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Form 10-Q
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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 November 30, 2020
or
☐ 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
https://cdn.kscope.io/b333d31fe3f1c82227893097790bb9c4-jbl-20201130_g1.jpg
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.)
10560 Dr. Martin Luther King, Jr. Street 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 ☐
1

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 December 31, 2020, there were 150,175,999 shares of the registrant’s Common Stock outstanding.
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JABIL INC. AND SUBSIDIARIES INDEX
Item 1.
Item 2.
Item 3.
Item 4.
Item 1.
Item 1A.
Item 2.
Item 3.
Item 4.
Item 5.
Item 6.


Table of Contents
PART I—FINANCIAL INFORMATION
Item 1. Financial Statements
JABIL INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except for share data)
November 30, 2020
(Unaudited)		 August 31, 2020
ASSETS
Current assets:
Cash and cash equivalents $ 1,107,573  $ 1,393,557 
Accounts receivable, net of allowance for doubtful accounts of $24,479 as of November 30, 2020 and $25,827 as of August 31, 2020
 3,651,869  2,847,743 
Contract assets 1,088,059  1,104,700 
Inventories, net 3,271,842  3,131,783 
Prepaid expenses and other current assets 727,849  657,102 
Total current assets 9,847,192  9,134,885 
Property, plant and equipment, net of accumulated depreciation of $4,676,152 as of November 30, 2020 and $4,525,758 as of August 31, 2020
 3,792,091  3,665,312 
Operating lease right-of-use asset 391,004  362,847 
Goodwill 706,625  696,853 
Intangible assets, net of accumulated amortization of $406,694 as of November 30, 2020 and $395,074 as of August 31, 2020
 198,801  209,870 
Deferred income taxes 165,264  165,407 
Other assets 168,501  162,242 
Total assets $ 15,269,478  $ 14,397,416 
LIABILITIES AND EQUITY
Current liabilities:
Current installments of notes payable and long-term debt $ 50,195  $ 50,194 
Accounts payable 6,431,567  5,687,038 
Accrued expenses 3,061,092  3,211,528 
Current operating lease liabilities 119,150  110,723 
Total current liabilities 9,662,004  9,059,483 
Notes payable and long-term debt, less current installments 2,679,005  2,678,288 
Other liabilities 331,093  268,925 
Non-current operating lease liabilities 324,379  302,035 
Income tax liabilities 163,459  148,629 
Deferred income taxes 115,587  114,657 
Total liabilities 13,275,527  12,572,017 
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; 266,047,352 and 263,830,270 shares issued and 150,471,570 and 150,330,358 shares outstanding as of November 30, 2020 and August 31, 2020, respectively
 266  264 
Additional paid-in capital
 2,445,582  2,413,616 
Retained earnings 2,228,729  2,040,922 
Accumulated other comprehensive loss (14,346) (34,168)
Treasury stock at cost, 115,575,782 and 113,499,912 shares as of November 30, 2020 and August 31, 2020, respectively
 (2,680,860) (2,609,250)
Total Jabil Inc. stockholders’ equity 1,979,371  1,811,384 
Noncontrolling interests 14,580  14,015 
Total equity 1,993,951  1,825,399 
Total liabilities and equity $ 15,269,478  $ 14,397,416 
See accompanying notes to Condensed Consolidated Financial Statements.
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JABIL INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except for per share data)
(Unaudited)
  Three months ended
  November 30, 2020 November 30, 2019
Net revenue $ 7,832,529  $ 7,505,698 
Cost of revenue 7,197,969  6,951,859 
Gross profit 634,560  553,839 
Operating expenses:
Selling, general and administrative 302,752  328,899 
Research and development 8,118  10,770 
Amortization of intangibles 11,455  16,140 
Restructuring, severance and related charges (1,715) 45,251 
Operating income 313,950  152,779 
Other (income) expense (1,922) 11,172 
Interest income (1,881) (5,944)
Interest expense 32,346  44,911 
Income before income tax 285,407  102,640 
Income tax expense 84,400  61,926 
Net income 201,007  40,714 
Net income attributable to noncontrolling interests, net of tax
 565  292 
Net income attributable to Jabil Inc. $ 200,442  $ 40,422 
Earnings per share attributable to the stockholders of Jabil Inc.:
Basic $ 1.33  $ 0.26 
Diluted $ 1.31  $ 0.26 
Weighted average shares outstanding:
Basic 150,157  153,100 
Diluted 152,918  156,462 
See accompanying notes to Condensed Consolidated Financial Statements.
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JABIL INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(in thousands)
(Unaudited)
  Three months ended
  November 30, 2020 November 30, 2019
Net income $ 201,007  $ 40,714 
Other comprehensive income (loss):
Change in foreign currency translation 10,718  (529)
Change in derivative instruments:
Change in fair value of derivatives
 24,911  10,945 
Adjustment for net (gains) losses realized and included in net income (15,551) 6,883 
Total change in derivative instruments
 9,360  17,828 
Unrealized loss on available for sale securities —  (8,827)
Actuarial loss (256) — 
Total other comprehensive income 19,822  8,472 
Comprehensive income $ 220,829  $ 49,186 
Comprehensive income attributable to noncontrolling interests
 565  292 
Comprehensive income attributable to Jabil Inc. $ 220,264  $ 48,894 
See accompanying notes to Condensed Consolidated Financial Statements.
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JABIL INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(in thousands)
(Unaudited)
Three months ended
November 30, 2020 November 30, 2019
Total stockholders' equity, beginning balances
 $ 1,825,399  $ 1,900,758 
Common stock:
Beginning balances
 264  260 
Vesting of restricted stock
 2  2 
Ending balances
 266  262 
Additional paid-in capital:
Beginning balances
 2,413,616  2,304,552 
Vesting of restricted stock
 (2) (2)
Recognition of stock-based compensation
 31,968  27,757 
Ending balances
 2,445,582  2,332,307 
Retained earnings:
Beginning balances
 2,040,922  2,037,037 
Declared dividends
 (12,635) (12,701)
Net income attributable to Jabil Inc. 200,442  40,422 
Ending balances
 2,228,729  2,064,758 
Accumulated other comprehensive loss:
Beginning balances
 (34,168) (82,794)
Other comprehensive income 19,822  8,472 
Ending balances
 (14,346) (74,322)
Treasury stock:
Beginning balances
 (2,609,250) (2,371,612)
Purchases of treasury stock under employee stock plans
 (21,581) (19,317)
Treasury shares purchased
 (50,029) (96,390)
Ending balances
 (2,680,860) (2,487,319)
Noncontrolling interests:
Beginning balances
 14,015  13,315 
Net income attributable to noncontrolling interests
 565  292 
Ending balances
 14,580  13,607 
Total stockholders' equity, ending balances
 $ 1,993,951  $ 1,849,293 

See accompanying notes to Condensed Consolidated Financial Statements.
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JABIL INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(Unaudited)
 
  Three months ended
  November 30, 2020 November 30, 2019
Cash flows provided by operating activities:
Net income $ 201,007  $ 40,714 
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 205,766  202,859 
Restructuring and related charges (1,556) 18,347 
Recognition of stock-based compensation expense and related charges 33,541  30,223 
Deferred income taxes (1,869) (6,645)
Provision for allowance for doubtful accounts 2,426  10,413 
Other, net 11,247  1,179 
Change in operating assets and liabilities, exclusive of net assets acquired:
Accounts receivable (791,492) (863,210)
Contract assets 27,971  (68,322)
Inventories (134,723) (286,775)
Prepaid expenses and other current assets (54,243) (31,413)
Other assets (8,142) (8,162)
Accounts payable, accrued expenses and other liabilities 575,527  981,736 
Net cash provided by operating activities 65,460  20,944 
Cash flows used in investing activities:
Acquisition of property, plant and equipment (352,881) (230,393)
Proceeds and advances from sale of property, plant and equipment 110,792  23,209 
Cash paid for business and intangible asset acquisitions, net of cash (18,417) (116,767)
Other, net (3,367) (1,779)
Net cash used in investing activities (263,873) (325,730)
Cash flows used in financing activities:
Borrowings under debt agreements 200,000  1,779,801 
Payments toward debt agreements (201,969) (1,787,243)
Payments to acquire treasury stock (50,029) (96,390)
Dividends paid to stockholders (13,814) (13,731)
Treasury stock minimum tax withholding related to vesting of restricted stock (21,581) (19,317)
Net cash used in financing activities (87,393) (136,880)
Effect of exchange rate changes on cash and cash equivalents (178) (1,835)
Net decrease in cash and cash equivalents (285,984) (443,501)
Cash and cash equivalents at beginning of period 1,393,557  1,163,343 
Cash and cash equivalents at end of period $ 1,107,573  $ 719,842 
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. 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, 2020. Results for the three months ended November 30, 2020 are not necessarily an indication of the results that may be expected for the full fiscal year ending August 31, 2021.
The full impact on the Company’s business and results of operations related to COVID-19 depends on future developments and cannot be fully predicted. The Company has considered all information available as of the date of these financial statements and is not aware of any circumstances that would result in an update to its estimates or judgments, or any adjustment to the carrying value of its assets or liabilities. Estimates are dependent on certain events and may change as future events occur or additional information becomes available and thus actual results could differ materially from these estimates and judgments.
2. Trade Accounts Receivable Sale Programs
The Company regularly sells designated pools of high credit quality trade accounts receivable 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. 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 each of the trade accounts receivable sale programs recognized during the three months ended November 30, 2020 and 2019 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.
Transfers of the receivables under the trade accounts receivable sale programs are accounted for as sales and, accordingly, net receivables sold under the trade accounts receivable sale programs 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.
The following is a summary of the trade accounts receivable sale programs with unaffiliated financial institutions where the Company may elect to sell receivables and the unaffiliated financial institution may elect to purchase, at a discount, on an ongoing basis:
Program
Maximum
Amount
(in millions)(1)
 Type of
Facility		 Expiration
Date
A $ 600.0  Uncommitted
December 5, 2021(2)
B $ 150.0  Uncommitted November 30, 2021
C 400.0  CNY Uncommitted August 31, 2023
D $ 150.0  Uncommitted
May 4, 2023(3)
E $ 150.0  Uncommitted
January 25, 2021(4)
F $ 50.0  Uncommitted
February 23, 2023(5)
G $ 100.0  Uncommitted
August 10, 2021(6)
H $ 100.0  Uncommitted
July 21, 2021(7)
I $ 650.0  Uncommitted
December 4, 2021(8)
J $ 135.0  Uncommitted
April 11, 2021(9)
K 100.0  CHF Uncommitted
December 5, 2021(2)
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(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.
(3)Any party may elect to terminate the agreement upon 30 days’ prior notice.
(4)The program will be automatically extended through January 25, 2023 unless either party provides 30 days’ notice of termination.
(5)Any party may elect to terminate the agreement upon 15 days’ prior notice.
(6)The program will be automatically extended through August 10, 2023 unless either party provides 30 days’ notice of termination.
(7)The program will be automatically extended through August 21, 2023 unless either party provides 30 days’ notice of termination.
(8)The program will be automatically extended through December 5, 2024 unless either party provides 30 days’ notice of termination.
(9)The program will be automatically extended through April 11, 2025 unless either party provides 30 days’ notice of termination.
In connection with the trade accounts receivable sale programs, the Company recognized the following (in millions):
  Three months ended
  November 30, 2020 November 30, 2019
Trade accounts receivable sold $ 1,256  $ 1,962 
Cash proceeds received $ 1,255  $ 1,957 
Pre-tax losses on sale of receivables(1)
 $ 1  $ 5 
(1)Recorded to other expense within the Condensed Consolidated Statement of Operations.
3. Inventories
    Inventories consist of the following (in thousands):
November 30, 2020 August 31, 2020
Raw materials $ 2,428,713  $ 2,389,719 
Work in process 480,968  450,781 
Finished goods 444,170  376,542 
Reserve for excess and obsolete inventory (82,009) (85,259)
Inventories, net $ 3,271,842  $ 3,131,783 
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4. Notes Payable and Long-Term Debt
Notes payable and long-term debt outstanding as of November 30, 2020 and August 31, 2020 are summarized below (in thousands): 
Maturity Date November 30, 2020 August 31, 2020
4.700% Senior Notes
 Sep 15, 2022 $ 498,823  $ 498,659 
4.900% Senior Notes
 Jul 14, 2023 299,361  299,300 
3.950% Senior Notes
 Jan 12, 2028 495,594  495,440 
3.600% Senior Notes
 Jan 15, 2030 494,896  494,756 
3.000% Senior Notes
 Jan 15, 2031 590,400  590,162 
Borrowings under credit facilities(1)
 Apr 23, 2021, Jan 22, 2023 and Jan 22, 2025 —  — 
Borrowings under loans Jan 22, 2025 350,126  350,165 
Total notes payable and long-term debt 2,729,200  2,728,482 
Less current installments of notes payable and long-term debt
 50,195  50,194 
Notes payable and long-term debt, less current installments
 $ 2,679,005  $ 2,678,288 
(1)As of November 30, 2020, the Company has $3.8 billion in available unused borrowing capacity under its revolving credit facilities. The Revolving Credit Facility under the five-year unsecured credit facility entered into on January 22, 2020 (the “Credit Facility”) acts as the back-up facility for commercial paper outstanding, if any. The Company has a borrowing capacity of up to $1.8 billion under its commercial paper program.
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% or 3.000% Senior Notes upon a change of control. As of November 30, 2020 and August 31, 2020, the Company was in compliance with its debt covenants.
Fair Value
Refer to Note 16 – “Fair Value Measurements” for the estimated fair values of the Company’s notes payable and long-term debt.
5. Asset-Backed Securitization Programs
The Company continuously sells designated pools of trade accounts receivable, at a discount, under its foreign asset-backed securitization program and its North American asset-backed securitization program to special purpose entities, which in turn sell certain of the receivables under the foreign program to an unaffiliated financial institution and a conduit administered by an unaffiliated financial institution and certain of the receivables under the North American program to conduits administered by an unaffiliated financial institution on a monthly basis.
The Company continues servicing the receivables sold and in exchange receives a servicing fee under each of the asset-backed securitization programs. Servicing fees related to each of the asset-backed securitization programs recognized during the three months ended November 30, 2020 and 2019 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.
Transfers of the receivables under the asset-backed securitization programs are accounted for as sales and, accordingly, net receivables sold under the asset-backed securitization programs 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.
The special purpose entity in the foreign asset-backed securitization program is a separate bankruptcy-remote entity whose assets would be first available to satisfy the creditor claims of the unaffiliated financial institution. The Company is
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deemed the primary beneficiary of this special purpose entity as the Company has both the power to direct the activities of the entity that most significantly impact the entity’s economic performance and the obligation to absorb losses or the right to receive the benefits that could potentially be significant to the entity from the transfer of the trade accounts receivable into the special purpose entity. Accordingly, the special purpose entity associated with the foreign asset-backed securitization program is included in the Company’s Condensed Consolidated Financial Statements. As of November 30, 2020, the special purpose entity has liabilities for which creditors do not have recourse to the general credit of the Company (primary beneficiary). The liabilities cannot exceed the maximum amount of net cash proceeds under the foreign asset-backed securitization program.
The foreign asset-backed securitization program contains a guarantee of payment by the special purpose entity, in an amount approximately equal to the net cash proceeds under the program. No liability has been recorded for obligations under the guarantee as of November 30, 2020.
The special purpose entity in the North American 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 the maximum amount of net cash proceeds available under the North American asset-backed securitization program are pledged as collateral to the unaffiliated financial institution as of November 30, 2020.
Following is a summary of the asset-backed securitization programs and key terms:    
Maximum Amount of
Net Cash Proceeds (in millions)(1)(2)
 Expiration
Date
North American $ 390.0  November 22, 2021
Foreign $ 400.0  September 30, 2021
(1)Maximum amount available at any one time.
(2)As of November 30, 2020, the Company had up to $6.3 million in available liquidity under its asset-backed securitization programs.
In connection with the asset-backed securitization programs, the Company recognized the following (in millions):
Three months ended
November 30, 2020 November 30, 2019
Trade accounts receivable sold $ 1,173  $ 1,162 
Cash proceeds received(1)
 $ 1,171  $ 1,156 
Pre-tax losses on sale of receivables(2)
 $ 2  $ 6 
(1)The amounts primarily represent proceeds from collections reinvested in revolving-period transfers.
(2)Recorded to other expense within the Condensed Consolidated Statements of Operations.
The asset-backed securitization programs require compliance with several covenants. The North American asset-backed securitization program covenants include compliance with the interest ratio and debt to EBITDA ratio of the Credit Facility. The foreign asset-backed securitization program covenants include limitations on certain corporate actions such as mergers and consolidations. As of November 30, 2020 and August 31, 2020, the Company was in compliance with all covenants under the asset-backed securitization programs.

6. Accrued Expenses
Accrued expenses consist of the following (in thousands):
November 30, 2020 August 31, 2020
Contract liabilities(1)
 $ 441,151  $ 496,219 
Accrued compensation and employee benefits 740,959  703,250 
Other accrued expenses 1,878,982  2,012,059 
Accrued expenses $ 3,061,092  $ 3,211,528 
(1)Revenue recognized during the three months ended November 30, 2020 and 2019 that was included in the contract liability balance as of August 31, 2020 and 2019 was $170.3 million and $101.4 million, respectively.
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7. 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 ended November 30, 2020 and 2019 (in thousands):
  Three months ended
  November 30, 2020 November 30, 2019
Service cost (1)
 $ 6,078  $ 4,463 
Interest cost (2)
 1,121  763 
Expected long-term return on plan assets (2)
 (3,870) (2,786)
Recognized actuarial (gain) loss (2)
 (1,243) 223 
Amortization of actuarial gain (2)
 (1,724) — 
Amortization of prior service credit (2)
 (13) (11)
Net periodic benefit cost $ 349  $ 2,652 
(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.
8. 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 $1.0 billion and $355.2 million as of November 30, 2020 and August 31, 2020, 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 December 1, 2020 and November 30, 2021.
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 November 30, 2020 and August 31, 2020, was $3.5 billion and $2.9 billion, respectively.
Refer to Note 16 – “Fair Value Measurements” for the fair values and classification of the Company’s derivative instruments.
The gains and losses recognized in earnings due to hedge ineffectiveness and the amount 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 thousands):
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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
November 30, 2020 November 30, 2019
Forward foreign exchange contracts(1)
 Cost of revenue $ 84,006  $ 26,718 
(1)During the three months ended November 30, 2020 and 2019, the Company recognized $72.9 million and $28.9 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.
Cash Flow Hedges
The following table presents the interest rate swaps outstanding as of November 30, 2020, which have been designated as hedging instruments and accounted for as cash flow hedges:
Interest Rate Swap Summary Hedged Interest Rate Payments Aggregate Notional Amount (in millions) Effective Date
Expiration Date (1)
Forward Interest Rate Swap
Anticipated Debt Issuance Fixed $ 250.0  November 2, 2020 July 31, 2024
(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 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”).
9. Accumulated Other Comprehensive Income

The following table sets forth the changes in accumulated other comprehensive income (loss) (“AOCI”), net of tax, by component for the three months ended November 30, 2020 (in thousands):
Foreign
Currency
Translation
Adjustment		 Derivative
Instruments		 Actuarial
Loss		 Prior
Service Cost		 Total
Balance as of August 31, 2020 $ (36,595) $ (30,996) $ 34,093  $ (670) $ (34,168)
Other comprehensive income (loss) before reclassifications 10,718  24,911  (256) —  35,373 
Amounts reclassified from AOCI —  (15,551) —  —  (15,551)
Other comprehensive income (loss)(1)
 10,718  9,360  (256) —  19,822 
Balance as of November 30, 2020 $ (25,877) $ (21,636) $ 33,837  $ (670) $ (14,346)
(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 thousands):
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  Three months ended
Comprehensive Income Components Financial Statement Line Item November 30, 2020 November 30, 2019
Realized (gains) losses on derivative instruments:(1)
Foreign exchange contracts Cost of revenue $ (16,368) $ 7,314 
Interest rate contracts Interest expense 817  (431)
Total amounts reclassified from AOCI(2)
 $ (15,551) $ 6,883 
(1)The Company expects to reclassify $14.5 million into earnings during the next twelve months, which will primarily be classified as a component of cost of revenue.
(2)Amounts are net of tax, which are immaterial for the three months ended November 30, 2020 and 2019.
10. Stockholders’ Equity
The Company recognized stock-based compensation expense within selling, general and administrative expense as follows (in thousands):
  Three months ended
  November 30, 2020 November 30, 2019
Restricted stock units
 $ 31,273  $ 28,183 
Employee stock purchase plan 2,268  2,040 
Total $ 33,541  $ 30,223 

On October 15, 2020, the Company’s Board of Directors approved the proposed 2021 Equity Incentive Plan (the “2021 Plan”). The 2021 Plan will replace the Company’s 2011 Stock Award and Incentive Plan, which terminated on October 21, 2020. The proposed 2021 Plan will be voted on during the annual meeting of shareholders to be held on January 21, 2021.
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 both the three months ended November 30, 2020 and 2019, the Company awarded approximately 1.1 million time-based restricted stock units, 0.3 million performance-based restricted stock units and 0.3 million market-based restricted stock units, respectively.
The following represents the stock-based compensation information as of the period indicated (in thousands):
  November 30, 2020
Unrecognized stock-based compensation expense—restricted stock units $ 70,544 
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
November 30, 2020 November 30, 2019
Common stock outstanding:
Beginning balances
 150,330,358  153,520,380 
Shares issued upon exercise of stock options
 —  13,930 
Vesting of restricted stock
 2,217,082  1,916,740 
Purchases of treasury stock under employee stock plans
 (601,406) (530,417)
Treasury shares purchased(1)
 (1,474,464) (2,620,277)
Ending balances
 150,471,570  152,300,356 
(1)In September 2019, the Company’s Board of Directors authorized the repurchase of up to $600.0 million of the Company’s common stock as part of a two-year capital allocation framework (the “2020 Share Repurchase Program”). As of November 30, 2020, 7.5 million shares had been repurchased for $263.9 million and $336.1 million remains available under the 2020 Share Repurchase Program.
11. Concentration of Risk and Segment Data
Concentration of Risk
Sales of the Company’s products are concentrated among specific customers. During the three months ended November 30, 2020, the Company’s five largest customers accounted for approximately 50% of its net revenue and 68 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. Segment income does not include amortization of intangibles, stock-based compensation expense and related charges, restructuring, severance and related charges, distressed customer charges, acquisition and integration charges, impairment on securities, loss on disposal of subsidiaries, settlement of receivables and related charges, impairment of notes receivable and related charges, restructuring of securities loss, goodwill impairment charges, business interruption and impairment charges, net, income (loss) from discontinued operations, gain (loss) on sale of discontinued operations, other expense (excluding certain components of net periodic benefit cost), interest income, interest expense, income tax expense or adjustment for net income (loss) attributable to noncontrolling interests. Transactions between operating segments are generally recorded at amounts that approximate those at which we would transact with third parties.
As of September 1, 2020, certain customers have been realigned within the Company’s operating segments. As there have been no changes to how the Company’s chief operating decision maker assesses operating performance and allocates resources, the Company’s operating segments which are the reporting segments continue to consist of the DMS and EMS segments. Customers within the automotive and transportation and smart home and appliances industries are now presented within the DMS segment. Prior period disclosures are restated to reflect the realignment.
The following table presents the Company’s revenues disaggregated by segment (in thousands):
Three months ended
November 30, 2020 November 30, 2019
EMS DMS Total EMS DMS Total
Timing of transfer
Point in time $ 1,057,019  $ 2,239,828  $ 3,296,847  $ 1,383,752  $ 1,876,637  $ 3,260,389 
Over time 2,536,028  1,999,654  4,535,682  2,375,186  1,870,123  4,245,309 
Total $ 3,593,047  $ 4,239,482  $ 7,832,529  $ 3,758,938  $ 3,746,760  $ 7,505,698 
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The following tables set forth operating segment information (in thousands):
  Three months ended
  November 30, 2020 November 30, 2019
Segment income and reconciliation of income before income tax
EMS $ 121,978  $ 89,354 
DMS 242,959  187,961 
Total segment income $ 364,937  $ 277,315 
Reconciling items:
Amortization of intangibles (11,455) (16,140)
Stock-based compensation expense and related charges (33,541) (30,223)
Restructuring, severance and related charges 1,715  (45,251)
Distressed customer charge —  (14,963)
Acquisition and integration charges (2,113) (16,134)
Other expense (net of periodic benefit cost) (3,671) (12,997)
Interest income 1,881  5,944 
Interest expense (32,346) (44,911)
Income before income tax $ 285,407  $ 102,640 
  November 30, 2020 August 31, 2020
Total assets
EMS $ 4,001,727  $ 3,233,681 
DMS 6,953,659  6,641,764 
Other non-allocated assets 4,314,092  4,521,971 
$ 15,269,478  $ 14,397,416 

As of November 30, 2020, the Company operated in 31 countries worldwide. Sales to unaffiliated customers are based on the Company location that maintains the customer relationship and transacts the external sale.

The following table sets forth, for the periods indicated, foreign source revenue expressed as a percentage of net revenue:
Three months ended
  November 30, 2020 November 30, 2019
Foreign source revenue 83.6  % 81.8  %
12. Restructuring, Severance and Related Charges
Following is a summary of the Company’s restructuring, severance and related charges (in thousands):
  Three months ended
  November 30, 2020 November 30, 2019
Employee severance and benefit costs $ 568  $ 18,781 
Lease costs (2,873) 239 
Asset write-off costs (2) 16,316 
Other costs 592  9,915 
Total restructuring, severance and related charges(1)
 $ (1,715) $ 45,251 
(1)Primarily relates to the 2020 Restructuring Plan, and includes $(3.0) million and $17.4 million recorded in the EMS segment, $1.0 million and $25.2 million recorded in the DMS segment and $0.3 million and $2.7 million of non-allocated charges for the three months ended November 30, 2020 and 2019, respectively. Except for asset write-off costs, all restructuring, severance and related charges are cash costs.
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2020 Restructuring Plan
On September 20, 2019, the Company’s Board of Directors formally approved a restructuring plan to realign the Company’s global capacity support infrastructure, particularly in the Company’s mobility footprint in China, in order to optimize organizational effectiveness. This action includes headcount reductions and capacity realignment (the “2020 Restructuring Plan”). The 2020 Restructuring Plan reflects the Company’s intention only and restructuring decisions, and the timing of such decisions, at certain locations are still subject to consultation with the Company’s employees and their representatives.
Upon completion of the 2020 Restructuring Plan, the Company expects to recognize approximately $85.0 million in restructuring and other related costs. The Company incurred $76.9 million of costs during fiscal year 2020 and anticipates incurring the remaining costs during fiscal year 2021 for employee severance and benefit costs, asset write-off costs, and other related costs.
The table below summarizes the Company’s liability activity, primarily associated with the 2020 Restructuring Plan
(in thousands):
Employee Severance
and Benefit Costs		 Lease Costs Asset Write-off Costs Other Related Costs Total
Balance as of August 31, 2020 $ 8,143  $ 2,316  $ —  $ 426  $ 10,885 
Restructuring related charges 264  (2,873) (2) 497  (2,114)
Asset write-off charge and other non-cash activity —  1,554  2  —  1,556 
Cash payments (4,525) (56) —  (171) (4,752)
Balance as of November 30, 2020 $ 3,882  $ 941  $ —  $ 752  $ 5,575 
The Company’s liability associated with the worldwide workforce reduction is $27.5 million as of November 30, 2020.
13. Income Taxes
Effective Income Tax Rate
The U.S. federal statutory income tax rate and the Company's effective income tax rate are as follows:
Three months ended
November 30, 2020 November 30, 2019
U.S. federal statutory income tax rate 21.0  % 21.0  %
Effective income tax rate 29.6  % 60.3  %
The effective income tax rate decreased for the three months ended November 30, 2020, compared to the three months ended November 30, 2019, primarily due to increased income for the three months ended November 30, 2020, driven in part by decreased restructuring charges in tax jurisdictions with minimal related income tax benefit.
The effective income tax rate differed from the U.S. federal statutory income tax rate of 21.0% during the three months ended November 30, 2020 and 2019, primarily due to: (i) losses in tax jurisdictions with existing valuation allowances and (ii) tax incentives granted to sites in Brazil, China, Malaysia, Singapore and Vietnam.
14. Earnings Per Share and Dividends
Earnings Per Share
The Company calculates its basic earnings per share by dividing net income attributable to the Company by the weighted average number of common shares outstanding during the period. The Company’s diluted earnings per share is calculated in a similar manner, but includes the effect of dilutive securities. The difference between the weighted average number of basic shares outstanding and the weighted average number of diluted shares outstanding is primarily due to dilutive unvested restricted stock units and dilutive stock appreciation rights.
Potential shares of common stock are excluded from the computation of diluted earnings per share when their effect would be antidilutive. Performance-based restricted stock units are considered dilutive when the related performance criteria
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have been met assuming the end of the reporting period represents the end of the performance period. All potential shares of common stock are antidilutive in periods of net loss. Potential shares of common stock not included in the computation of earnings per share because their effect would have been antidilutive or because the performance criterion was not met were as follows (in thousands):
  Three months ended
  November 30, 2020 November 30, 2019