JABIL INC 10-Q

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations Overview We are one of the leading providers of worldwide manufacturing services and solutions. We provide comprehensive electronics design, production and product management services to companies in various industries and end markets. Our services enable our customers to reduce manufacturing costs, improve supply-chain management, reduce inventory obsolescence, lower transportation costs and reduce product fulfillment time. Our manufacturing and supply chain management services and solutions include innovation, design, planning, fabrication and assembly, delivery and managing the flow of resources and products. We derive substantially all of our revenue from production and product management services (collectively referred to as “manufacturing services”), which encompass the act of producing tangible components that are built to customer specifications and are then provided to the customer. 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 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, 86.9% and 85.6%, of net revenue from our international operations for the three months and nine months ended May 31, 2023, respectively. Our global manufacturing production sites allow customers to manufacture products simultaneously in the optimal locations for their products. Our global presence is key to assessing and executing on our business opportunities. We have two reporting segments: Electronics Manufacturing Services (“EMS”) and Diversified Manufacturing Services (“DMS”), which are organized based on the economic profiles of the services performed, including manufacturing capabilities, market strategy, margins, return on capital and risk profiles. Our EMS segment is focused around leveraging IT, supply chain design and engineering, technologies largely centered on core electronics, utilizing our large scale manufacturing infrastructure and our ability to serve a broad range of end markets. Our EMS segment is a high volume business that produces product at a quicker rate (i.e. cycle time) and in larger quantities and includes customers primarily in the 5G, wireless and cloud, digital print and retail, industrial and semi-cap, and networking and storage industries. Our DMS segment is focused on providing engineering solutions, with an emphasis on material sciences, technologies and healthcare. Our DMS segment includes customers primarily in the 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, 2022 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 May 31, 2023 contained herein. COVID-19 The COVID-19 pandemic has had, and continues to have, significant impacts in countries where we operate. Travel and business operation restrictions arising from governmental virus containment efforts have continued to impact our operations in Asia during this fiscal year. Certain of our suppliers continue to experience supply chain constraints, including difficulty sourcing materials necessary to fulfill customer production requirements and challenges in transporting completed products to our end customers. 18 Table of Contents Summary of Results The following table sets forth, for the periods indicated, certain key operating results and other financial information (in millions, except per share data): 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 Gross profit $ 697 $ 619 $ 2,101 $ 1,903 Operating income $ 375 $ 321 $ 1,096 $ 984 Net income attributable to Jabil Inc. $ 233 $ 218 $ 663 $ 681 Earnings per share—basic $ 1.76 $ 1.55 $ 4.96 $ 4.77 Earnings per share—diluted $ 1.72 $ 1.52 $ 4.86 $ 4.67 Key Performance Indicators Management regularly reviews financial and non-financial performance indicators to assess the Company’s operating results. Changes in our operating assets and liabilities are largely affected by our working capital requirements, which are dependent on the effective management of our sales cycle as well as timing of payments. Our sales cycle measures how quickly we can convert our manufacturing services into cash through sales. We believe the metrics set forth below are useful to investors in measuring our liquidity as future liquidity needs will depend on fluctuations in levels of inventory, accounts receivable and accounts payable. The following table sets forth, for the quarterly periods indicated, certain of management’s key financial performance indicators: Three months ended May 31, 2023 February 28, 2023 May 31, 2022 Sales cycle (1) 48 days 50 days 37 days Inventory turns (annualized) (2) 4 turns 4 turns 4 turns Days in accounts receivable (3) 38 days 41 days 35 days Days in inventory (4) 84 days 93 days 85 days Days in accounts payable (5) 74 days 84 days 83 days (1) The sales cycle is calculated as the sum of days in accounts receivable and days in inventory, less the days in accounts payable; accordingly, the variance in the sales cycle quarter over quarter was a direct result of changes in these indicators. (2) Inventory turns (annualized) are calculated as 360 days divided by days in inventory. (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, 2023, the decrease in days in accounts receivable from the prior sequential quarter was primarily due to the timing of collections. During the three months ended May 31, 2023, the increase in days in accounts receivable from the three months ended May 31, 2022, was primarily due to higher sales and the timing of collections. (4) Days in inventory is calculated as inventories, net and contract assets divided by cost of revenue multiplied by 90 days. During the three months ended May 31, 2023, the decrease in days in inventory from the prior sequential quarter was primarily driven by increased sales activity during the quarter resulting in a higher consumption of inventory and improved working capital management. (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, 2023, the decrease in days in accounts payable from the prior sequential quarter was primarily due to a decrease in material purchases and timing of cash payments during the quarter. During the three months ended May 31, 2023, the decrease in days in accounts payable from the three months ended May 31, 2022, was primarily due to cash payments and timing of purchases during the quarter. 19 Table of Contents Critical Accounting Policies and Estimates The preparation of our Condensed Consolidated Financial Statements and related disclosures in conformity with U.S. generally accepted accounting principles (“U.S. GAAP”) requires management to make estimates and judgments that affect our reported amounts of assets and liabilities, revenues and expenses, and related disclosures of contingent assets and liabilities. On an on-going basis, we evaluate our estimates and assumptions based upon historical experience and various other factors and circumstances. Management believes that our estimates and assumptions are reasonable under the circumstances; 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, 2022. Recent Accounting Pronouncements See Note 18 – “New Accounting Guidance” to the Condensed Consolidated Financial Statements for a discussion of recent accounting guidance. Results of Operations Net Revenue Generally, we assess revenue on a global customer basis regardless of whether the growth is associated with organic growth or as a result of an acquisition. Accordingly, we do not differentiate or separately report revenue increases generated by acquisitions as opposed to existing business. In addition, the added cost structures associated with our acquisitions have historically been relatively insignificant when compared to our overall cost structure. The distribution of revenue across our segments has fluctuated, and will continue to fluctuate, as a result of numerous factors, including the following: fluctuations in customer demand; efforts to diversify certain portions of our business; business growth from new and existing customers; specific product performance; and any potential termination, or substantial winding down, of significant customer relationships. Three months ended Nine months ended (dollars in millions) May 31, 2023 May 31, 2022 Change May 31, 2023 May 31, 2022 Change Net revenue $ 8,475 $ 8,328 1.8 % $ 26,244 $ 24,448 7.3 % Net revenue increased during the three months ended May 31, 2023, compared to the three months ended May 31, 2022. Specifically, the DMS segment net revenue increased 13% due to: (i) an 11% increase in revenues from existing customers within our automotive and transportation business, and (ii) a 5% increase in revenues from existing customers within our healthcare and packaging business. The increase is partially offset by a 3% decrease in revenues from existing customers within our connected devices business. The EMS segment net revenue decreased 8% primarily due to a decrease in revenues from existing customers within our 5G, wireless and cloud business, which began transitioning to a customer-controlled consignment model in fiscal year 2023. Net revenue increased during the nine months ended May 31, 2023, compared to the nine months ended May 31, 2022. Specifically, the DMS segment net revenue increased 10% due to: (i) a 8% increase in revenues from existing customers within our automotive and transportation business, (ii) a 4% increase in revenues from existing customers within our healthcare and packaging business, and (iii) a 1% increase in revenues from existing customers within our mobility business. The increase is partially offset by a 3% decrease in revenues from existing customers within our connected devices business. The EMS segment net revenue increased 5% due to: (i) a 3% increase in revenues from existing customers within our industrial and capital equipment business, and (ii) a 2% increase in revenues from existing customers within our digital print and retail business. 20 Table of Contents The following table sets forth, for the periods indicated, revenue by segment 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 EMS 49 % 54 % 48 % 50 % DMS 51 % 46 % 52 % 50 % Total 100 % 100 % 100 % 100 % 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 % Gross Profit Three months ended Nine months ended (dollars in millions) May 31, 2023 May 31, 2022 May 31, 2023 May 31, 2022 Gross profit $ 697 $ 619 $ 2,101 $ 1,903 Percent of net revenue 8.2 % 7.4 % 8.0 % 7.8 % Gross profit as a percentage of net revenue increased for the three months ended May 31, 2023, compared to the three months ended May 31, 2022, primarily due to product mix and improved profitability across various businesses. Gross profit as a percentage of net revenue remained relatively consistent for the nine months ended May 31, 2023, compared to the nine months ended May 31, 2022. Selling, General and Administrative Three months ended Nine months ended (dollars in millions) May 31, 2023 May 31, 2022 Change May 31, 2023 May 31, 2022 Change Selling, general and administrative $ 307 $ 282 $ 25 $ 911 $ 870 $ 41 Selling, general and administrative expenses increased during the three months ended May 31, 2023, compared to the three months ended May 31, 2022. The increase is primarily due to: (i) $15 million due to higher salary and salary related expenses and (ii) $6 million of indirect taxes. Selling, general and administrative expenses increased during the nine months ended May 31, 2023, compared to the nine months ended May 31, 2022. The increase is primarily due to: (i) $13 million due to higher salary and salary related expenses, (ii) $13 million in stock-based compensation expense due to higher anticipated achievement levels for certain performance-based stock awards and awards granted during the three months ended November 30, 2022, (iii) $8 million for higher travel-related costs, and (iv) $6 million of indirect taxes. Research and Development Three months ended Nine months ended (dollars in millions) May 31, 2023 May 31, 2022 May 31, 2023 May 31, 2022 Research and development $ 8 $ 8 $ 25 $ 25 Percent of net revenue 0.1 % 0.1 % 0.1 % 0.1 % Research and development expenses remained consistent as a percentage of net revenue during the three months and nine months ended May 31, 2023, compared to the three months and nine months ended May 31, 2022. 21 Table of Contents Amortization of Intangibles Three months ended Nine months ended (dollars in millions) May 31, 2023 May 31, 2022 Change May 31, 2023 May 31, 2022 Change Amortization of intangibles $ 7 $ 8 $ (1) $ 24 $ 24 $ — Amortization of intangibles remained relatively consistent during the three months and nine months ended May 31, 2023, compared to the three months and nine months ended May 31, 2022. Restructuring, Severance and Related Charges Three months ended Nine months ended (dollars in millions) May 31, 2023 May 31, 2022 Change May 31, 2023 May 31, 2022 Change Restructuring, severance and related charges $ — $ — $ — $ 45 $ — $ 45 Restructuring, severance and related charges increased during the nine months ended May 31, 2023, compared to the nine months ended May 31, 2022 primarily related to a headcount reduction to further optimize our business activities during the three months ended November 30, 2022. Loss on Debt Extinguishment Three months ended Nine months ended (dollars in millions) May 31, 2023 May 31, 2022 Change May 31, 2023 May 31, 2022 Change Loss on debt extinguishment $ — $ 4 $ (4) $ — $ 4 $ (4) Loss on debt extinguishment is due to the “make-whole” premium incurred during the three months ended May 31, 2022, for the redemption of the 4.700% Senior Notes due 2022. Other Expense (Income) Three months ended Nine months ended (dollars in millions) May 31, 2023 May 31, 2022 Change May 31, 2023 May 31, 2022 Change Other expense (income) $ 18 $ 1 $ 17 $ 50 $ (2) $ 52 The change in other expense (income) during the three months ended May 31, 2023, compared to the three months ended May 31, 2022, is primarily due to an increase in fees associated with the securitization programs and higher interest rates for the trade accounts receivable sales programs. The change in other expense (income) during the nine months ended May 31, 2023, compared to the nine months ended May 31, 2022, is primarily due to: (i) $48 million related to an increase in fees associated with the securitization programs and higher utilization of and higher interest rates for the trade accounts receivable programs and (ii) $10 million, primarily related to higher net periodic benefit costs. The change is partially offset by a $6 million decrease in other expense. Interest Income Three months ended Nine months ended (dollars in millions) May 31, 2023 May 31, 2022 Change May 31, 2023 May 31, 2022 Change Interest income $ 32 $ 1 $ 31 $ 62 $ 2 $ 60 Interest income increased during 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 higher interest rates on and higher cash balances. 22 Table of Contents Interest Expense Three months ended Nine months ended (dollars in millions) May 31, 2023 May 31, 2022 Change May 31, 2023 May 31, 2022 Change Interest expense $ 83 $ 39 $ 44 $ 216 $ 105 $ 111 Interest expense increased during the three months ended May 31, 2023, compared to the three months ended May 31, 2022, primarily due to higher interest rates on our commercial paper program, credit facilities, and other borrowings. Interest expense increased during the nine months ended May 31, 2023, compared to the nine months ended May 31, 2022, primarily due to higher borrowings and higher interest rates on our commercial paper program, credit facilities, and other borrowings. Income Tax Expense Three months ended Nine months ended May 31, 2023 May 31, 2022 Change May 31, 2023 May 31, 2022 Change Effective income tax rate 24.0 % 21.8 % 2.2 % 25.7 % 22.5 % 3.2 % 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. Non-GAAP (Core) Financial Measures The following discussion and analysis of our financial condition and results of operations include certain non-GAAP financial measures as identified in the reconciliations below. The non-GAAP financial measures disclosed herein do not have standard meaning and may vary from the non-GAAP financial measures used by other companies or how we may calculate those measures in other instances from time to time. Non-GAAP financial measures should not be considered a substitute for, or superior to, measures of financial performance prepared in accordance with U.S. GAAP. 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. 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. For fiscal year 2023, the Company adopted an annual normalized tax rate (“normalized core tax rate”) for the computation of the non-GAAP (core) income tax provision to provide better consistency across reporting periods. In estimating the normalized core tax rate annually, the Company utilizes a full-year financial projection of core earnings that considers the mix of earnings across tax jurisdictions, existing tax positions, and other significant tax matters. The Company may adjust the normalized core tax rate during the year for material impacts from new tax legislation or material changes to the Company’s operations. Prior to fiscal year 2023, the Company determined the tax effect of the items included and excluded from core earnings quarterly. 23 Table of Contents Included in the tables below are reconciliations of the non-GAAP financial measures to the most directly comparable U.S. GAAP financial measures as provided in our Condensed Consolidated Financial Statements: Reconciliation of U.S. GAAP Financial Results to Non-GAAP Measures Three months ended Nine months ended (in millions, except for per share data) May 31, 2023 May 31, 2022 May 31, 2023 May 31, 2022 Operating income (U.S. GAAP) $ 375 $ 321 $ 1,096 $ 984 Amortization of intangibles 7 8 24 24 Stock-based compensation expense and related charges 18 16 80 67 Restructuring, severance and related charges (1) — — 45 — Net periodic benefit cost (2) 4 7 11 21 Adjustments to operating income 29 31 160 112 Core operating income (Non-GAAP) $ 404 $ 352 $ 1,256 $ 1,096 Net income attributable to Jabil Inc. (U.S. GAAP) $ 233 $ 218 $ 663 $ 681 Adjustments to operating income 29 31 160 112 Loss on debt extinguishment — 4 — 4 Net periodic benefit cost (2) (4) (7) (11) (21) Adjustments for taxes 11 — 32 — Core earnings (Non-GAAP) $ 269 $ 246 $ 844 $ 776 Diluted earnings per share (U.S. GAAP) $ 1.72 $ 1.52 $ 4.86 $ 4.67 Diluted core earnings per share (Non-GAAP) $ 1.99 $ 1.72 $ 6.18 $ 5.32 Diluted weighted average shares outstanding (U.S. GAAP and Non-GAAP) 135.1 143.3 136.4 145.8 (1) Recorded during the nine months ended May 31, 2023, related to headcount reduction to further optimize our business activities. (2) 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. There is no impact to core earnings or diluted core earnings per share for this adjustment. Adjusted Free Cash Flow Nine months ended (in millions) May 31, 2023 May 31, 2022 Net cash provided by operating activities (U.S. GAAP) $ 1,048 $ 745 Acquisition of property, plant and equipment (“PP&E”) (1) (860) (1,068) Proceeds and advances from sale of PP&E (1) 180 470 Adjusted free cash flow (Non-GAAP) $ 368 $ 147 (1) Certain customers co-invest in property, plant and equipment (“PP&E”) with us. As we acquire PP&E, we recognize the cash payments in acquisition of PP&E. When our customers reimburse us and obtain control, we recognized the cash receipts in proceeds and advances from the sale of PP&E. Liquidity and Capital Resources We believe that our level of liquidity sources, which includes cash on hand, 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 flows provided by operating activities and 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 programs, any potential acquisitions, our working capital requirements and our contractual obligations for the next 12 months and beyond. We continue to assess our capital structure and evaluate the merits of redeploying available cash. 24 Table of Contents Cash and Cash Equivalents As of May 31, 2023, we had approximately $1.5 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 May 31, 2023 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 millions) 4.900% Senior Notes 3.950% Senior Notes 3.600% Senior Notes 3.000% Senior Notes 1.700% Senior Notes 4.250% Senior Notes 5.450% Senior Notes (1) Borrowings under revolving credit facilities (2)(3) Borrowings under loans Total notes payable and credit facilities Balance as of August 31, 2022 $ 300 $ 497 $ 496 $ 592 $ 497 $ 493 $ — $ — $ — $ 2,875 Borrowings — — — — — — 298 3,258 — 3,556 Payments — — — — — — — (3,258) — (3,258) Other — — — 1 1 2 (3) — — 1 Balance as of May 31, 2023 $ 300 $ 497 $ 496 $ 593 $ 498 $ 495 $ 295 $ — $ — $ 3,174 Maturity Date Jul 14, 2023 Jan 12, 2028 Jan 15, 2030 Jan 15, 2031 Apr 15, 2026 May 15, 2027 Feb 1, 2029 Jan 22, 2025 and Jan 22, 2027 Jul 31, 2026 Original Facility/ Maximum Capacity (3) $300 million $500 million $500 million $600 million $500 million $500 million $300 million $3.9 billion (3) $1 million . (1) On April 13, 2023, we issued $300 million of publicly registered 5.450% Senior Notes due 2029 (the “5.450% Senior Notes”). We intend to use the net proceeds for general corporate purposes, including, together with available cash, repayment of the $300 million aggregate principal amount of our 4.900% Senior Notes due in July 2023. (2) On February 10, 2023, we entered into an amendment (the “Amendment”) to our 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 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, we had $3.9 billion in available unused borrowing capacity under our revolving credit facilities. The Credit Facility acts as the back-up facility for commercial paper outstanding, if any. We have a borrowing capacity of up to $3.2 billion under our commercial paper program. Commercial paper borrowings with an original maturity of 90 days or less are recorded net within the Condensed Consolidated Statements 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. Our Senior Notes and our credit facilities contain various financial and nonfinancial covenants. 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, 2023 and August 31, 2022, 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. 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. 25 Table of Contents 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 global asset-backed securitization program recognized during the three months and nine months ended May 31, 2023 and 2022 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 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. During the three months and nine months ended May 31, 2023, we sold $1.0 billion and $3.1 billion, respectively, of trade accounts receivable and we received cash proceeds of $1.0 billion and $3.0 billion, respectively. As of May 31, 2023, 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 May 31, 2023 and August 31, 2022, 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 As of May 31, 2023, we may elect to sell receivables and the unaffiliated financ ial 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. During the three months and nine months ended May 31, 2023, we sold $2.6 billion and $9.0 billion, respectively, of trade accounts receivable under these programs and we received cash proceeds of $2.6 billion and $9.0 billion, respectively. As of May 31, 2023, we had up to $1.0 billion in available liquidity under our trade accounts receivable sale programs. Cash Flows The following table sets forth selected consolidated cash flow information (in millions): Nine months ended May 31, 2023 May 31, 2022 Net cash provided by operating activities $ 1,048 $ 745 Net cash used in investing activities (738) (616) 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) Operating Activities Net cash provided by operating activities during the nine months ended May 31, 2023, was primarily due to non-cash expenses and net income and a decrease in accounts receivable, inventories, and contract assets. The net cash provided by operating activities was partially offset by a decrease in accounts payable, accrued expenses and other liabilities and an increase in prepaid expenses and other current assets. The decrease in accounts receivable is primarily driven by the timing of collections. The decrease in inventories is primarily due to higher consumption of inventories to support sales during the quarter. The decrease in contract assets is primarily due to timing of revenue recognition for over time customers. The decrease in accounts payable, accrued expenses and other liabilities is primarily due to the timing of purchases and cash payments. The increase in prepaid expenses and other current assets is primarily due to the timing of payments. 26 Table of Contents Investing Activities Net cash used in investing activities during the nine months ended May 31, 2023 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, 2023 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. Capital Expenditures For Fiscal Year 2023, we anticipate our net capital expenditures will be approximately $875 million. In general, our capital expenditures support ongoing maintenance in our DMS and EMS segments and investments in capabilities and targeted end markets. The amount of actual capital expenditures may be affected by general economic, financial, competitive, legislative and regulatory factors, among other things. Dividends and Share Repurchases We currently expect to continue to declare and pay regular quarterly dividends of an amount similar to our past declarations. However, the declaration and payment of future dividends are discretionary and will be subject to determination by our Board of Directors each quarter following its review of our financial performance and global economic conditions. 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 February 28, 2023, 16.5 million shares had been repurchased for $1.0 billion and no authorization remained under the 2022 Share Repurchase Program. In September 2022, the Board of Directors approved an authorization for the repurchase of up to $1.0 billion of our 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. Contractual Obligations As of the date of this report, other than the borrowings on the 5.450% Senior Notes, (see Note 5 – “Notes Payable and Long-Term Debt” to the Condensed Consolidated Financial Statements) and 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, 2022, to our contractual obligations and commitments and the related cash requirements. Item 3. Quantitative and Qualitative Disclosures About Market Risk There have been no material changes in our primary risk exposures or management of market risks from those disclosed in our Annual Report on Form 10-K for the fiscal year ended August 31, 2022.