JABIL INC [JBL] Filings

10-Q 1 d193672d10q.htm 10-Q 10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended May 31, 2022


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number: 001-14063

JABIL INC.

(Exact name of registrant as specified in its charter)


Delaware						38-1886260
(State or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification No.)

10800 Roosevelt Boulevard North, St. Petersburg, Florida 33716

(Address of principal executive offices) (Zip Code)

(727) 577-9749

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading symbol(s)	Name of each exchange on which registered
Common Stock, $0.001 par value per share	JBL	New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer	☒	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
		Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of June 21, 2022, there were 137,554,586 shares of the registrant’s Common Stock outstanding.

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JABIL INC. AND SUBSIDIARIES INDEX


Part I – Financial Information
Item 1.	Financial Statements
	Condensed Consolidated Balance Sheets as of May 31, 2022 and August 31, 2021	1
	Condensed Consolidated Statements of Operations for the three months and nine months ended May 31, 2022 and 2021	2
	Condensed Consolidated Statements of Comprehensive Income for the three months and nine months ended May 31, 2022 and 2021	3
	Condensed Consolidated Statements of Stockholders’ Equity for the three months and nine months ended May 31, 2022 and 2021	4
	Condensed Consolidated Statements of Cash Flows for the nine months ended May 31, 2022 and 2021	5
	Notes to Condensed Consolidated Financial Statements	6
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	18
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	27
Item 4.	Controls and Procedures	27

Part II – Other Information
Item 1.	Legal Proceedings	28
Item 1A.	Risk Factors	28
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	29
Item 3.	Defaults Upon Senior Securities	30
Item 4.	Mine Safety Disclosures	30
Item 5.	Other Information	30
Item 6.	Exhibits	31
	Signatures	33

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PART I—FINANCIAL INFORMATION


Item 1.			Financial Statements

JABIL INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(in millions, except for share data)


	May 31, 2022 (Unaudited)		August 31, 2021
ASSETS
Current assets:
Cash and cash equivalents	$	1,070	$	1,567
Accounts receivable, net of allowance for doubtful accounts	3,193		3,141
Contract assets	1,276		998
Inventories, net	5,981		4,414

Prepaid expenses and other current assets	952		757
Total current assets	12,472		10,877
Property, plant and equipment, net of accumulated depreciation of $5,482 as of May 31, 2022 and $5,033 as of August 31, 2021	3,894		4,075
Operating lease right-of-use asset	481		390
Goodwill	711		715
Intangible assets, net of accumulated amortization of $464 as of May 31, 2022 and $442 as of August 31, 2021	167		182
Deferred income taxes	174		176
Other assets	272		239
Total assets	$	18,171	$	16,654
LIABILITIES AND EQUITY
Current liabilities:
Current installments of notes payable and long-term debt	$	1	$	—
Accounts payable	7,082		6,841

Accrued expenses	4,744		3,734
Current operating lease liabilities	115		108
Total current liabilities	11,942		10,683
Notes payable and long-term debt, less current installments	2,874		2,878
Other liabilities	289		334
Non-current operating lease liabilities	405		333
Income tax liabilities	190		178
Deferred income taxes	114		111
Total liabilities	15,814		14,517
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; 270,407,585 and 267,418,092 shares issued and 138,851,189 and 144,496,077 shares outstanding as of May 31, 2022 and August 31, 2021, respectively	—		—
Additional paid-in capital	2,622		2,533
Retained earnings	3,333		2,688
Accumulated other comprehensive loss	(20)		(25)
Treasury stock at cost, 131,556,396 and 122,922,015 shares as of May 31, 2022 and August 31, 2021, respectively	(3,579)		(3,060)
Total Jabil Inc. stockholders’ equity	2,356		2,136
Noncontrolling interests	1		1
Total equity	2,357		2,137
Total liabilities and equity	$	18,171	$	16,654

See accompanying notes to Condensed Consolidated Financial Statements.

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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, 2022		May 31, 2021		May 31, 2022		May 31, 2021
Net revenue	$	8,328	$	7,215	$	24,448	$	21,876
Cost of revenue	7,709		6,647		22,545		20,104
Gross profit	619		568		1,903		1,772
Operating expenses:
Selling, general and administrative	282		305		870		914
Research and development	8		10		25		27
Amortization of intangibles	8		12		24		35
Restructuring, severance and related charges	—		1		—		6

Operating income	321		240		984		790
Loss on debt extinguishment	4		—		4		—
Gain on securities	—		(2)		—		(2)
Other expense (income)	1		(4)		(2)		(7)
Interest income	(1)		(1)		(2)		(5)
Interest expense	39		34		105		97
Income before income tax	278		213		879		707
Income tax expense	60		43		198		184
Net income	218		170		681		523
Net income attributable to noncontrolling interests, net of tax	—		1		—		2
Net income attributable to Jabil Inc.	$	218	$	169	$	681	$	521
Earnings per share attributable to the stockholders of Jabil Inc.:
Basic	$	1.55	$	1.14	$	4.77	$	3.49
Diluted	$	1.52	$	1.12	$	4.67	$	3.41
Weighted average shares outstanding:
Basic	140.4		148.1		142.6		149.5
Diluted	143.3		152.0		145.8		152.8

See accompanying notes to Condensed Consolidated Financial Statements.

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JABIL INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(in millions)

(Unaudited)


	Three months ended				Nine months ended
	May 31, 2022		May 31, 2021		May 31, 2022		May 31, 2021
Net income	$	218	$	170	$	681	$	523
Other comprehensive income:
Change in foreign currency translation	(9)		15		(20)		26
Change in derivative instruments:
Change in fair value of derivatives	6		8		31		64
Adjustment for net losses (gains) realized and included in net income	9		(4)		6		(41)
Total change in derivative instruments	15		4		37		23


Actuarial loss	(5)		—		(15)		—
Prior service credit	1		—		3		—
Total other comprehensive income	2		19		5		49
Comprehensive income	$	220	$	189	$	686	$	572
Comprehensive income attributable to noncontrolling interests	—		1		—		2
Comprehensive income attributable to Jabil Inc.	$	220	$	188	$	686	$	570

See accompanying notes to Condensed Consolidated Financial Statements.

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JABIL INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(in millions)

(Unaudited)


	Three months ended				Nine months ended
	May 31, 2022		May 31, 2021		May 31, 2022		May 31, 2021
Total stockholders' equity, beginning balances	$	2,338	$	2,102	$	2,137	$	1,825




Common stock:	—		—		—		—
Additional paid-in capital:
Beginning balances	2,608		2,488		2,533		2,414
Shares issued under employee stock purchase plan	—		—		26		20

Purchase of noncontrolling interest	—		(14)		—		(14)
Recognition of stock-based compensation	14		17		63		71
Ending balances	2,622		2,491		2,622		2,491
Retained earnings:
Beginning balances	3,127		2,368		2,688		2,041
Declared dividends	(12)		(12)		(36)		(37)

Net income attributable to Jabil Inc.	218		169		681		521
Ending balances	3,333		2,525		3,333		2,525
Accumulated other comprehensive (loss) income:
Beginning balances	(22)		(4)		(25)		(34)
Other comprehensive income	2		19		5		49
Ending balances	(20)		15		(20)		15
Treasury stock:
Beginning balances	(3,376)		(2,763)		(3,060)		(2,610)
Purchases of treasury stock under employee stock plans	—		—		(44)		(21)
Treasury shares purchased	(203)		(130)		(475)		(262)
Ending balances	(3,579)		(2,893)		(3,579)		(2,893)
Noncontrolling interests:
Beginning balances	1		13		1		14
Net income attributable to noncontrolling interests	—		1		—		2


Purchase of noncontrolling interest	—		(13)		—		(13)
Declared dividends to noncontrolling interests	—		—		—		(2)

Ending balances	1		1		1		1
Total stockholders' equity, ending balances	$	2,357	$	2,139	$	2,357	$	2,139

See accompanying notes to Condensed Consolidated Financial Statements.

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JABIL INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in millions)

(Unaudited)


	Nine months ended
	May 31, 2022		May 31, 2021
Cash flows provided by operating activities:
Net income	$	681	$	523
Depreciation, amortization, and other, net	768		730







Change in operating assets and liabilities, exclusive of net assets acquired	(704)		(582)






Net cash provided by operating activities	745		671
Cash flows used in investing activities:
Acquisition of property, plant and equipment	(1,068)		(878)
Proceeds and advances from sale of property, plant and equipment	470		287
Cash paid for business and intangible asset acquisitions, net of cash	(18)		(50)

Other, net	—		(3)
Net cash used in investing activities	(616)		(644)
Cash flows used in financing activities:
Borrowings under debt agreements	2,621		1,081
Payments toward debt agreements	(2,707)		(908)
Payments to acquire treasury stock	(475)		(262)
Dividends paid to stockholders	(37)		(38)
Net proceeds from exercise of stock options and issuance of common stock under employee stock purchase plan	26		20
Treasury stock minimum tax withholding related to vesting of restricted stock	(44)		(21)
Other, net	(23)		(49)
Net cash used in financing activities	(639)		(177)
Effect of exchange rate changes on cash and cash equivalents	13		(3)
Net decrease in cash and cash equivalents	(497)		(153)
Cash and cash equivalents at beginning of period	1,567		1,394
Cash and cash equivalents at end of period	$	1,070	$	1,241

See accompanying notes to Condensed Consolidated Financial Statements.

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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. Jabil Inc. (the “Company”) has made certain reclassification adjustments to conform prior periods’ Condensed Consolidated Financial Statements to the current presentation. 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, 2021. Results for the nine months ended May 31, 2022 are not necessarily an indication of the results that may be expected for the full fiscal year ending August 31, 2022.

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, 2022, the Company may elect to sell receivables and the unaffiliated financial institution may elect to purchase specific accounts receivable at any one time up to a: (i) maximum aggregate amount available of $2.0 billion under nine trade accounts receivable sale programs, (ii) maximum amount available of 400 million CNY under one trade accounts receivable sale program and (iii) maximum amount available of 100 million CHF under one trade accounts receivable sale program. The trade accounts receivable sale programs expire on various dates through 2025.

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, 2022 and 2021 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, 2022		May 31, 2021		May 31, 2022		May 31, 2021
Trade accounts receivable sold(1)	$	2,575	$	1,016	$	6,509	$	3,567
Cash proceeds received	$	2,572	$	1,015	$	6,504	$	3,565
Pre-tax losses on sale of receivables(2)	$	3	$	1	$	5	$	2

(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 Statement of Operations.

3. Inventories

Inventories consist of the following (in millions):


	May 31, 2022		August 31, 2021
Raw materials	$	4,722	$	3,142
Work in process	699		677
Finished goods	646		680
Reserve for excess and obsolete inventory	(86)		(85)
Inventories, net	$	5,981	$	4,414

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4. Leases

During fiscal year 2022, the Company entered into new operating and finance leases. The future minimum lease payments under these new leases as of May 31, 2022 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)	$	180	$	31	$	56	$	44	$	49
Finance lease obligations(1)	$	74	$	37	$	36	$	1	$	—

(1)Excludes $33 million of payments related to leases signed but not yet commenced. 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, 2022 and August 31, 2021 are summarized below (in millions):


	Maturity Date	May 31, 2022		August 31, 2021
4.700% Senior Notes(1)	Sep 15, 2022	$	—	$	499
4.900% Senior Notes	Jul 14, 2023	300		300
3.950% Senior Notes	Jan 12, 2028	497		496
3.600% Senior Notes	Jan 15, 2030	496		495
3.000% Senior Notes	Jan 15, 2031	592		591
1.700% Senior Notes	Apr 15, 2026	496		496
4.250% Senior Notes(1)	May 15, 2027	493		—
Borrowings under credit facilities(2)	Jan 22, 2024 and Jan 22, 2026	—		—
Borrowings under loans	Jul 31, 2026	1		1

Total notes payable and long-term debt		2,875		2,878
Less current installments of notes payable and long-term debt		1		—
Notes payable and long-term debt, less current installments		$	2,874	$	2,878

(1)On May 4, 2022, the Company 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 the Company’s 4.700% Senior Notes due in 2022 and pay the applicable “make-whole” premium and accrued interest. In addition, the Company intends to allocate an amount equal to the net proceeds from this offering to finance or refinance eligible expenditures under the Company’s new green financing framework.

(2)As of May 31, 2022, the Company has $3.8 billion in available unused borrowing capacity under its revolving credit facilities. The senior unsecured credit agreement dated as of January 22, 2020 and amended on April 28, 2021 (the “Credit Facility”) acts as the back-up facility for commercial paper outstanding, if any. The Company has a borrowing capacity of up to $3.2 billion under its commercial paper program, which was increased from $1.8 billion on February 18, 2022.

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% or 4.250% Senior Notes upon a change of control. As of May 31, 2022 and August 31, 2021, the Company was in compliance with its debt covenants.

Fair Value

Refer to Note 15 – “Fair Value Measurements” for the estimated fair values of the Company’s notes payable and long-term debt.

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

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 asset-backed securitization programs recognized during the three months and nine months ended May 31, 2022 and 2021 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, 2022.

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, 2022, 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, 2022		May 31, 2021(4)		May 31, 2022		May 31, 2021(4)
Trade accounts receivable sold(1)	$	947	$	1,074	$	2,979	$	3,388
Cash proceeds received(2)	$	942	$	1,072	$	2,971	$	3,381

Pre-tax losses on sale of receivables(3)	$	5	$	2	$	8	$	7

(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.

(4)Activity includes the foreign asset-backed securitization program which terminated on June 28, 2021.

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, 2022 and August 31, 2021, the Company was in compliance with all covenants under the global asset-backed securitization program.

7. Accrued Expenses

Accrued expenses consist of the following (in millions):


	May 31, 2022		August 31, 2021
Inventory deposits	$	1,254	$	711
Contract liabilities(1)	733		559
Accrued compensation and employee benefits	729		827

Other accrued expenses	2,028		1,637
Accrued expenses	$	4,744	$	3,734

(1)Revenue recognized during the nine months ended May 31, 2022 and 2021 that was included in the contract liability balance as of August 31, 2021 and 2020 was $269 million and $306 million, respectively.

8. Postretirement and Other Employee Benefits

Net Periodic Benefit Cost

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The following table provides information about the net periodic benefit cost (credit) for all plans for the three months and nine months ended May 31, 2022 and 2021 (in millions):


	Three months ended				Nine months ended
	May 31, 2022		May 31, 2021		May 31, 2022		May 31, 2021
Service cost(1)	$	7	$	6	$	19	$	19
Interest cost(2)	1		2		3		4
Expected long-term return on plan assets(2)	(5)		(4)		(13)		(12)
Recognized actuarial gain(2)	(2)		(1)		(8)		(4)
Amortization of actuarial gain(2)(3)	(2)		(2)		(6)		(5)
Amortization of prior service cost(2)	1		—		3		—

Net periodic benefit cost (credit)	$	—	$	1	$	(2)	$	2

(1)Service cost is recognized in cost of revenue in the Condensed Consolidated Statement of Operations.

(2)Components are recognized in other expense in the Condensed Consolidated Statement 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 $1.3 billion and $1.5 billion as of May 31, 2022 and August 31, 2021, 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, 2022 and May 31, 2023.

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, 2022 and August 31, 2021, was $3.1 billion and $3.6 billion, respectively.

Refer to Note 15 – “Fair Value Measurements” for the fair values and classification of the Company’s derivative instruments.

The gains and losses 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.

The following table presents the net (losses) gains 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) Gain on Derivatives Recognized in Net Income	Amount of (Loss) Gain Recognized in Net Income on Derivatives
		Three months ended				Nine months ended
		May 31, 2022		May 31, 2021		May 31, 2022		May 31, 2021
Forward foreign exchange contracts(1)	Cost of revenue	$	(66)	$	27	$	(6)	$	148

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(1)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. For the three months and nine months ended May 31, 2021, the Company recognized $22 million and $121 million, respectively, of foreign currency losses in cost of revenue, which are offset by the gains 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.

Cash Flow Hedges

The following table presents the interest rate swaps outstanding as of May 31, 2022, which have been designated as hedging instruments and are accounted for as cash flow hedges:

Interest Rate Swap Summary

Hedged Interest Rate Payments

Aggregate Notional Amount (in millions)

Effective Date

Expiration Date

Forward Interest Rate Swap

Anticipated Debt Issuance

Fixed

150

May 24, 2021

July 31, 2024

(1)(2)

(1)The contracts will be settled with the respective counterparties on a net basis at the expiration date for the forward interest rate swap.

(2)If the anticipated debt issuance occurs before July 31, 2024, the contracts will be terminated simultaneously with the debt issuance.

Contemporaneously with the issuance of the 4.250% Senior Notes, in April 2022 the Company settled cash flow hedges with an aggregate notional amount of $250 million and $170 million, with effective dates of November 2020 and March 2022, respectively. The cash received for the cash flow hedges at settlement was $46 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.

Contemporaneously with the issuance of the 3.000% Senior Notes in July 2020, the Company amended interest rate swap agreements with a notional amount of $200 million, with mandatory termination dates from August 15, 2020 to February 15, 2022 (the “2020 Extended Interest Rate Swaps”). In addition, the Company entered into interest rate swaps to offset future exposures of fluctuations in the fair value of the 2020 Extended Interest Rate Swaps (the “Offsetting Interest Rate Swaps”). The change in fair value of the 2020 Extended Interest Rate Swaps and Offsetting Interest Rate Swaps was recorded in the Condensed Consolidated Statements of Operations through the maturity date of February 15, 2022, as an adjustment to interest expense.

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, 2022 (in millions):


	Foreign Currency Translation Adjustment		Derivative Instruments		Actuarial Gain (Loss)		Prior Service (Cost) Credit		Total
Balance as of August 31, 2021	$	(20)	$	(36)	$	51	$	(20)	$	(25)
Other comprehensive (loss) income before reclassifications	(20)		31		(1)		—		10
Amounts reclassified from AOCI	—		6		(14)		3		(5)
Other comprehensive (loss) income(1)	(20)		37		(15)		3		5
Balance as of May 31, 2022	$	(40)	$	1	$	36	$	(17)	$	(20)

(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):

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		Three months ended				Nine months ended
Comprehensive Income Components	Financial Statement Line Item	May 31, 2022		May 31, 2021		May 31, 2022		May 31, 2021
Realized losses (gains) on derivative instruments:(1)
Foreign exchange contracts	Cost of revenue	$	9	$	(4)	$	4	$	(43)
Interest rate contracts	Interest expense	—		—		2		2

Actuarial gain	(2)	(4)		—		(14)		—
Prior service cost	(2)	1		—		3		—
Total amounts reclassified from AOCI(3)		$	6	$	(4)	$	(5)	$	(41)

(1)The Company expects to reclassify $20 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 (credit). 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, 2022 and 2021.

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, 2022		May 31, 2021		May 31, 2022		May 31, 2021
Restricted stock units	$	13	$	16	$	57	$	68
Employee stock purchase plan	3		3		10		8

Total	$	16	$	19	$	67	$	76

As of May 31, 2022, the shares available to be issued under the 2021 Equity Incentive Plan were 9,940,536.

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. The 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 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 have 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, 2022 and 2021, the Company awarded approximately 0.7 million and 1.2 million time-based restricted stock units, respectively, 0.2 million and 0.4 million performance-based restricted stock units, respectively, and 0.2 million and 0.3 million market-based restricted stock units, respectively.

The following represents the stock-based compensation information as of the period indicated (in millions):



	May 31, 2022
Unrecognized stock-based compensation expense—restricted stock units	$	44
Remaining weighted-average period for restricted stock units expense	1.5 years

Common Stock Outstanding

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The following represents the common stock outstanding for the periods indicated:


	Three months ended		Nine months ended
	May 31, 2022	May 31, 2021	May 31, 2022	May 31, 2021
Common stock outstanding:
Beginning balances	142,392,135	149,366,501	144,496,077	150,330,358
Shares issued upon exercise of stock options	—	9,321	—	9,321
Shares issued under employee stock purchase plan