JABIL INC. Overview
We are one of the leading providers of worldwide manufacturing services and
solutions. We provide comprehensive electronics design, production and product
management services to companies in various industries and end markets. We
derive substantially all of our revenue from production and product management
services (collectively referred to as "manufacturing services"), which encompass
the act of producing tangible components that are built to customer
specifications and are then provided to the customer.
We have two reporting segments: Electronics Manufacturing Services ("EMS") and
Diversified Manufacturing Services ("DMS"), which are organized based on the
economic profiles of the services performed, including manufacturing
capabilities, market strategy, margins, return on capital and risk profiles. Our
EMS segment is focused around leveraging IT, supply chain design and
engineering, technologies largely centered on core electronics, utilizing our
large scale manufacturing infrastructure and our ability to serve a broad range
of end markets. Our EMS segment is a high volume business that produces product
at a quicker rate (i.e. cycle time) and in larger quantities and includes
customers primarily in the 5G, wireless and cloud, digital print and retail,
industrial and semi-cap, and networking and storage industries. Our DMS segment
is focused on providing engineering solutions, with an emphasis on material
sciences, technologies and healthcare. Our DMS segment includes customers
primarily in the automotive and transportation, connected devices, healthcare
and packaging, and mobility industries.
Our cost of revenue includes the cost of electronic components and other
materials that comprise the products we manufacture; the cost of labor and
manufacturing overhead; and adjustments for excess and obsolete inventory. As a
provider of turnkey manufacturing services, we are responsible for procuring
components and other materials. This requires us to commit significant working
capital to our operations and to manage the purchasing, receiving, inspecting
and stocking of materials. At times, we collect deposits from our customers
related to the purchase of inventory in order to effectively manage our working
capital. Although we bear the risk of fluctuations in the cost of materials and
excess scrap, our ability to purchase components and materials efficiently may
contribute significantly to our operating results. While we periodically
negotiate cost of materials adjustments with our customers, rising component and
material prices may negatively affect our margins. Net revenue from each product
that we manufacture consists of an element based on the costs of materials in
that product and an element based on the labor and manufacturing overhead costs
allocated to that product. Our gross margin for any product depends on the mix
between the cost of materials in the product and the cost of labor and
manufacturing overhead allocated to the product.
Our operating results are impacted by the level of capacity utilization of
manufacturing facilities; indirect labor costs; and selling, general and
administrative expenses. Operating income margins have generally improved during
periods of high production volume and high capacity utilization. During periods
of low production volume, we generally have reduced operating income margins.
We monitor the current economic environment and its potential impact on both the
customers we serve as well as our end markets and closely manage our costs and
capital resources so that we can try to respond appropriately as circumstances
change.
We have consistently utilized advanced circuit design, production design and
manufacturing technologies to meet the needs of our customers. To support this
effort, our engineering staff focuses on developing and refining design and
manufacturing technologies to meet specific needs of specific customers. Most of
the expenses associated with these customer-specific efforts are reflected in
our cost of revenue. In addition, our engineers engage in research and
development ("R&D") of new technologies that apply generally to our operations.
The expenses of these R&D activities are reflected in the research and
development line item within our Consolidated Statement of Operations.
An important element of our strategy is the expansion of our global production
facilities. The majority of our revenue and materials costs worldwide are
denominated in U.S. dollars, while our labor and utility costs in operations
outside the U.S. are denominated in local currencies. We economically hedge
certain of these local currency costs, based on our evaluation of the potential
exposure as compared to the cost of the hedge, through the purchase of foreign
currency exchange contracts. Changes in the fair market value of such hedging
instruments are reflected within the Consolidated Statement of Operations and
the Consolidated Statement of Comprehensive Income.
See Note 13 - "Concentration of Risk and Segment Data" to the Consolidated Financial Statements.
COVID-19
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The COVID-19 pandemic, which began to impact us inJanuary 2020 , has continued to affect our business and the businesses of our customers and suppliers. Travel and business operation restrictions arising from virus containment efforts of governments around the world have continued to impact our operations inAsia ,Europe and theAmericas . Essential activity exceptions from these restrictions have allowed us to continue to operate but virus containment efforts have resulted in additional direct costs.
The impact on our suppliers has led to supply chain constraints, including difficulty sourcing materials necessary to fulfill customer production requirements and challenges in transporting completed products to our end customers.
Summary of Results
The following table sets forth, for the periods indicated, certain key operating
results and other financial information (in millions, except per share data):
Fiscal Year Ended August 31,
2022 2021 2020
Net revenue $ 33,478 $ 29,285 $ 27,266
Gross profit $ 2,632 $ 2,359 $ 1,931
Operating income $ 1,393 $ 1,055 $ 500
Net income attributable to Jabil Inc. $ 996 $ 696 $ 54
Earnings per share - basic $ 7.06 $ 4.69 $ 0.36
Earnings per share - diluted $ 6.90 $ 4.58 $ 0.35
Key Performance Indicators
Management regularly reviews financial and non-financial performance indicators
to assess the Company's operating results. Changes in our operating assets and
liabilities are largely affected by our working capital requirements, which are
dependent on the effective management of our sales cycle as well as timing of
payments. Our sales cycle measures how quickly we can convert our manufacturing
services into cash through sales. We believe the metrics set forth below are
useful to investors in measuring our liquidity as future liquidity needs will
depend on fluctuations in levels of inventory, accounts receivable and accounts
payable.
The following table sets forth, for the quarterly periods indicated, certain of management's key financial performance indicators:
Three Months Ended
August 31, 2022 May 31, 2022 August 31, 2021
Sales cycle(1) 32 days 37 days 19 days
Inventory turns (annualized)(2) 5 turns 4 turns 5 turns
Days in accounts receivable(3) 40 days 35 days 38 days
Days in inventory(4) 79 days 85 days 71 days
Days in accounts payable(5) 87 days 83 days 90 days
(1)The sales cycle is calculated as the sum of days in accounts receivable and
days in inventory, less the days in accounts payable; accordingly, the variance
in the sales cycle quarter over quarter is a direct result of changes in these
indicators.
(2)Inventory turns (annualized) are calculated as 360 days divided by days in
inventory.
(3)Days in accounts receivable is calculated as accounts receivable, net,
divided by net revenue multiplied by 90 days. During the three months ended
August 31, 2022 , the increase in days in accounts receivable from the three
months ended May 31, 2022 and August 31, 2021 was primarily due to an increase
in accounts receivable, primarily driven by higher sales and the timing of
collections.
(4)Days in inventory is calculated as inventory and contract assets divided by
cost of revenue multiplied by 90 days. During the three months ended August 31,
2022 , the increase in days in inventory from the three months ended August 31,
2021 was primarily due to higher raw material balances due to supply-chain
constraints and to support expected sales levels in the first quarter of fiscal
year 2023. During the three months ended August 31, 2022 , the decrease in days
in inventory from the prior sequential quarter was primarily driven by increased
sales activity during the quarter.
(5)Days in accounts payable is calculated as accounts payable divided by cost of
revenue multiplied by 90 days. During the three months ended August 31, 2022 ,
the decrease in days in accounts payable from the three months ended August 31,
2021 was primarily due to timing of purchases and cash payments during the
quarter. During the three months
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ended August 31, 2022 , the increase in days in accounts payable from the three
months ended May 31, 2022 was primarily due to an increase in materials
purchases and timing of payments.
Critical Accounting Policies and Estimates
The preparation of our Consolidated Financial Statements and related disclosures in conformity withU.S. generally accepted accounting principles ("U.S. GAAP") requires management to make estimates and judgments that affect our reported amounts of assets and liabilities, revenues and expenses, and related disclosures of contingent assets and liabilities. On an on-going basis, we evaluate our estimates and assumptions based upon historical experience and various other factors and circumstances. Management believes that our estimates and assumptions are reasonable under the circumstances; however, actual results may vary from these estimates and assumptions under different future circumstances. We have identified the following critical accounting policies that affect the more significant judgments and estimates used in the preparation of our Consolidated Financial Statements. For further discussion of our significant accounting policies, refer to Note 1 - "Description of Business and Summary of Significant Accounting Policies" to the Consolidated Financial Statements.
Revenue Recognition
For our over time customers, we believe the measure of progress which best
depicts the transfer of control is based on costs incurred to date, relative to
total estimated cost at completion (i.e., an input method). This method is a
faithful depiction of the transfer of goods or services because it results in
the recognition of revenue on the basis of our to-date efforts in the
satisfaction of a performance obligation relative to the total expected efforts
in the satisfaction of the performance obligation. We believe that the use of an
input method best depicts the transfer of control to the customer, which occurs
as we incur costs on our contracts. The transaction price of each performance
obligation is generally based upon the contractual stand-alone selling price of
the product or service.
Inventory Valuation
We purchase inventory based on forecasted demand and record inventory at the
lower of cost and net realizable value. Management regularly assesses inventory
valuation based on current and forecasted usage, customer inventory-related
contractual obligations and other lower of cost and net realizable value
considerations. If actual market conditions or our customers' product demands
are less favorable than those projected, additional valuation adjustments may be
necessary.
Long-Lived Assets
We have recorded intangible assets, including goodwill, in connection with
business acquisitions. Estimated useful lives of amortizable intangible assets
are determined by management based on an assessment of the period over which the
asset is expected to contribute to future cash flows. The fair value of acquired
amortizable intangible assets impacts the amounts recorded as goodwill. We
review amortizable intangible assets for impairment whenever events or changes
in circumstances indicate that the carrying amount of an asset may not be
recoverable.
We perform a goodwill impairment analysis on an annual basis and whenever events
or changes in circumstances indicate that the carrying value may not be
recoverable. The Company may elect to perform a qualitative assessment to
determine whether it is more likely than not that a reporting unit is impaired.
If the qualitative assessment is not performed or if the Company determines that
it is not more likely than not that the fair value of the reporting unit exceeds
the carrying value, the recoverability of goodwill is measured at the reporting
unit level by comparing the reporting unit's carrying amount, including
goodwill, to the fair value of the reporting unit. If the carrying amount of the
reporting unit exceeds its fair value, goodwill is considered impaired and a
loss is recognized in the amount equal to that excess.
We perform an indefinite-lived intangible asset impairment analysis on an annual
basis and whenever events or changes in circumstances indicate that the carrying
value may not be recoverable. The Company may elect to perform a qualitative
assessment to determine whether it is more likely than not that an
indefinite-lived intangible is impaired. If the qualitative assessment is not
performed or if the Company determines that it is not more likely than not that
the fair value of an indefinite-lived intangible exceeds the carrying value, the
recoverability is measured by comparing the carrying amount to the fair value.
If the carrying amount of the indefinite-lived intangible asset exceeds its fair
value, the indefinite-lived intangible asset is considered impaired.
We completed our annual impairment analysis for goodwill and indefinite-lived
intangible assets during the fourth quarter of fiscal year 2022. The qualitative
assessment was used for all reporting units and we determined that it is more
likely than not that the fair values of our reporting units and the
indefinite-lived intangible assets are in excess of the carrying values and that
no impairment existed as of the date of the impairment analysis.
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Income Taxes
We estimate our income tax provision in each of the jurisdictions in which we operate, a process that includes estimating exposures related to examinations by taxing authorities. We must also make judgments regarding the ability to realize deferred tax assets. The carrying value of our net deferred tax assets is based on our belief that it is more likely than not that we will generate sufficient future taxable income in certain jurisdictions to realize these deferred tax assets. A valuation allowance has been established for deferred tax assets that we do not believe meet the "more likely than not" criteria. We assess whether an uncertain tax position taken or expected to be taken in a tax return meets the threshold for recognition and measurement in the Consolidated Financial Statements. Our judgments regarding future taxable income as well as tax positions taken or expected to be taken in a tax return may change due to changes in market conditions, changes in tax laws or other factors. If our assumptions and consequently our estimates change in the future, the valuation allowances and/or tax reserves established may be increased or decreased, resulting in a respective increase or decrease in income tax expense. For further discussion related to our income taxes, refer to Note 15 - "Income Taxes" to the Consolidated Financial Statements.
Recent Accounting Pronouncements
See Note 19 - "New Accounting Guidance" to the Consolidated Financial Statements for a discussion of recent accounting guidance.
Results of Operations
Refer to Item 7. "Management's Discussion and Analysis of Financial Condition and Results of Operations" section contained in our Annual Report on Form 10-K for the fiscal year endedAugust 31, 2021 for the results of operations discussion for the fiscal year endedAugust 31, 2021 compared to the fiscal year endedAugust 31, 2020 . Net Revenue Generally, we assess revenue on a global customer basis regardless of whether the growth is associated with organic growth or as a result of an acquisition. Accordingly, we do not differentiate or separately report revenue increases generated by acquisitions as opposed to existing business. In addition, the added cost structures associated with our acquisitions have historically been relatively insignificant when compared to our overall cost structure. The distribution of revenue across our segments has fluctuated, and will continue to fluctuate, as a result of numerous factors, including the following: fluctuations in customer demand; efforts to diversify certain portions of our business; business growth from new and existing customers; specific product performance; and any potential termination, or substantial winding down, of significant customer relationships. Fiscal Year Ended August 31, Change (dollars in millions) 2022 2021 2020 2022 vs. 2021 2021 vs. 2020 Net revenue$ 33,478 $ 29,285 $ 27,266 14.3 % 7.4 % 2022 vs. 2021 Net revenue increased during the fiscal year endedAugust 31, 2022 compared to the fiscal year endedAugust 31, 2021 . Specifically, the EMS segment net revenue increased 20% due to: (i) a 9% increase in revenues from existing customers within our 5G, wireless and cloud business, (ii) a 5% increase in revenues from existing customers within our digital print and retail business, (iii) a 4% increase in revenues from existing customers within our industrial and capital equipment business and (iv) a 2% increase in revenues from existing customer within our networking and storage business. The DMS segment net revenue increased 9% due to: (i) a 6% increase in revenues from existing customers within our automotive and transportation business, (ii) a 3% increase in revenues from existing customers within our healthcare and packaging businesses and (iii) a 2% increase in revenues from existing customers within our connected devices business. The increase was partially offset by a 2% decrease in revenues from existing customers within our mobility business. During fiscal year 2023, we expect an additional$500 million in components that we procure and integrate for our cloud business will shift from a purchase and resale model to a customer-controlled consignment service model. As a result of this continued transition, revenue associated with these components are shown on a net basis and as a result, we expect higher gross margins and lower cash used in this business.
The following table sets forth, for the periods indicated, revenue by segment expressed as a percentage of net revenue:
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Fiscal Year Ended August 31,
2022 2021 2020
EMS 50 % 47 % 52 %
DMS 50 % 53 % 48 %
Total 100 % 100 % 100 %
The following table sets forth, for the periods indicated, foreign source revenue expressed as a percentage of net revenue:
Fiscal Year Ended August 31,
2022 2021 2020
Foreign source revenue 83.9 % 83.6 % 82.6 %
Gross Profit
Fiscal Year Ended August 31,
(dollars in millions) 2022 2021 2020
Gross profit $ 2,632 $ 2,359 $ 1,931
Percent of net revenue 7.9 % 8.1 % 7.1 %
2022 vs. 2021
Gross profit as a percentage of net revenue decreased for the fiscal year ended
August 31, 2022 compared to the fiscal year ended August 31, 2021 , primarily due
to product mix.
Selling, General and Administrative
Fiscal Year Ended August 31, Change
(in millions) 2022 2021 2020 2022 vs. 2021 2021 vs. 2020
Selling, general and
administrative $ 1,154 $ 1,213 $ 1,175 $ (59) $ 38
2022 vs. 2021
Selling, general and administrative expenses decreased during the fiscal year
ended August 31, 2022 compared to the fiscal year ended August 31, 2021 . The
decrease is primarily due to (i) a $39 million decrease due to lower salary and
salary related expenses and (ii) a $21 million decrease in stock-based
compensation expense due to higher anticipated achievement levels for certain
performance-based stock awards during the fiscal year ended August 31, 2021 and
certain one-time awards granted during the second quarter of fiscal year 2021.
Research and Development
Fiscal Year Ended August 31,
(dollars in millions) 2022 2021 2020
Research and development $ 33 $ 34 $ 43
Percent of net revenue 0.1 % 0.1 % 0.2 %
2022 vs. 2021
Research and development expenses remained consistent as a percent of net
revenue during the fiscal year ended August 31, 2022 compared to the fiscal year
ended August 31, 2021 .
Amortization of Intangibles
Fiscal Year Ended August 31, Change
(in millions) 2022 2021 2020 2022 vs. 2021 2021 vs. 2020
Amortization of intangibles $ 34 $ 47 $ 56 $ (13) $ (9)
2022 vs. 2021
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Amortization of intangibles decreased during the fiscal year ended
Restructuring, Severance and Related Charges
Following is a summary of our restructuring, severance and related charges:
Fiscal Year Ended
(in millions) 2022(1) 2021 2020 Employee severance and benefit costs $ 18 $ 5$ 94 Lease costs - (1) 8 Asset write-off costs - 5 33 Other costs - 1 22 Total restructuring, severance and related charges(2) $ 18$ 10 $ 157 (1)Recorded during the fiscal year endedAugust 31, 2022 for headcount reduction activities. (2)Includes$1 million and$0 million recorded in the EMS segment,$10 million and$9 million recorded in the DMS segment and$7 million and$1 million of non-allocated charges for the fiscal years endedAugust 31, 2022 and 2021, respectively. Except for asset write-off costs, all restructuring, severance and related charges are cash costs. See Note 14 - "Restructuring, Severance and Related Charges" to the Consolidated Financial Statements for further discussion of restructuring, severance and related charges. Loss on Debt Extinguishment Fiscal Year Ended August 31, Change (in millions) 2022 2021 2020 2022 vs. 2021 2021 vs. 2020 Loss on debt extinguishment $ 4 $ - $ - $ 4 $ - 2022 vs. 2021 Loss on debt extinguishment is due to the "make-whole" premium incurred during the fiscal year endedAugust 31, 2022 , for the redemption of the 4.700% Senior Notes due 2022. (Gain) Loss on Securities Fiscal Year Ended August 31, Change (in millions) 2022 2021 2020 2022 vs. 2021 2021 vs. 2020 (Gain) loss on securities $ -$ (2) $ 49 $ 2 $ (51) 2022 vs. 2021 The change in (gain) loss on securities during the fiscal year endedAugust 31, 2022 compared to the fiscal year endedAugust 31, 2021 , is due to cash proceeds received in connection with the sale of an investment during the fiscal year endedAugust 31, 2021 . Other Expense (Income) Fiscal Year Ended August 31, Change (in millions) 2022 2021 2020 2022 vs. 2021 2021 vs. 2020 Other expense (income)$ 12 $ (11) $ 31 $ 23 $ (42) 2022 vs. 2021 The change in other expense (income) during the fiscal year endedAugust 31, 2022 compared to the fiscal year endedAugust 31, 2021 , is primarily due to: (i)$10 million related to an increase in fees associated with higher utilization of the trade accounts receivable sales programs, (ii)$7 million primarily related to higher net periodic benefit costs, and (iii)$6 million arising from an increase in other expense.
Interest Income
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Fiscal Year Ended August 31, Change
(in millions) 2022 2021 2020 2022 vs. 2021 2021 vs. 2020
Interest income $ 5 $ 6 $ 15 $ (1) $ (9)
2022 vs. 2021
Interest income remained relatively consistent during the fiscal year ended
Interest Expense
Fiscal Year Ended August 31, Change
(in millions) 2022 2021 2020 2022 vs. 2021 2021 vs. 2020
Interest expense $ 151 $ 130 $ 174 $ 21 $ (44)
2022 vs. 2021
Interest expense increased during the fiscal year ended August 31, 2022 ,
compared to the fiscal year ended August 31, 2021 , primarily due to higher
interest rates and higher borrowings on our credit facilities and commercial
paper program. Additionally, the increase is due to higher borrowings on our
senior notes.
Income Tax Expense
Fiscal Year Ended August 31, Change
2022 2021 2020 2022 vs. 2021 2021 vs. 2020Effective income tax rate 19.1 % 26.0 % 78.2 % (6.9) % (52.2) % 2022 vs. 2021 The effective income tax rate decreased for the fiscal year endedAugust 31, 2022 , compared to the fiscal year endedAugust 31, 2021 , primarily due to: (i) higher income before income tax in low tax rate jurisdictions and decreased losses in tax jurisdictions with existing valuation allowances for the fiscal year endedAugust 31, 2022 and (ii) an income tax benefit of$26 million for the reversal of a portion of theU.S. valuation allowance for the fiscal year endedAugust 31, 2022 . These decreases were partially offset by a$17 million income tax expense for an unrecognized tax benefit related to the taxation of certain prior year intercompany transactions for the fiscal year endedAugust 31, 2022 .
Non-GAAP (Core) Financial Measures
The following discussion and analysis of our financial condition and results of operations include certain non-GAAP financial measures as identified in the reconciliation below. The non-GAAP financial measures disclosed herein do not have standard meaning and may vary from the non-GAAP financial measures used by other companies or how we may calculate those measures in other instances from time to time. Non-GAAP financial measures should not be considered a substitute for, or superior to, measures of financial performance prepared in accordance withU.S. GAAP. Also, our "core" financial measures should not be construed as an inference by us that our future results will be unaffected by those items that are excluded from our "core" financial measures. Management believes that the non-GAAP "core" financial measures set forth below are useful to facilitate evaluating the past and future performance of our ongoing manufacturing operations over multiple periods on a comparable basis by excluding the effects of the amortization of intangibles, stock-based compensation expense and related charges, restructuring, severance and related charges, distressed customer charges, acquisition and integration charges, loss on disposal of subsidiaries, settlement of receivables and related charges, impairment of notes receivable and related charges, goodwill impairment charges, business interruption and impairment charges, net, loss on debt extinguishment, (gain) loss on securities, income (loss) from discontinued operations, gain (loss) on sale of discontinued operations and certain other expenses, net of tax and certain deferred tax valuation allowance charges. Among other uses, management uses non-GAAP "core" financial measures to make operating decisions, assess business performance and as a factor in determining certain employee performance when evaluating incentive compensation. We determine the tax effect of the items excluded from "core" earnings and "core" diluted earnings per share based upon evaluation of the statutory tax treatment and the applicable tax rate of the jurisdiction in which the pre-tax items were incurred, and for which realization of the resulting tax benefit, if any, is expected. In certain jurisdictions where we do not expect to 32
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realize a tax benefit (due to existing tax incentives or a history of operating losses or other factors resulting in a valuation allowance related to deferred tax assets), a reduced or 0% tax rate is applied. We are reporting "core" operating income, "core" earnings and cash flows to provide investors with an additional method for assessing operating income and earnings, by presenting what we believe are our "core" manufacturing operations. A significant portion (based on the respective values) of the items that are excluded for purposes of calculating "core" operating income and "core" earnings also impacted certain balance sheet assets, resulting in a portion of an asset being written off without a corresponding recovery of cash we may have previously spent with respect to the asset. In the case of restructuring, severance and related charges, we may make associated cash payments in the future. In addition, although, for purposes of calculating "core" operating income and "core" earnings, we exclude stock-based compensation expense (which we anticipate continuing to incur in the future) because it is a non-cash expense, the associated stock issued may result in an increase in our outstanding shares of stock, which may result in the dilution of our stockholders' ownership interest. We encourage you to consider these matters when evaluating the utility of these non-GAAP financial measures. Adjusted free cash flow is defined as net cash provided by (used in) operating activities less net capital expenditures (acquisition of property, plant and equipment less proceeds and advances from the sale of property, plant and equipment). We report adjusted free cash flow as we believe this non-GAAP financial measure is useful to investors in measuring our ability to generate cash internally and fund future growth and to provide a return to shareholders.
Included in the tables below are a reconciliation of the non-GAAP financial
measures to the most directly comparable
Refer to Item 7. "Management's Discussion and Analysis of Financial Condition and Results of Operations" section contained in our Annual Report on Form 10-K for the fiscal year endedAugust 31, 2021 for the non-GAAP financial measures discussion for the fiscal year endedAugust 31, 2021 compared to the fiscal year endedAugust 31, 2020 .
Reconciliation of
Fiscal Year Ended August 31,
(in millions, except for per share data) 2022 2021 2020
Operating income (U.S. GAAP) $ 1,393 $ 1,055 $ 500
Amortization of intangibles 34 47 56
Stock-based compensation expense and related charges 81 102 83
Restructuring, severance and related charges(1) 18 10 157
Distressed customer charge - - 15
Net periodic benefit cost(2) 17 24 16
Business interruption and impairment charges, net - (1) 6
Acquisition and integration charges - 4 31
Adjustments to operating income 150 186 364
Core operating income (Non-GAAP) $ 1,543 $ 1,241 $ 864
Net income attributable to Jabil Inc. (U.S. GAAP) $ 996 $ 696 $ 54
Adjustments to operating income 150 186 364
Loss on debt extinguishment(3) 4 - -
(Gain) loss on securities - (2) 49
Net periodic benefit cost(2) (17) (24) (16)
Adjustment for taxes(4) (28) (3) (1)
Core earnings (Non-GAAP) $ 1,105 $ 853 $ 450
Diluted earnings per share (U.S. GAAP) $ 6.90 Diluted core earnings per share (Non-GAAP)$ 7.65
Diluted weighted average shares outstanding (U.S. GAAP and Non-GAAP) 144.4 152.1 155.3 (1)Recorded during the fiscal year endedAugust 31, 2022 for headcount reduction activities. (2)Pension service cost is recognized in cost of revenue and all other components of net periodic benefit cost, including return on plan assets, are presented in other expense. We are reclassifying the pension components in other expense to 33 -------------------------------------------------------------------------------- Table of Contents core operating income as we assess operating performance, inclusive of all components of net periodic benefit cost, with the related revenue. There is no impact to core earnings or diluted core earnings per share for this adjustment. (3)Charges related to the redemption of our 4.700% Senior Notes due 2022. (4)The fiscal year endedAugust 31, 2022 includes an income tax benefit of$26 million for the reversal of a portion of theU.S. valuation allowance. Adjusted Free Cash Flow Fiscal Year Ended August 31, (in millions) 2022 2021 2020
Net cash provided by operating activities (
Acquisition of property, plant and equipment
("PP&E")(1) (1,385) (1,159) (983)
Proceeds and advances from sale of PP&E(1) 544 366 187
Adjusted free cash flow (Non-GAAP) $ 810 $ 640 $ 461
(1)Certain customers co-invest in property, plant and equipment ("PP&E") with
us. As we acquire PP&E, we recognize the cash payments in acquisition of PP&E.
When our customers reimburse us and obtain control, we recognized the cash
receipts in proceeds and advances from the sale of PP&E.
Quarterly Results (Unaudited)
The following table sets forth certain unaudited quarterly financial information for the three months endedAugust 31, 2022 and 2021. In the opinion of management, this information has been presented on the same basis as the audited consolidated financial statements appearing elsewhere, and all necessary adjustments (consisting primarily of normal recurring accruals) have been included in the amounts stated below to present fairly the unaudited quarterly results when read in conjunction with the audited consolidated financial statements and related notes thereto. The operating results for any quarter are not necessarily indicative of results for any future period. Three Months Ended (in millions, except for per share data) August 31, 2022 August 31, 2021 Net revenue$ 9,030 $ 7,409 Gross profit $ 729 $ 587 Operating income $ 409 $ 265 Net income $ 315 $ 175 Net income attributable to Jabil Inc. $ 315 $ 175 Earnings per share attributable to the stockholders ofJabil Inc. : Basic $ 2.30 $ 1.20 Diluted $ 2.25 $ 1.16 Acquisitions and Expansion
Refer to Note 16 - "Business Acquisitions" to the Consolidated Financial Statements for discussion.
Liquidity and Capital Resources
We believe that our level of liquidity sources, which includes cash on hand, available borrowings under our revolving credit facilities and commercial paper program, additional proceeds available under our global asset-backed securitization program and under our uncommitted trade accounts receivable sale programs, cash flows provided by operating activities and access to the capital markets will be adequate to fund our capital expenditures, the payment of any declared quarterly dividends, any share repurchases under the approved program, any potential acquisitions, our working capital requirements and our contractual obligations for the next 12 months and beyond. We continue to assess our capital structure and evaluate the merits of redeploying available cash.
Cash and Cash Equivalents
As of
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Notes Payable and Credit Facilities
Following is a summary of principal debt payments and debt issuance for our notes payable and credit facilities:
Borrowings Total notes
under payable
4.700% 4.900% 3.950% 3.600% 3.000% revolving Borrowings and
Senior Senior Senior Senior Senior 1.700% 4.250% Senior credit under credit
(in millions) Notes(1) Notes Notes Notes Notes Senior Notes Notes(1) facilities(2) loans facilities
Balance as of
August 31, 2020 $ 499 $ 299 $ 495 $ 495 $ 590 $ - $ - $ - $ 350 $ 2,728
Borrowings - - - - - 500 - 1,224 - 1,724
Payments - - - - - - - (1,224) (350) (1,574)
Other - 1 1 - 1 (4) - - 1 -
Balance as of
August 31, 2021 499 300 496 495 591 496 - - 1 2,878
Borrowings - - - - - - 498 3,269 - 3,767
Payments (500) - - - - - - (3,269) (1) (3,770)
Other 1 - 1 1 1 1 (5) - - -
Balance as of
August 31, 2022 $ - $ 300 $ 497 $ 496 $ 592 $ 497 $ 493 $ - $ - $ 2,875
Jan 22, 2024 and
Maturity Date Sep 15, 2022 Jul 14, 2023 Jan 12, 2028 Jan 15, 2030 Jan 15, 2031 Apr 15, 2026 May 15, 2027 Jan 22, 2026 Jul 31, 2026
Original
Facility/
Maximum
Capacity(2) $500 million $300 million $500 million $3.8 billion (2)$2 million (1)OnMay 4, 2022 , we issued$500 million of registered 4.250% Senior Notes due 2027 (the "Green Bonds" or the "4.250% Senior Notes"). OnMay 31, 2022 , the net proceeds from the offering were used to redeem our 4.700% Senior Notes due in 2022 and pay the applicable "make-whole" premium and accrued interest. In addition, we intend to allocate an amount equal to the net proceeds from this offering to finance or refinance eligible expenditures under our new green financing framework. (2)As ofAugust 31, 2022 , we had$3.8 billion in available unused borrowing capacity under our revolving credit facilities. The Credit Facility acts as the back-up facility for commercial paper outstanding, if any. We have a borrowing capacity of up to$3.2 billion under our commercial paper program, which was increased from$1.8 billion onFebruary 18, 2022 . Commercial paper borrowings with an original maturity of 90 days or less are recorded net within the Consolidated Statement of Cash Flows, and have been excluded from the table above. In the ordinary course of business, we have letters of credit and surety bonds with banks and insurance companies outstanding of$73 million as ofAugust 31, 2022 . Unused letters of credit were$77 million as ofAugust 31, 2022 . Letters of credit and surety bonds are generally available for draw down in the event we do not perform. We have a shelf registration statement with theSEC registering the potential sale of an indeterminate amount of debt and equity securities in the future to augment our liquidity and capital resources. Our Senior Notes and our credit facilities contain various financial and nonfinancial covenants. A violation of these covenants could negatively impact our liquidity by restricting our ability to borrow under the notes payable and credit facilities and potentially causing acceleration of amounts due under these notes payable and credit facilities. As ofAugust 31, 2022 and 2021, we were in compliance with our debt covenants. Refer to Note 7 - "Notes Payable and Long-Term Debt" to the Consolidated Financial Statements for further details.
Asset-Backed Securitization Programs
Global asset-backed securitization program - EffectiveAugust 20, 2021 , the global asset-backed securitization program (formerly referred to as the North American asset-backed securitization program) terms were amended to: (i) add a foreign entity to the program, (ii) increase the maximum amount of net cash proceeds available at any one time from$390 million to$600 million and (iii) extend the expiration date of the program toNovember 25, 2024 . 35
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In connection with our asset-backed securitization program, during the fiscal year endedAugust 31, 2022 , we sold$3.9 billion of trade accounts receivable and we received cash proceeds of$3.9 billion . As ofAugust 31, 2022 , we had no available liquidity under our global asset-backed securitization program. Certain entities participating in the global asset-backed securitization program continuously sell designated pools of trade accounts receivable to a special purpose entity, which in turn sells certain of the receivables at a discount to conduits administered by an unaffiliated financial institution on a monthly basis. In addition, the foreign entity participating in the global asset-backed securitization program sells certain receivables at a discount to conduits administered by an unaffiliated financial institution on a daily basis. The special purpose entity in the global asset-backed securitization program is a wholly-owned subsidiary of the Company and is included in our Consolidated Financial Statements. Certain unsold receivables covering up to the maximum amount of net cash proceeds available under the domestic, orU.S. , portion of our global asset-backed securitization program are pledged as collateral to the unaffiliated financial institution as ofAugust 31, 2022 . Foreign asset-backed securitization program - We terminated the foreign asset-backed securitization program onJune 28, 2021 . In connection with the termination, we paid approximately$167 million in cash, which consisted of: (i)$68 million for the remittance of collections received prior toJune 28, 2021 , in our role as servicer of sold receivables and (ii) a repurchase of$99 million of all previously sold receivables, at fair value, that remained outstanding as ofJune 28, 2021 . As ofAugust 31, 2021 , we had substantially collected the repurchased receivables from customers. Global and foreign asset-backed securitization programs - We continue servicing the receivables sold and in exchange receive a servicing fee under the global asset-backed securitization program. Servicing fees related to each of the asset-backed securitization programs recognized during the fiscal years endedAugust 31, 2022 , 2021 and 2020 were not material. We do not record a servicing asset or liability on the Consolidated Balance Sheets as we estimate that the fee received to service these receivables approximates the fair market compensation to provide the servicing activities.
Refer to Note 8 - "Asset-Backed Securitization Programs" to the Consolidated Financial Statements for further details on the programs.
Trade Accounts Receivable Sale Programs
Following is a summary of the trade accounts receivable sale programs with
unaffiliated financial institutions. Under the programs we may elect to sell
receivables and the unaffiliated financial institutions may elect to purchase,
at a discount, on an ongoing basis (in millions):
Maximum Type of Expiration
Program Amount(1) Facility Date
A $ 700 Uncommitted December 5, 2022 (2)
B $ 150 Uncommitted November 30, 2022
C 400 CNY Uncommitted August 31, 2023
D $ 150 Uncommitted May 4, 2023 (3)
E $ 150 Uncommitted January 25, 2023 (3)
F $ 50 Uncommitted February 23, 2023 (4)
G $ 100 Uncommitted August 10, 2023 (3)
H $ 550 Uncommitted December 4, 2022 (5)
I $ 135 Uncommitted April 11, 2023 (6)
J 100 CHF Uncommitted December 5, 2022 (2)
K $ 65 Uncommitted January 23, 2023
(1)Maximum amount of trade accounts receivable that may be sold under a facility
at any one time.
(2)The program will be automatically extended through December 5, 2025 unless
either party provides 30 days notice of termination.
(3)Any party may elect to terminate the agreement upon 30 days prior notice.
(4)Any party may elect to terminate the agreement upon 15 days prior notice.
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(5)The program will be automatically extended through December 5, 2024 unless
either party provides 30 days notice of termination.
(6)The program will be automatically extended through April 11, 2025 unless
either party provides 30 days notice of termination.
During the fiscal year ended August 31, 2022 , we sold $8.5 billion of trade
accounts receivable under these programs and we received cash proceeds of $8.5
billion . As of August 31, 2022 , we had up to $1.6 billion in available liquidity
under our trade accounts receivable sale programs.
Cash Flows
The following table sets forth selected consolidated cash flow information (in
millions):
Fiscal Year Ended August 31,
2022 2021 2020
Net cash provided by operating activities $ 1,651 $ 1,433 $ 1,257
Net cash used in investing activities (858) (851) (921)
Net cash used in financing activities (888) (413) (65)
Effect of exchange rate changes on cash and cash
equivalents 6 4 (40)
Net (decrease) increase in cash and cash
equivalents $ (89) $ 173 $ 231
Operating Activities
Net cash provided by operating activities during the fiscal year ended August
31, 2022 was primarily due to increased accounts payable, accrued expenses and
other liabilities, non-cash expenses and net income, partially offset by
increased inventories, accounts receivable, prepaid expenses and other current
assets and contract assets. The increase in accounts payable, accrued expenses
and other liabilities is primarily due to the timing of purchases and cash
payments. The increase in inventories is primarily due to higher raw material
balances due to supply chain constraints and to support expected sales levels in
the first quarter of fiscal year 2023. The increase in accounts receivable is
primarily driven by higher sales and the timing of collections. The increase in
prepaid expenses and other current assets is primarily driven by the timing of
payments. The increase in contract assets is primarily due to the timing of
billings to our customers.
Investing Activities
Net cash used in investing activities during the fiscal year endedAugust 31, 2022 consisted primarily of capital expenditures principally to support ongoing business in the DMS and EMS segments, partially offset by proceeds and advances from the sale of property, plant and equipment.
Financing Activities
Net cash used in financing activities during the fiscal year endedAugust 31, 2022 was primarily due to (i) payments for debt agreements, (ii) the repurchase of our common stock, (iii) dividend payments, and (iv) treasury stock minimum tax withholding related to vesting of restricted stock. Net cash used in financing activities was partially offset by (i) borrowings under debt agreements and (ii) net proceeds from the exercise of stock options and issuance of common stock under the employee stock purchase plan.
Capital Expenditures
For Fiscal Year 2023, we anticipate our net capital expenditures will be approximately$875 million . In general, our capital expenditures support ongoing maintenance in our DMS and EMS segments and investments in capabilities and targeted end markets. The amount of actual capital expenditures may be affected by general economic, financial, competitive, legislative and regulatory factors, among other things.
Dividends and Share Repurchases
Following is a summary of the dividends and share repurchases for the fiscal years indicated below (in millions):
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Dividends Paid(1) Share Repurchases(2) Total
Fiscal years 2016 - 2020 $ 283 $ 1,468 $ 1,751
Fiscal year 2021 $ 50 $ 428 $ 478
Fiscal year 2022 $ 48 $ 696 $ 744
Total $ 381 $ 2,592 $ 2,973
(1)The difference between dividends declared and dividends paid is due to
dividend equivalents for unvested restricted stock units that are paid at the
time the awards vest.
(2)Excludes commissions.
We currently expect to continue to declare and pay regular quarterly dividends
of an amount similar to our past declarations. However, the declaration and
payment of future dividends are discretionary and will be subject to
determination by our Board of Directors each quarter following its review of our
financial performance and global economic conditions.
In July 2021 , the Board of Directors approved an authorization for the
repurchase of up to $1.0 billion of our common stock (the "2022 Share Repurchase
Program"). As of August 31, 2022 , 12.4 million shares had been repurchased for
$737 million and $263 million remains available under the 2022 Share Repurchase
Program.
In
Contractual Obligations Our contractual obligations as ofAugust 31, 2022 are summarized below. As disclosed below, while we have certain non-cancelable purchase order obligations for property, plant and equipment, we generally do not enter into non-cancelable purchase orders for materials until we receive a corresponding purchase commitment from our customer. Non-cancelable purchase orders do not typically extend beyond the normal lead time of several weeks, at most. Purchase orders beyond this time frame are typically cancellable.
Payments due by period (in millions)
Less than 1 After 5
Total year 1-3 years 3-5 years years
Notes payable and long-term debt $ 2,875 $
300 $ -
535 98 171 154 112
Operating lease obligations(2) 587 130 180 103 174
Finance lease obligations(2)(3) 338 126 109 89 14
Non-cancelable purchase order obligations(4) 759 539 187 33 -
Pension and postretirement contributions and
payments(5) 51 27 4 5 15
Other(6) 51 25 16 10 -
Total contractual obligations(7) $ 5,196 $ 1,245 $ 667 $ 1,384 $ 1,900
(1)Consists of interest on notes payable and long-term debt outstanding as of
August 31, 2022 . Certain of our notes payable and long-term debt pay interest at
variable rates. We have applied estimated interest rates to determine the value
of these expected future interest payments.
(2)Excludes $78 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.
(3)Excludes $194 million of residual value guarantees that could potentially
come due in future periods. The Company does not believe it is probable that any
amounts will be owed under these guarantees. Therefore, no amounts related to
the residual value guarantees are included in the lease payments used to measure
the right-of-use assets and lease liabilities.
(4)Consists of purchase commitments entered into as of August 31, 2022 primarily
for property, plant and equipment and software pursuant to legally enforceable
and binding agreements.
(5)Includes the estimated company contributions to funded pension plans during
fiscal year 2023 and the expected benefit payments for unfunded pension and
postretirement plans from fiscal years 2023 through 2032. These future payments
are not recorded on the Consolidated Balance Sheets but will be recorded as
incurred.
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Table of Contents (6)Includes (i) a$19 million capital commitment, (ii) a$5 million obligation related to a human resource system and (iii)$27 million related to the one-time transition tax as a result of the Tax Cuts and Jobs Act of 2017 that will be paid in annual installments through fiscal year 2026. (7)As ofAugust 31, 2022 , we have$7 million and$158 million recorded as a current and a long-term liability, respectively, for uncertain tax positions. We are not able to reasonably estimate the timing of payments, or the amount by which our liability for these uncertain tax positions will increase or decrease over time, and accordingly, this liability has been excluded from the above table.
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