What changed in this filing

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Item 7. Management’s Discussion and Analysis

2023-10-20 compared with 2022-10-25 · 113 added, 104 removed, 322 unchanged (40% of the section changed)

7 unchanged sentences

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.

cycle time) and in larger quantities and includes customers primarily in the 5G, wireless and cloud, digital print and retail, industrial and semi-capital equipment, and networking and storage industries.

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

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In addition, our engineers engage in research and development (“R&D”) of new technologies that apply generally to our operations.

The expenses of these R&D activities are reflected in the research and development line item within our Consolidated Statement of Operations.

The expenses of these R&D activities are reflected in the research and development line item within our Consolidated Statements of Operations.

An important element of our strategy is the expansion of our global production facilities.

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We economically hedge certain of these local currency costs, based on our evaluation of the potential exposure as compared to the cost of the hedge, through the purchase of foreign currency exchange contracts.

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

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

On September 26, 2023, we announced the signing of a definitive agreement to divest our mobility business to BYD Electronic (International) Company Limited (“BYDE”) in a cash transaction valued at approximately $2.2 billion.

The transaction is

anticipated to close within the first two quarters of our fiscal year 2024 (which is the period from September 1, 2023 through February 29, 2024), and is subject to closing conditions, including required regulatory approvals.

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

The COVID-19 pandemic, which began to impact us in January 2020, has continued to affect our business and the businesses of our customers and suppliers.

Travel and business operation restrictions arising from virus containment efforts of governments around the world have continued to impact our operations in Asia, Europe and the Americas.

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

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

Summary of Results

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Days in accounts payable (6)

(1) The calculation of these key performance indicators includes assets and liabilities held for sale for the three months ended August 31, 2023.

(2) The sales cycle is calculated as the sum of days in accounts receivable and days in inventory, less the days in accounts payable;

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

During the three months ended August 31, 2022, the increase in days in accounts receivable from the three months ended May 31, 2022 and August 31, 2021 was primarily due to an increase in accounts receivable, primarily driven by higher sales and the timing of collections.

During the three months ended August 31, 2023, the increase in days in accounts receivable from the prior sequential quarter was primarily due to an increase in accounts receivable, primarily driven by timing of collections.

(5) Days in inventory is calculated as inventory and contract assets divided by cost of revenue multiplied by 90 days.

During the three months ended August 31, 2022, the increase in days in inventory from the three months ended August 31, 2021 was primarily due to higher raw material balances due to supply-chain constraints and to support expected sales levels in the first quarter of fiscal year 2023.

During the three months ended August 31, 2022, the decrease in days in inventory from the prior sequential quarter was primarily driven by increased sales activity during the quarter.

During the three months ended August 31, 2023, the decrease in days in inventory from the prior sequential quarter was primarily driven by sales activity during the quarter resulting in a higher consumption of inventory and improved working capital management.

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

During the three months ended August 31, 2022, the decrease in days in accounts payable from the three months ended August 31, 2021 was primarily due to timing of purchases and cash payments during the quarter.

During the three months

ended August 31, 2022, the increase in days in accounts payable from the three months ended May 31, 2022 was primarily due to an increase in materials purchases and timing of payments.

During the three months ended August 31, 2023, the decrease in days in accounts payable from the three months ended August 31, 2022 was primarily due to cash payments and timing of purchases during the quarter.

During the three months ended August 31, 2023, the increase in days in accounts payable from the prior sequential quarter was primarily due to an increase in material purchases and timing of cash payments during the quarter.

Critical Accounting Policies and Estimates

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Net revenue increased during the fiscal year ended August 31, 2023 compared to the fiscal year ended August 31, 2022.

Specifically, the EMS segment net revenue increased 20% due to:

(i) a 9% increase in revenues from existing customers within our 5G, wireless and cloud business, (ii) a 5% increase in revenues from existing customers within our digital print and retail business, (iii) a 4% increase in revenues from existing customers within our industrial and capital equipment business and (iv) a 2% increase in revenues from existing customer within our networking and storage business.

The DMS segment net revenue increased 9% due to:

(i) a 6% increase in revenues from existing customers within our automotive and transportation business, (ii) a 3% increase in revenues from existing customers within our healthcare and packaging businesses and (iii) a 2% increase in revenues from existing customers within our connected devices business.

The increase was partially offset by a 2% decrease in revenues from existing customers within our mobility business.

Specifically, the DMS segment net revenue increased 8% due to:

(i) a 7% 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 businesses and (iii) a 1% increase in in revenues from existing customers within our mobility business.

The increase was partially offset by a 4% decrease in revenues from existing customers within our connected devices business.

The EMS segment net revenue remained consistent due to:

(i) a 2% increase in revenues from existing customers within our industrial and semi-capital equipment business and (ii) a 2% decrease in revenues from existing customers within our 5G, wireless and cloud business.

The transaction is anticipated to close within the first two quarters of our fiscal year 2024 (which is the period from September 1, 2023 through February 29, 2024), and is subject to closing conditions, including required regulatory approvals.

See Note 16 – “Business Acquisitions and Divestitures” to the Consolidated Financial Statements for additional information.

During fiscal year 2024, we expect an additional $700 million in components that we procure and integrate for our cloud business will shift from a purchase and resale model to a customer-controlled consignment service model.

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Percent of net revenue

Gross profit as a percentage of net revenue decreased for the fiscal year ended August 31, 2022 compared to the fiscal year ended August 31, 2021, primarily due to product mix.

Gross profit as a percentage of net revenue increased for the fiscal year ended August 31, 2023 compared to the fiscal year ended August 31, 2022, primarily due to product mix.

Selling, General and Administrative

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Selling, general and administrative

Selling, general and administrative expenses decreased during the fiscal year ended August 31, 2022 compared to the fiscal year ended August 31, 2021.

The decrease is primarily due to (i) a $39 million decrease due to lower salary and salary related expenses and (ii) a $21 million decrease in stock-based compensation expense due to higher anticipated achievement levels for certain performance-based stock awards during the fiscal year ended August 31, 2021 and certain one-time awards granted during the second quarter of fiscal year 2021.

Selling, general and administrative expenses increased during the fiscal year ended August 31, 2023 compared to the fiscal year ended August 31, 2022.

The increase is primarily due to:

(i) a $26 million increase due to higher salary and salary related expenses, (ii) a $14 million increase in stock-based compensation expense due to higher anticipated achievement levels for certain performance-based stock awards and increased awards granted, and (iii) $12 million of other selling, general and administrative expenses.

Research and Development

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Amortization of intangibles

Amortization of intangibles decreased during the fiscal year ended August 31, 2022 compared to the fiscal year ended August 31, 2021 primarily driven by reduced amortization related to the Nypro trade name.

Amortization of intangibles remained relatively consistent during the fiscal year ended August 31, 2023 compared to the fiscal year ended August 31, 2022.

Restructuring, Severance and Related Charges

Following is a summary of our restructuring, severance and related charges:

Fiscal Year Ended August 31,

(in millions)

Employee severance and benefit costs

Asset write-off costs

Total restructuring, severance and related charges (2)

(1) Recorded during the fiscal year ended August 31, 2022 for headcount reduction activities.

(2) Includes $1 million and $0 million recorded in the EMS segment, $10 million and $9 million recorded in the DMS segment and $7 million and $1 million of non-allocated charges for the fiscal years ended August 31, 2022 and 2021, respectively.

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

Se e Note 14 – “Restructuring, Severance and Related Charges” to the Consolidated Financial Statements for further discussion of restructuring, severance and related charges.

Restructuring, severance and related charges

Restructuring, severance and related charges increased during the fiscal year ended August 31, 2023, compared to the fiscal year ended August 31, 2022 primarily related to a headcount reduction to further optimize our business activities.

2024 Restructuring Plan

On September 26, 2023, our Board of Directors approved a restructuring plan to (i) realign our cost base for stranded costs associated with the sale and realignment of our mobility business and (ii) optimize our global footprint.

This action includes headcount reductions across our Selling, General and Administrative (“SG&A”) cost base and capacity realignment (the “2024 Restructuring Plan”).

The 2024 Restructuring Plan reflects our intention only and restructuring decisions, and the timing of such decisions, at certain locations are still subject to consultation with our employees and their representatives.

Based on the analysis done to date, we currently expect to recognize approximately $300 million in pre-tax restructuring and other related costs over the course of our 2024 fiscal year.

The charges relating to the 2024 Restructuring Plan are currently expected to result in net cash expenditures of approximately $200 million that will be payable over the course of our fiscal years 2024 and 2025.

The exact timing of these charges and cash outflows, as well as the estimated cost ranges by category type, have not been finalized.

This information will be subject to the finalization of timetables for the transition of functions, consultation with employees and their representatives as well as the statutory severance requirements of the jurisdictions impacted, and the amount and timing of the actual charges may vary due to a variety of factors.

Our estimates for the charges discussed above exclude any potential income tax effects.

See Note 14 – “Restructuring, Severance and Related Charges” to the Consolidated Financial Statements for further discussion of restructuring, severance and related charges.

Loss on Debt Extinguishment

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Loss on debt extinguishment

Loss on debt extinguishment is due to the “make-whole” premium incurred during the fiscal year ended August 31, 2022, for the redemption of the 4.700% Senior Notes due 2022.

(Gain) Loss on Securities

The change in loss on debt extinguishment during the fiscal year ended August 31, 2023 compared to the fiscal year ended August 31, 2022, is due to the “make-whole” premium incurred for the redemption of the 4.700% Senior Notes during the fiscal year ended August 31, 2022.

Gain on Securities

Fiscal Year Ended August 31,

(in millions)

(Gain) loss on securities

The change in (gain) loss on securities during the fiscal year ended August 31, 2022 compared to the fiscal year ended August 31, 2021, is due to cash proceeds received in connection with the sale of an investment during the fiscal year ended August 31, 2021.

Gain on securities

Gain on securities remained consistent during the fiscal year ended August 31, 2023 compared to the fiscal year ended August 31, 2022.

Other Expense (Income)

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Other expense (income)

The change in other expense (income) during the fiscal year ended August 31, 2022 compared to the fiscal year ended August 31, 2021, is primarily due to:

(i) $10 million related to an increase in fees associated with higher utilization of the trade accounts receivable sales programs, (ii) $7 million primarily related to higher net periodic benefit costs, and (iii) $6 million arising from an increase in other expense.

Interest Income

Fiscal Year Ended August 31,

(in millions)

Interest income

Interest income remained relatively consistent during the fiscal year ended August 31, 2022 compared to the fiscal year ended August 31, 2021.

Interest Expense

The change in other expense (income) during the fiscal year ended August 31, 2023 compared to the fiscal year ended August 31, 2022, is primarily due to a $57 million increase in fees due to higher interest rates on our trade accounts receivable sale programs and global asset-backed securitization program.

Interest Expense, net

Fiscal Year Ended August 31,

(in millions)

Interest expense

Interest expense increased during the fiscal year ended August 31, 2022, compared to the fiscal year ended August 31, 2021, primarily due to higher interest rates and higher borrowings on our credit facilities and commercial paper program.

Additionally, the increase is due to higher borrowings on our senior notes.

Interest expense, net

Interest expense, net increased during the fiscal year ended August 31, 2023 compared to the fiscal year ended August 31, 2022, primarily due to higher interest rates on our commercial paper program and credit facilities.

Income Tax Expense

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Effective income tax rate

The effective income tax rate decreased for the fiscal year ended August 31, 2022, compared to the fiscal year ended August 31, 2021, primarily due to:

(i) higher income before income tax in low tax rate jurisdictions and decreased losses in tax jurisdictions with existing valuation allowances for the fiscal year ended August 31, 2022 and (ii) an income tax benefit of $26 million for the reversal of a portion of the U.S.

The effective income tax rate increased for the fiscal year ended August 31, 2023, compared to the fiscal year ended August 31, 2022, primarily due to:

(i) a change in the jurisdictional mix of earnings, (ii) an income tax expense of $146 million related to a change in the indefinite reinvestment assertion resulting from the planned divestiture and operations classified as held for sale for the fiscal year ended August 31, 2023, and (iii) an income tax benefit of $26 million for the reversal of a portion of the U.S.

valuation allowance for the fiscal year ended August 31, 2022.

These decreases were partially offset by a $17 million income tax expense for an unrecognized tax benefit related to the taxation of certain prior year intercompany transactions for the fiscal year ended August 31, 2022.

These increases were partially offset by a $17 million income tax expense for an unrecognized tax benefit related to the taxation of certain prior year intercompany transactions for the fiscal year ended August 31, 2022.

Non-GAAP (Core) Financial Measures

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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.

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.

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

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Restructuring, severance and related charges (1)

Distressed customer charge

Net periodic benefit cost (2)

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Loss on debt extinguishment

(Gain) loss on securities

Gain on securities

Net periodic benefit cost (2)

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GAAP and Non-GAAP)

(1) Recorded during the fiscal year ended August 31, 2022 for headcount reduction activities.

(1) Recorded during the fiscal year ended August 31, 2023, related to headcount reduction to further optimize our business activities.

(2) 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.

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.

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.

(3) Charges related to the redemption of our 4.700% Senior Notes due 2022.

(4) The fiscal year ended August 31, 2022 includes an income tax benefit of $26 million for the reversal of a portion of the U.S.

valuation allowance.

(3) The adjustment for taxes for the fiscal year ended August 31, 2023, primarily relates to a change in the indefinite reinvestment assertion associated with operations that have been classified as held for sale.

Adjusted Free Cash Flow

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Earnings per share attributable to the stockholders of Jabil Inc.:

Acquisitions and Expansion

Refe r to Note 16 – “Business Acquisitions” to th e Consolidated Financial Statements for discussion.

Acquisitions and Divestitures

We announced on September 26, 2023 that, through our indirect subsidiary, Jabil Circuit (Singapore) Pte.

Ltd., a Singapore private limited company (“Singapore Seller”), we have agreed to sell to BYD Electronic (International) Co.

Ltd., a Hong Kong limited liability company (“Purchaser” or “BYDE”), our product manufacturing business in Chengdu, including our supporting component manufacturing in Wuxi (the “Business”) for cash consideration of approximately $2.2 billion, subject to certain customary purchase price adjustments.

The sale is being made pursuant to a definitive agreement (the “Purchase Agreement”) for the sale and purchase of certain assets of Singapore Seller and the shares of Juno Singapore Target Newco Pte.

(the “Target”).

Following a pre-closing reorganization (the “Reorganization”), the Target will hold, indirectly or directly, the Business.

Pursuant to the Preliminary Acquisition Agreement, dated August 26, 2023, by and between Purchaser and Singapore Seller, and the Purchase Agreement, Purchaser paid an aggregate deposit in the amount of $440 million, of which $132 million was paid to an escrow agent and $308 million was paid to the Company.

Singapore Seller is entitled to retain the deposits in all circumstances, except in the event of a termination of the Purchase Agreement by Purchaser due to Singapore Seller’s breach of any warranty or failure to comply with any covenant applicable to it that would cause any closing condition of Purchaser to not be satisfied.

Purchaser is entitled to repayment of $390 million of the deposit if on April 1, 2024 (i) the Reorganization has not been completed in all material respects, other than as a result of the failure to obtain regulatory approvals in the People’s Republic of China, and (ii) all other mutual conditions and conditions of Singapore Seller to closing have been satisfied.

The transaction is anticipated to close within the first two quarters of our current fiscal year 2024 (which is the period from September 1, 2023 through February 29, 2024).

The closing of the transaction is subject to certain customary closing conditions set forth in the Purchase Agreement that include, among other things, receipt of regulatory approvals, accuracy of the warranties of the parties (subject to certain materiality standards set forth in the Purchase Agreement), completion of the Reorganization in all material respects, and material performance of certain respective obligations.

The closing of the transaction is not conditioned on the receipt of financing.

As of August 31, 2023, the assets and liabilities of the Business were classified as held for sale and the carrying value is less than the estimated fair value less cost to sell and, thus, no adjustment to the carrying value of the disposal group is necessary.

The planned divestiture did not meet the criteria to be reported as discontinued operations and we will continue to report the operating results for the Business in our Consolidated Statement of Operations in the DMS segment until the transaction is closed.

Refer to Note 16 – “Business Acquisitions and Divestitures” to the Consolidated Financial Statements for discussion.

Liquidity and Capital Resources

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(in millions)

1.700% Senior Notes

4.250% Senior Notes (1)

facilities (2)(3)

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$3.8 billion (3)

(1) On May 4, 2022, we issued $500 million of registered 4.250% Senior Notes due 2027 (the “Green Bonds” or the “4.250% Senior Notes”).

On May 31, 2022, the net proceeds from the offering were used to redeem our 4.700% Senior Notes due in 2022 and pay the applicable “make-whole” premium and accrued interest.

In addition, we intend to allocate an amount equal to the net proceeds from this offering to finance or refinance eligible expenditures under our new green financing framework.

(1) On April 13, 2023, we issued $300 million of publicly registered 5.450% Senior Notes due 2029 (the “5.450% Senior Notes”).

We used 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 August 31, 2023, we had $3.8 billion in available unused borrowing capacity under our revolving credit facilities.

The Credit Facility acts as the back-up facility for commercial paper outstanding, if any.

We have a borrowing capacity of up to $3.2 billion under our commercial paper program, which was increased from $1.8 billion on February 18, 2022.

Commercial paper borrowings with an original maturity of 90 days or less are recorded net within the Consolidated Statement of Cash Flows, and have been excluded from the table above.

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 Consolidated Statements of Cash Flows, and have been excluded from the table above.

In the ordinary course of business, we have letters of credit and surety bonds with banks and insurance companies outstanding of $66 million as of August 31, 2023.

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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 August 31, 2022 and 2021, we were in compliance with our debt covenants.

As of August 31, 2023 and 2022,

we were in compliance with our debt covenants.

Refer to Note 7 – “Notes Payable and Long-Term Debt” to the Consolidated Financial Statements for further details.

Asset-Backed Securitization Programs

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

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

In connection with our asset-backed securitization program, during the fiscal year ended August 31, 2022, we sold $3.9 billion of trade accounts receivable and we received cash proceeds of $3.9 billion.

As of August 31, 2022, we had no available liquidity under our global asset-backed securitization program.

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

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

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 global asset-backed securitization program recognized during the fiscal years ended August 31, 2023, 2022 and 2021 were not material.

We do not record a servicing asset or liability on the 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 Consolidated Financial Statements.

Certain unsold receivables covering up to the maximum amount of net cash proceeds available under the domestic, or U.S., portion of our global asset-backed securitization program are pledged as collateral to the unaffiliated financial institution as of August 31, 2022.

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

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

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

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

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

Servicing fees related to each of the asset-backed securitization programs recognized during the fiscal years ended August 31, 2022, 2021 and 2020 were not material.

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

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 August 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.

The facility limit was increased to $700 million for the month of August 2023.

During the fiscal year ended August 31, 2023, we sold $4.1 billion of trade accounts receivable and we received cash proceeds of $4.1 billion.

As of August 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 August 31, 2023, we were in compliance with all covenants under our global asset-backed securitization program.

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

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December 5, 2025 (2)

November 30, 2022

August 31, 2023 (2)

January 25, 2023

February 23, 2023

August 10, 2023

May 4, 2028 (2)

December 5, 2024 (2)

1 unchanged sentence

December 5, 2025 (2)

January 23, 2023

(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.

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

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

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

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

During the fiscal year ended August 31, 2023, we sold $10.8 billion of trade accounts receivable under these programs and we received cash proceeds of $10.7 billion.

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Effect of exchange rate changes on cash and cash equivalents

Net (decrease) increase in cash and cash equivalents

Net increase (decrease) in cash and cash equivalents

Operating Activities

Net cash provided by operating activities during the fiscal year ended August 31, 2022 was primarily due to increased accounts payable, accrued expenses and other liabilities, non-cash expenses and net income, partially offset by increased inventories, accounts receivable, prepaid expenses and other current assets and contract 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 due to higher raw material balances due to supply chain constraints and to support expected sales levels in the first quarter of fiscal year 2023 .

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

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

The increase in contract assets is primarily due to the timing of billings to our customers.

Net cash provided by operating activities during the fiscal year ended August 31, 2023, was primarily due to non-cash expenses and net income and a decrease in inventories, accounts receivable and contract assets.

These decreases were 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 inventories is primarily driven by sales activity resulting in a higher consumption of inventory and improved working capital management.

The decrease in accounts receivable is primarily driven by the timing of collections.

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.

Investing Activities

Net cash used in investing activities during the fiscal year ended August 31, 2022 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.

Net cash used in investing activities during the fiscal year ended August 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 and proceeds from the planned divestiture of our mobility business.

Financing Activities

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Capital Expenditures

For Fiscal Year 2023, we anticipate our net capital expenditures will be approximately $875 million.

For Fiscal Year 2024, we anticipate our net capital expenditures to be in the range of 2.2 percent to 2.5 percent of net revenue.

Upon closing of the Company’s sale of its mobility business, we anticipate our longer-term net capital expenditures to be in the range of 2.0 to 2.3 percent of net revenue.

In general, our capital expenditures support ongoing maintenance in our DMS and EMS segments and investments in capabilities and targeted end markets.

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Fiscal year 2022

Fiscal year 2023

(1) The difference between dividends declared and dividends paid is due to dividend equivalents for unvested restricted stock units that are paid at the time the awards vest.

(2) Excludes commissions.

We currently expect to continue to declare and pay regular quarterly dividends of an amount similar to our past declarations.

(2) Excludes commissions and excise taxes.

We currently expect to continue to declare and pay regular quarterly dividends in amounts 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 August 31, 2022, 12.4 million shares had been repurchased for $737 million and $263 million remains available under 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 August 31, 2023, 2.7 million shares had been repurchased for $224 million, excluding excise tax, and $776 million remains available under the 2023 Share Repurchase Program.

In September 2023, the Board of Directors amended and increased the 2023 Share Repurchase Program to allow for the repurchase of up to $2.5 billion of our common stock.

Contractual Obligations

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(2) Excludes $214 million of payments related to 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.

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

What changed 10-K

Item 7. Management’s Discussion and Analysis