating segments are generally recorded at amounts that approximate those at which we would transact with third parties. 12 Table of Contents The following table sets forth operating segment information (in millions): Three months ended Nine months ended May 31, 2023 May 31, 2022 May 31, 2023 May 31, 2022 Segment income and reconciliation of income before income tax EMS $ 226 $ 208 $ 629 $ 507 DMS 178 144 627 589 Total segment income $ 404 $ 352 $ 1,256 $ 1,096 Reconciling items: Amortization of intangibles ( 7 ) ( 8 ) ( 24 ) ( 24 ) Stock-based compensation expense and related charges ( 18 ) ( 16 ) ( 80 ) ( 67 ) Restructuring, severance and related charges — — ( 45 ) — Loss on debt extinguishment — ( 4 ) — ( 4 ) Other expense (net of periodic benefit cost) ( 22 ) ( 8 ) ( 61 ) ( 19 ) Interest income 32 1 62 2 Interest expense ( 83 ) ( 39 ) ( 216 ) ( 105 ) Income before income tax $ 306 $ 278 $ 892 $ 879 The following table presents the Company’s revenues disaggregated by segment (in millions): Three months ended May 31, 2023 May 31, 2022 EMS DMS Total EMS DMS Total Timing of transfer Point in time $ 1,120 $ 1,351 $ 2,471 $ 1,755 $ 1,395 $ 3,150 Over time 3,010 2,994 6,004 2,736 2,442 5,178 Total $ 4,130 $ 4,345 $ 8,475 $ 4,491 $ 3,837 $ 8,328 Nine months ended May 31, 2023 May 31, 2022 EMS DMS Total EMS DMS Total Timing of transfer Point in time $ 3,925 $ 5,047 $ 8,972 $ 4,489 $ 5,183 $ 9,672 Over time 8,802 8,470 17,272 7,634 7,142 14,776 Total $ 12,727 $ 13,517 $ 26,244 $ 12,123 $ 12,325 $ 24,448 The Company operates in more than 30 countries worldwide. Sales to unaffiliated customers are based on the Company location that maintains the customer relationship and transacts the external sale. The following table sets forth, for the periods indicated, foreign source revenue expressed as a percentage of net revenue: Three months ended Nine months ended May 31, 2023 May 31, 2022 May 31, 2023 May 31, 2022 Foreign source revenue 86.9 % 82.6 % 85.6 % 83.7 % 13 Table of Contents 13. Restructuring, Severance and Related Charges Following is a summary of the Company’s restructuring, severance and related charges (in millions): Three months ended Nine months ended May 31, 2023 (1) May 31, 2022 May 31, 2023 (1) May 31, 2022 Employee severance and benefit costs $ — $ — $ 36 $ 1 Lease costs — — — ( 1 ) Asset write-off costs — — 5 — Other costs — — 4 — Total restructuring, severance and related charges (2) $ — $ — $ 45 $ — (1) Primarily relates to headcount reduction to further optimize the Company’s business activities and includes $ 0 million and $ 4 million recorded in the EMS segment, $ 0 million and $ 33 million recorded in the DMS segment and $ 0 million and $ 8 million of non-allocated charges for the three months and nine months ended May 31, 2023, respectively. Except for asset write-off costs, all restructuring, severance and related charges are cash costs. (2) The restructuring liability is $ 25 million as of May 31, 2023, which primarily relates to employee severance and benefit costs incurred in fiscal year 2022 and the nine months ended May 31, 2023. We expect the majority of the severance to be paid during fiscal year 2023. 14. Income Taxes Effective Income Tax Rate The U.S. federal statutory income tax rate and the Company's effective income tax rate are as follows: Three months ended Nine months ended May 31, 2023 May 31, 2022 May 31, 2023 May 31, 2022 U.S. federal statutory income tax rate 21.0 % 21.0 % 21.0 % 21.0 % Effective income tax rate 24.0 % 21.8 % 25.7 % 22.5 % The effective income tax rate increased for the three months and nine months ended May 31, 2023, compared to the three months and nine months ended May 31, 2022, primarily due to a change in the jurisdictional mix of earnings, partially offset by a $ 17 million income tax expense during the three months and nine months ended May 31, 2022 for an unrecognized tax benefit related to the taxation of certain prior year intercompany transactions. The effective income tax rate differed from the U.S. federal statutory income tax rate of 21.0% during the three months and nine months ended May 31, 2023 and 2022, primarily due to: (i) the jurisdictional mix of earnings, (ii) losses in tax jurisdictions with existing valuation allowances, (iii) tax incentives granted to sites in China, Malaysia, Singapore and Vietnam, and (iv) a $ 17 million income tax expense during the three months and nine months ended May 31, 2022 for an unrecognized tax benefit related to the taxation of certain prior year intercompany transactions. 15. Earnings Per Share and Dividends Earnings Per Share The Company calculates its basic earnings per share by dividing net income attributable to the Company by the weighted average number of common shares outstanding during the period. The Company’s diluted earnings per share is calculated in a similar manner, but includes the effect of dilutive securities. The difference between the weighted average number of basic shares outstanding and the weighted average number of diluted shares outstanding is primarily due to dilutive unvested restricted stock units. Potential shares of common stock are excluded from the computation of diluted earnings per share when their effect would be antidilutive. Performance-based restricted stock units are considered dilutive when the related performance criteria have been met assuming the end of the reporting period represents the end of the performance period. All potential shares of common stock are antidilutive in periods of net loss. Potential shares of common stock not included in the computation of earnings per share because their effect would have been antidilutive or because the performance criterion was not met were as follows (in thousands): 14 Table of Contents Three months ended Nine months ended May 31, 2023 May 31, 2022 May 31, 2023 May 31, 2022 Restricted stock units 361.2 430.9 361.2 431.7 Dividends The following table sets forth cash dividends declared by the Company to common stockholders during the nine months ended May 31, 2023 and 2022 (in millions, except for per share data): Dividend Declaration Date Dividend per Share Total of Cash Dividends Declared Date of Record for Dividend Payment Dividend Cash Payment Date Fiscal Year 2023: October 20, 2022 $ 0.08 $ 12 November 15, 2022 December 2, 2022 January 26, 2023 $ 0.08 $ 10 February 15, 2023 March 2, 2023 April 20, 2023 $ 0.08 $ 11 May 15, 2023 June 2, 2023 Fiscal Year 2022: October 21, 2021 $ 0.08 $ 12 November 15, 2021 December 1, 2021 January 20, 2022 $ 0.08 $ 12 February 15, 2022 March 2, 2022 April 21, 2022 $ 0.08 $ 12 May 16, 2022 June 2, 2022 16. Fair Value Measurements Fair Value Measurements on a Recurring Basis The following table presents the fair value of the Company's financial assets and liabilities measured at fair value by hierarchy level on a recurring basis as of the periods indicated (in millions): Fair Value Hierarchy May 31, 2023 August 31, 2022 Assets: Cash and cash equivalents: Cash equivalents Level 1 (1) $ 5 $ 14 Prepaid expenses and other current assets: Short-term investments Level 1 23 16 Forward foreign exchange contracts: Derivatives designated as hedging instruments (Note 9) Level 2 (2) 9 3 Derivatives not designated as hedging instruments (Note 9) Level 2 (2) 23 13 Other assets: Forward interest rate swap: Derivatives designated as hedging instruments (Note 9) Level 2 (3) — 13 Liabilities: Accrued expenses: Forward foreign exchange contracts: Derivatives designated as hedging instruments (Note 9) Level 2 (2) $ 26 $ 32 Derivatives not designated as hedging instruments (Note 9) Level 2 (2) 61 76 (1) Consist of investments that are readily convertible to cash with original maturities of 90 days or less. (2) The Company’s forward foreign exchange contracts, including cash flow hedges and net investment hedges are measured on a recurring basis at fair value, based on foreign currency spot rates and forward rates quoted by banks or foreign currency dealers. (3) Fair value measurements are based on the contractual terms of the derivatives and use observable market-based inputs. The interest rate swaps are valued using a discounted cash flow analysis on the expected cash flows of each derivative using observable inputs including interest rate curves and credit spreads. 15 Table of Contents Fair Value of Financial Instruments The carrying amounts of cash and cash equivalents, trade accounts receivable, prepaid expenses and other current assets, accounts payable and accrued expenses approximate fair value because of the short-term nature of these financial instruments. The carrying amounts of borrowings under credit facilities and under loans approximates fair value as interest rates on these instruments approximates current market rates. Notes payable and long-term debt is carried at amortized cost; however, the Company estimates the fair values of notes payable and long-term debt for disclosure purposes. The following table presents the carrying amounts and fair values of the Company's notes payable and long-term debt, by hierarchy level as of the periods indicated (in millions): May 31, 2023 August 31, 2022 Fair Value Hierarchy Carrying Amount Fair Value Carrying Amount Fair Value Notes payable and long-term debt: (Note 5) 4.900 % Senior Notes Level 3 (1) $ 300 $ 300 $ 300 $ 300 3.950 % Senior Notes Level 2 (2) $ 497 $ 469 $ 497 $ 471 3.600 % Senior Notes Level 2 (2) $ 496 $ 446 $ 496 $ 440 3.000 % Senior Notes Level 2 (2) $ 593 $ 503 $ 592 $ 500 1.700 % Senior Notes Level 2 (2) $ 498 $ 451 $ 497 $ 446 4.250 % Senior Notes Level 2 (2) $ 495 $ 482 $ 493 $ 483 5.450 % Senior Notes Level 2 (2) $ 295 $ 297 $ — $ — (1) This fair value estimate is based on the Company’s indicative borrowing cost derived from discounted cash flows. (2) The fair value estimates are based upon observable market data. 17. Commitments and Contingencies Legal Proceedings The Company is party to certain lawsuits in the ordinary course of business. The Company does not believe that these proceedings, individually or in the aggregate, will have a material adverse effect on the Company’s financial position, results of operations or cash flows. 18. New Accounting Guidance New accounting guidance adopted during the period did not have a material impact to the Company. Recently issued accounting guidance is not applicable or did not have, or is not expected to have, a material impact to the Company. 16 Table of Contents JABIL INC. AND SUBSIDIARIES This Quarterly Report on Form 10-Q contains forward-looking statements, within the meaning of the Private Securities Litigation Reform Act of 1995, that involve risks and uncertainties. Many of the forward-looking statements are located in Item 2 of this Form 10-Q under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” Forward-looking statements provide current expectations of future events based on certain assumptions and include any statement that does not directly relate to any historical or current fact. Forward-looking statements can also be identified by words such as “future,” “anticipates,” “believes,” “estimates,” “expects,” “intends,” “plans,” “predicts,” “will,” “would,” “should,” “could,” “can,” “may,” and similar terms. Forward-looking statements are not guarantees of future performance and the Company’s actual results may differ significantly from the results discussed in the forward-looking statements. Achievement of anticipated results is subject to substantial risks, uncertainties and inaccurate assumptions. Should these risks or uncertainties materialize, or should underlying assumptions prove inaccurate, actual results could vary materially from past results and those anticipated, estimated or projected. You should bear this in mind as you consider forward-looking statements, and you are cautioned not to put undue reliance on forward-looking statements. We undertake no obligation to publicly update forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law or by the rules and regulations of the SEC. You are advised, however, to consult any further disclosures we make on related subjects. Factors that might cause such differences include, but are not limited to, those discussed in Part II, Item 1A to this Quarterly Report on Form 10-Q and in Part 1, Item 1A of the Company’s Annual Report on Form 10-K for the year ended August 31, 2022 such as, scheduling production, managing growth and capital expenditures and maximizing the efficiency of our manufacturing capacity effectively; managing rapid declines or increases in customer demand and other related customer challenges that may occur; the scope and duration of the COVID-19 outbreak and its impact on our operations, sites, customers and supply chain; our dependence on a limited number of customers; our ability to purchase components efficiently and reliance on a limited number of suppliers for critical components; risks arising from relationships with emerging companies; changes in technology and competition in our industry; our ability to introduce new business models or programs requiring implementation of new competencies; competition; transportation issues; our ability to maintain our engineering, technological and manufacturing expertise; retaining key personnel; risks associated with international sales and operations; energy price increases or shortages; our ability to achieve expected profitability from acquisitions; risk arising from our restructuring activities; issues involving our information systems, including security issues; regulatory risks (including the expense of complying, or failing to comply, with applicable regulations; risk arising from design or manufacturing defects; and intellectual property risk); financial risks (including customers or suppliers who become financially troubled; turmoil in financial markets; tax risks; credit rating risks; risks of exposure to debt; currency fluctuations; and asset impairment); changes in financial accounting standards or policies; and risk of natural disaster, climate change or other global events. References in this report to “the Company,” “Jabil,” “we,” “our,” or “us” mean Jabil Inc. together with its consolidated subsidiaries, except where the context otherwise requires. 17 Table of Contents