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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended February 28, 2022
or
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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)
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| Delaware |
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38-1886260 |
(State or other jurisdiction of
incorporation or organization) |
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(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:
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| 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.
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| Large accelerated filer |
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Accelerated filer |
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| Non-accelerated filer |
☐ |
Smaller reporting company |
☐ |
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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 March 22, 2022, there were 141,216,283 shares of the registrant’s Common Stock outstanding.
JABIL INC. AND SUBSIDIARIES INDEX
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| Item 1. |
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| Item 2. |
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| Item 3. |
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| Item 4. |
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| Item 1. |
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| Item 1A. |
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| Item 2. |
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| Item 3. |
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| Item 4. |
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| Item 5. |
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| Item 6. |
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PART I—FINANCIAL INFORMATION
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| Item 1. |
Financial Statements |
JABIL INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(in millions, except for share data)
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February 28, 2022
(Unaudited) |
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August 31, 2021 |
| ASSETS |
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| Current assets: |
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| Cash and cash equivalents |
$ |
1,093 |
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$ |
1,567 |
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| Accounts receivable, net of allowance for doubtful accounts |
3,229 |
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3,141 |
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| Contract assets |
1,236 |
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998 |
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| Inventories, net |
5,395 |
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4,414 |
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| Prepaid expenses and other current assets |
914 |
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757 |
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| Total current assets |
11,867 |
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10,877 |
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Property, plant and equipment, net of accumulated depreciation of $5,328 as of February 28, 2022 and $5,033 as of August 31, 2021 |
3,784 |
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4,075 |
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| Operating lease right-of-use asset |
470 |
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390 |
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| Goodwill |
719 |
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715 |
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Intangible assets, net of accumulated amortization of $457 as of February 28, 2022 and $442 as of August 31, 2021 |
176 |
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182 |
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| Deferred income taxes |
167 |
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176 |
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| Other assets |
247 |
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239 |
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| Total assets |
$ |
17,430 |
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$ |
16,654 |
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| LIABILITIES AND EQUITY |
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| Current liabilities: |
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| Current installments of notes payable and long-term debt |
$ |
501 |
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$ |
— |
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| Accounts payable |
6,868 |
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6,841 |
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| Accrued expenses |
4,231 |
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3,734 |
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| Current operating lease liabilities |
114 |
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108 |
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| Total current liabilities |
11,714 |
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10,683 |
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| Notes payable and long-term debt, less current installments |
2,380 |
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2,878 |
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| Other liabilities |
302 |
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334 |
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| Non-current operating lease liabilities |
401 |
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333 |
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| Income tax liabilities |
176 |
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178 |
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| Deferred income taxes |
119 |
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111 |
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| Total liabilities |
15,092 |
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14,517 |
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| Commitments and contingencies |
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| Equity: |
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| Jabil Inc. stockholders’ equity: |
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Preferred stock, $0.001 par value, authorized 10,000,000 shares; no shares issued and no shares outstanding |
— |
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— |
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Common stock, $0.001 par value, authorized 500,000,000 shares; 270,392,290 and 267,418,092 shares issued and 142,392,135 and 144,496,077 shares outstanding as of February 28, 2022 and August 31, 2021, respectively |
— |
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— |
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| Additional paid-in capital |
2,608 |
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2,533 |
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| Retained earnings |
3,127 |
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2,688 |
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| Accumulated other comprehensive loss |
(22) |
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(25) |
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Treasury stock at cost, 128,000,155 and 122,922,015 shares as of February 28, 2022 and August 31, 2021, respectively |
(3,376) |
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(3,060) |
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| Total Jabil Inc. stockholders’ equity |
2,337 |
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2,136 |
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| Noncontrolling interests |
1 |
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1 |
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| Total equity |
2,338 |
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2,137 |
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| Total liabilities and equity |
$ |
17,430 |
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$ |
16,654 |
|
See accompanying notes to Condensed Consolidated Financial Statements.
JABIL INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in millions, except for per share data)
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Three months ended |
|
Six months ended |
| |
February 28, 2022 |
|
February 28, 2021 |
|
February 28, 2022 |
|
February 28, 2021 |
| Net revenue |
$ |
7,553 |
|
|
$ |
6,828 |
|
|
$ |
16,120 |
|
|
$ |
14,661 |
|
| Cost of revenue |
6,944 |
|
|
6,259 |
|
|
14,836 |
|
|
13,457 |
|
| Gross profit |
609 |
|
|
569 |
|
|
1,284 |
|
|
1,204 |
|
| Operating expenses: |
|
|
|
|
|
|
|
| Selling, general and administrative |
280 |
|
|
306 |
|
|
588 |
|
|
609 |
|
| Research and development |
8 |
|
|
9 |
|
|
17 |
|
|
17 |
|
| Amortization of intangibles |
8 |
|
|
12 |
|
|
16 |
|
|
23 |
|
| Restructuring, severance and related charges |
— |
|
|
6 |
|
|
— |
|
|
5 |
|
|
|
|
|
|
|
|
|
| Operating income |
313 |
|
|
236 |
|
|
663 |
|
|
550 |
|
|
|
|
|
|
|
|
|
| Other income |
(4) |
|
|
(2) |
|
|
(3) |
|
|
(3) |
|
| Interest income |
— |
|
|
(2) |
|
|
(1) |
|
|
(4) |
|
| Interest expense |
33 |
|
|
31 |
|
|
66 |
|
|
63 |
|
| Income before income tax |
284 |
|
|
209 |
|
|
601 |
|
|
494 |
|
| Income tax expense |
62 |
|
|
57 |
|
|
138 |
|
|
141 |
|
| Net income |
222 |
|
|
152 |
|
|
463 |
|
|
353 |
|
| Net income attributable to noncontrolling interests, net of tax |
— |
|
|
— |
|
|
— |
|
|
1 |
|
| Net income attributable to Jabil Inc. |
$ |
222 |
|
|
$ |
152 |
|
|
$ |
463 |
|
|
$ |
352 |
|
| Earnings per share attributable to the stockholders of Jabil Inc.: |
|
|
|
|
|
|
|
| Basic |
$ |
1.55 |
|
|
$ |
1.01 |
|
|
$ |
3.22 |
|
|
$ |
2.34 |
|
| Diluted |
$ |
1.51 |
|
|
$ |
0.99 |
|
|
$ |
3.15 |
|
|
$ |
2.30 |
|
| Weighted average shares outstanding: |
|
|
|
|
|
|
|
| Basic |
143.5 |
|
|
150.3 |
|
|
143.8 |
|
|
150.2 |
|
| Diluted |
146.4 |
|
|
153.0 |
|
|
147.0 |
|
|
153.1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to Condensed Consolidated Financial Statements.
JABIL INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(in millions)
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Three months ended |
|
Six months ended |
| |
February 28, 2022 |
|
February 28, 2021 |
|
February 28, 2022 |
|
February 28, 2021 |
| Net income |
$ |
222 |
|
|
$ |
152 |
|
|
$ |
463 |
|
|
$ |
353 |
|
| Other comprehensive income: |
|
|
|
|
|
|
|
| Change in foreign currency translation |
16 |
|
|
— |
|
|
(11) |
|
|
11 |
|
| Change in derivative instruments: |
|
|
|
|
|
|
|
| Change in fair value of derivatives |
19 |
|
|
31 |
|
|
25 |
|
|
56 |
|
| Adjustment for net gains realized and included in net income |
(5) |
|
|
(21) |
|
|
(3) |
|
|
(37) |
|
| Total change in derivative instruments |
14 |
|
|
10 |
|
|
22 |
|
|
19 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Actuarial loss |
(5) |
|
|
— |
|
|
(10) |
|
|
— |
|
| Prior service credit |
1 |
|
|
— |
|
|
2 |
|
|
— |
|
| Total other comprehensive income |
26 |
|
|
10 |
|
|
3 |
|
|
30 |
|
| Comprehensive income |
$ |
248 |
|
|
$ |
162 |
|
|
$ |
466 |
|
|
$ |
383 |
|
| Comprehensive income attributable to noncontrolling interests |
— |
|
|
— |
|
|
— |
|
|
1 |
|
| Comprehensive income attributable to Jabil Inc. |
$ |
248 |
|
|
$ |
162 |
|
|
$ |
466 |
|
|
$ |
382 |
|
See accompanying notes to Condensed Consolidated Financial Statements.
JABIL INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(in millions)
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended |
|
Six months ended |
|
February 28, 2022 |
|
February 28, 2021 |
|
February 28, 2022 |
|
February 28, 2021 |
Total stockholders' equity, beginning balances |
$ |
2,207 |
|
|
$ |
1,994 |
|
|
$ |
2,137 |
|
|
$ |
1,825 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock: |
— |
|
|
— |
|
|
— |
|
|
— |
|
Additional paid-in capital: |
|
|
|
|
|
|
|
Beginning balances |
2,567 |
|
|
2,445 |
|
|
2,533 |
|
|
2,414 |
|
Shares issued under employee stock purchase plan |
26 |
|
|
20 |
|
|
26 |
|
|
20 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Recognition of stock-based compensation |
15 |
|
|
23 |
|
|
49 |
|
|
54 |
|
Ending balances |
2,608 |
|
|
2,488 |
|
|
2,608 |
|
|
2,488 |
|
Retained earnings: |
|
|
|
|
|
|
|
Beginning balances |
2,917 |
|
|
2,229 |
|
|
2,688 |
|
|
2,041 |
|
Declared dividends |
(12) |
|
|
(13) |
|
|
(24) |
|
|
(25) |
|
|
|
|
|
|
|
|
|
| Net income attributable to Jabil Inc. |
222 |
|
|
152 |
|
|
463 |
|
|
352 |
|
Ending balances |
3,127 |
|
|
2,368 |
|
|
3,127 |
|
|
2,368 |
|
| Accumulated other comprehensive loss: |
|
|
|
|
|
|
|
Beginning balances |
(48) |
|
|
(14) |
|
|
(25) |
|
|
(34) |
|
| Other comprehensive income |
26 |
|
|
10 |
|
|
3 |
|
|
30 |
|
Ending balances |
(22) |
|
|
(4) |
|
|
(22) |
|
|
(4) |
|
Treasury stock: |
|
|
|
|
|
|
|
Beginning balances |
(3,230) |
|
|
(2,681) |
|
|
(3,060) |
|
|
(2,610) |
|
Purchases of treasury stock under employee stock plans |
(1) |
|
|
— |
|
|
(44) |
|
|
(21) |
|
Treasury shares purchased |
(145) |
|
|
(82) |
|
|
(272) |
|
|
(132) |
|
Ending balances |
(3,376) |
|
|
(2,763) |
|
|
(3,376) |
|
|
(2,763) |
|
Noncontrolling interests: |
|
|
|
|
|
|
|
Beginning balances |
1 |
|
|
15 |
|
|
1 |
|
|
14 |
|
Net income attributable to noncontrolling interests |
— |
|
|
— |
|
|
— |
|
|
1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Declared dividends to noncontrolling interests |
— |
|
|
(2) |
|
|
— |
|
|
(2) |
|
|
|
|
|
|
|
|
|
Ending balances |
1 |
|
|
13 |
|
|
1 |
|
|
13 |
|
Total stockholders' equity, ending balances |
$ |
2,338 |
|
|
$ |
2,102 |
|
|
$ |
2,338 |
|
|
$ |
2,102 |
|
See accompanying notes to Condensed Consolidated Financial Statements.
JABIL INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in millions)
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
| |
Six months ended |
| |
February 28, 2022 |
|
February 28, 2021 |
| Cash flows provided by operating activities: |
|
|
|
| Net income |
$ |
463 |
|
|
$ |
353 |
|
| Depreciation, amortization, and other, net |
524 |
|
|
493 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Change in operating assets and liabilities, exclusive of net assets acquired |
(787) |
|
|
(760) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Net cash provided by operating activities |
200 |
|
|
86 |
|
| Cash flows used in investing activities: |
|
|
|
| Acquisition of property, plant and equipment |
(704) |
|
|
(661) |
|
| Proceeds and advances from sale of property, plant and equipment |
430 |
|
|
267 |
|
| Cash paid for business and intangible asset acquisitions, net of cash |
(18) |
|
|
(49) |
|
|
|
|
|
| Other, net |
— |
|
|
(4) |
|
| Net cash used in investing activities |
(292) |
|
|
(447) |
|
| Cash flows used in financing activities: |
|
|
|
| Borrowings under debt agreements |
984 |
|
|
379 |
|
| Payments toward debt agreements |
(1,038) |
|
|
(393) |
|
| Payments to acquire treasury stock |
(272) |
|
|
(132) |
|
| Dividends paid to stockholders |
(25) |
|
|
(26) |
|
| 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 |
(12) |
|
|
(16) |
|
| Net cash used in financing activities |
(381) |
|
|
(189) |
|
| Effect of exchange rate changes on cash and cash equivalents |
(1) |
|
|
(6) |
|
| Net decrease in cash and cash equivalents |
(474) |
|
|
(556) |
|
| Cash and cash equivalents at beginning of period |
1,567 |
|
|
1,394 |
|
| Cash and cash equivalents at end of period |
$ |
1,093 |
|
|
$ |
838 |
|
See accompanying notes to Condensed Consolidated Financial Statements.
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 six months ended February 28, 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 February 28, 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 six months ended February 28, 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 |
|
Six months ended |
| |
February 28, 2022 |
|
February 28, 2021 |
|
February 28, 2022 |
|
February 28, 2021 |
Trade accounts receivable sold(1) |
$ |
1,966 |
|
|
$ |
1,335 |
|
|
$ |
3,934 |
|
|
$ |
2,552 |
|
| Cash proceeds received |
$ |
1,965 |
|
|
$ |
1,334 |
|
|
$ |
3,932 |
|
|
$ |
2,550 |
|
Pre-tax losses on sale of receivables(2) |
$ |
1 |
|
|
$ |
1 |
|
|
$ |
2 |
|
|
$ |
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):
|
|
|
|
|
|
|
|
|
|
|
|
|
February 28, 2022 |
|
August 31, 2021 |
| Raw materials |
$ |
4,247 |
|
|
$ |
3,142 |
|
| Work in process |
628 |
|
|
677 |
|
| Finished goods |
608 |
|
|
680 |
|
| Reserve for excess and obsolete inventory |
(88) |
|
|
(85) |
|
| Inventories, net |
$ |
5,395 |
|
|
$ |
4,414 |
|
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 February 28, 2022 were as follows (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Payments due by period (in millions) |
| |
Total |
|
Less than 1
year |
|
1-3 years |
|
3-5 years |
|
After 5 years |
Operating lease obligations(1) |
$ |
146 |
|
|
$ |
26 |
|
|
$ |
46 |
|
|
$ |
36 |
|
|
$ |
38 |
|
Finance lease obligations(1) |
$ |
59 |
|
|
$ |
32 |
|
|
$ |
26 |
|
|
$ |
1 |
|
|
$ |
— |
|
(1)Excludes $28 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 February 28, 2022 and August 31, 2021 are summarized below (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Maturity Date |
|
February 28, 2022 |
|
August 31, 2021 |
4.700% Senior Notes |
|
Sep 15, 2022 |
|
$ |
500 |
|
|
$ |
499 |
|
4.900% Senior Notes |
|
Jul 14, 2023 |
|
300 |
|
|
300 |
|
3.950% Senior Notes |
|
Jan 12, 2028 |
|
496 |
|
|
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 |
|
Borrowings under credit facilities(1) |
|
Jan 22, 2024 and Jan 22, 2026 |
|
— |
|
|
— |
|
| Borrowings under loans |
|
Jul 31, 2026 |
|
1 |
|
|
1 |
|
|
|
|
|
|
|
|
| Total notes payable and long-term debt |
|
|
|
2,881 |
|
|
2,878 |
|
Less current installments of notes payable and long-term debt |
|
|
|
501 |
|
|
— |
|
Notes payable and long-term debt, less current installments |
|
|
|
$ |
2,380 |
|
|
$ |
2,878 |
|
(1)As of February 28, 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 4.700%, 4.900%, 3.950%, 3.600%, 3.000% or 1.700% Senior Notes upon a change of control. As of February 28, 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.
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 six months ended February 28, 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 February 28, 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 February 28, 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 |
|
Six months ended |
|
February 28, 2022 |
|
February 28, 2021(4) |
|
February 28, 2022 |
|
February 28, 2021(4) |
Trade accounts receivable sold(1) |
$ |
1,000 |
|
|
$ |
1,140 |
|
|
$ |
2,032 |
|
|
$ |
2,313 |
|
Cash proceeds received(2) |
$ |
999 |
|
|
$ |
1,137 |
|
|
$ |
2,029 |
|
|
$ |
2,308 |
|
|
|
|
|
|
|
|
|
Pre-tax losses on sale of receivables(3) |
$ |
1 |
|
|
$ |
3 |
|
|
$ |
3 |
|
|
$ |
5 |
|
|
|
|
|
|
|
|
|
(1)Receivables sold are excluded from accounts receivable on the Condensed Consolidated Balance Sheets and are reflected as cash provided by operating activities on the Condensed Consolidated Statements of Cash Flows.
(2)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 February 28, 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):
|
|
|
|
|
|
|
|
|
|
|
|
|
February 28, 2022 |
|
August 31, 2021 |
Contract liabilities(1) |
$ |
690 |
|
|
$ |
559 |
|
| Accrued compensation and employee benefits |
648 |
|
|
827 |
|
|
|
|
|
| Inventory deposits |
1,161 |
|
|
711 |
|
| Other accrued expenses |
1,732 |
|
|
1,637 |
|
| Accrued expenses |
$ |
4,231 |
|
|
$ |
3,734 |
|
|
|
|
|
|
|
|
|
(1)Revenue recognized during the six months ended February 28, 2022 and 2021 that was included in the contract liability balance as of August 31, 2021 and 2020 was $196 million and $233 million, respectively.
8. Postretirement and Other Employee Benefits
Net Periodic Benefit Cost
The following table provides information about the net periodic benefit cost for all plans for the three months and six months ended February 28, 2022 and 2021 (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
Three months ended |
|
Six months ended |
| |
February 28, 2022 |
|
February 28, 2021 |
|
February 28, 2022 |
|
February 28, 2021 |
Service cost (1) |
$ |
6 |
|
|
$ |
8 |
|
|
$ |
12 |
|
|
$ |
13 |
|
Interest cost (2) |
1 |
|
|
1 |
|
|
2 |
|
|
2 |
|
Expected long-term return on plan assets (2) |
(4) |
|
|
(5) |
|
|
(8) |
|
|
(8) |
|
Recognized actuarial gain (2) |
(3) |
|
|
(2) |
|
|
(6) |
|
|
(3) |
|
Amortization of actuarial gain (2)(3) |
(2) |
|
|
(1) |
|
|
(4) |
|
|
(3) |
|
Amortization of prior service cost (2) |
1 |
|
|
— |
|
|
2 |
|
|
— |
|
|
|
|
|
|
|
|
|
| Net periodic benefit cost |
$ |
(1) |
|
|
$ |
1 |
|
|
$ |
(2) |
|
|
$ |
1 |
|
(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 $1.2 billion and $1.5 billion as of February 28, 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 March 1, 2022 and February 28, 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 February 28, 2022 and August 31, 2021, was $3.0 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 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 Gain on Derivatives Recognized in Net Income |
|
Amount of Gain Recognized in Net Income on Derivatives |
|
|
|
|
Three months ended |
|
Six months ended |
|
|
|
|
February 28, 2022 |
|
February 28, 2021 |
|
February 28, 2022 |
|
February 28, 2021 |
Forward foreign exchange contracts(1) |
|
Cost of revenue |
|
$ |
22 |
|
|
$ |
36 |
|
|
$ |
60 |
|
|
$ |
120 |
|
(1)For the three months and six months ended February 28, 2022, the Company recognized $9 million and $37 million, respectively, of foreign currency losses in cost of revenue, which are offset by the gains from the forward foreign exchange contracts. For the three months and six months ended February 28, 2021, the Company recognized $26
million and $99 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 February 28, 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 (2) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Forward Interest Rate Swap (1) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Anticipated Debt Issuance |
Fixed |
|
$ |
250 |
|
|
November 2, 2020 |
|
July 31, 2024 |
(3) |
| Anticipated Debt Issuance |
Fixed |
|
$ |
150 |
|
|
May 24, 2021 |
|
July 31, 2024 |
(3) |
|
|
|
|
|
|
|
|
|
(1)During March 2022, the Company entered into new cash flow hedges. These cash flow hedges have an aggregate notional amount totaling $170 million and are related to an anticipated debt issuance.
(2)The contracts will be settled with the respective counterparties on a net basis at the expiration date for the forward interest rate swap.
(3)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 our 3.000% Notes in July 2020, the Company amended interest rate swap agreements with a notional value of $200.0 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 accumulated other comprehensive income (“AOCI”), net of tax, by component for the six months ended February 28, 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 |
(11) |
|
|
25 |
|
|
— |
|
|
— |
|
|
|
|
14 |
|
| Amounts reclassified from AOCI |
— |
|
|
(3) |
|
|
(10) |
|
|
2 |
|
|
|
|
(11) |
|
Other comprehensive (loss) income(1) |
(11) |
|
|
22 |
|
|
(10) |
|
|
2 |
|
|
|
|
3 |
|
Balance as of February 28, 2022 |
$ |
(31) |
|
|
$ |
(14) |
|
|
$ |
41 |
|
|
$ |
(18) |
|
|
|
|
$ |
(22) |
|
(1)Amounts are net of tax, which are immaterial.
The following table sets forth the amounts reclassified from AOCI into the Condensed Consolidated Statements of Operations, and the associated financial statement line item, net of tax, for the periods indicated (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
|
Three months ended |
|
Six months ended |
| Comprehensive Income Components |
|
Financial Statement Line Item |
|
February 28, 2022 |
|
February 28, 2021 |
|
February 28, 2022 |
|
February 28, 2021 |
Realized (gains) losses on derivative instruments:(1) |
|
|
|
|
|
|
|
|
|
|
| Foreign exchange contracts |
|
Cost of revenue |
|
$ |
(6) |
|
|
$ |
(22) |
|
|
$ |
(5) |
|
|
$ |
(39) |
|
| Interest rate contracts |
|
Interest expense |
|
1 |
|
|
1 |
|
|
2 |
|
|
2 |
|
|
|
|
|
|
|
|
|
|
|
|
| Actuarial gain |
|
(2) |
|
(5) |
|
|
— |
|
|
(10) |
|
|
— |
|
| Prior service cost |
|
(2) |
|
1 |
|
|
— |
|
|
2 |
|
|
— |
|
Total amounts reclassified from AOCI(3) |
|
|
|
$ |
(9) |
|
|
$ |
(21) |
|
|
$ |
(11) |
|
|
$ |
(37) |
|
(1)The Company expects to reclassify $10 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 pension cost. Refer to Note 8 – “Postretirement and Other Employee Benefits” for additional information.
(3)Amounts are net of tax, which are immaterial for the three months and six months ended February 28, 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 |
|
Six months ended |
| |
February 28, 2022 |
|
February 28, 2021 |
|
February 28, 2022 |
|
February 28, 2021 |
Restricted stock units |
$ |
12 |
|
|
$ |
20 |
|
|
$ |
44 |
|
|
$ |
52 |
|
| Employee stock purchase plan |
4 |
|
|
3 |
|
|
7 |
|
|
5 |
|
|
|
|
|
|
|
|
|
| Total |
$ |
16 |
|
|
$ |
23 |
|
|
$ |
51 |
|
|
$ |
57 |
|
As of February 28, 2022, the shares available to be issued under the 2021 Equity Incentive Plan were 9,894,144.
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 six months ended February 28, 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):
|
|
|
|
|
|
|
|
| |
February 28, 2022 |
| Unrecognized stock-based compensation expense—restricted stock units |
$ |
56 |
|
| Remaining weighted-average period for restricted stock units expense |
1.5 years |
Common Stock Outstanding
The following represents the common stock outstanding for the periods indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended |
|
Six months ended |
|
February 28, 2022 |
|
February 28, 2021 |
|
February 28, 2022 |
|
February 28, 2021 |
Common stock outstanding: |
|
|
|
|
|
|
|
Beginning balances |
144,166,009 |
|
|
150,471,570 |
|
|
144,496,077 |
|
|
150,330,358 |
|
|
|
|
|
|
|
|
|
Shares issued under employee stock purchase plan |
520,483 |
|
|
771,548 |
|
|
520,483 |
|
|
771,548 |
|
Vesting of restricted stock |
28,243 |
|
|
24,054 |
|
|
2,453,715 |
|
|
2,241,136 |
|
Purchases of treasury stock under employee stock plans |
(9,719) |
|
|
(8,873) |
|
|
(700,274) |
|
|
(610,279) |
|
Treasury shares purchased(1) |
(2,312,881) |
|
|
(1,891,798) |
|
|
(4,377,866) |
|
|
(3,366,262) |
|
Ending balances |
142,392,135 |
|
|
149,366,501 |
|
|
142,392,135 |
|
|
149,366,501 |
|
(1)In July 2021, the Board of Directors approved an authorization for the repurchase of up to $1.0 billion of the Company’s common stock (the “2022 Share Repurchase Program”). As of February 28, 2022, 5.1 million shares had been repurchased for $314 million and $686 million remains available under the 2022 Share Repurchase Program.
12. Concentration of Risk and Segment Data
Concentration of Risk
Sales of the Company’s products are concentrated among specific customers. During the six months ended February 28, 2022, the Company’s five largest customers accounted for approximately 47% of its net revenue and 78 customers accounted for approximately 90% of its net revenue. Sales to these customers were reported in the Electronics Manufacturing Services (“EMS”) and Diversified Manufacturing Services (“DMS”) operating segments.
The Company procures components from a broad group of suppliers. Some of the products manufactured by the Company require one or more components that are available from only a single source.
Segment Data
Net revenue for the operating segments is attributed to the segment in which the service is performed. An operating segment’s performance is evaluated based on its pre-tax operating contribution, or segment income. Segment income is defined as net revenue less cost of revenue, segment selling, general and administrative expenses, segment research and development expenses and an allocation of corporate manufacturing expenses and selling, general and administrative expenses. Certain items are excluded from the calculation of segment income. Transactions between operating segments are generally recorded at amounts that approximate those at which we would transact with third parties.
