JABIL : Management's Discussion and Analysis of Financial Condition and Results of Operations (form 10-K)

October 22, 2020 at 04:26 pm EDT

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 includes customers primarily in the automotive
and transportation, capital equipment, cloud, networking and storage, defense
and aerospace, industrial and energy, print and retail, and smart home and
appliances 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 connected devices,
healthcare, mobility and packaging industries.
As of September 1, 2020, certain customers have been realigned within our
operating segments. Our operating segments, which are the reporting segments,
continue to consist of the DMS and EMS segments. Beginning in fiscal year 2021,
customers within the automotive and transportation and smart home and appliances
industries will be presented within the DMS segment.
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. 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.

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See Note 13 - "Concentration of Risk and Segment Data" to the Consolidated
Financial Statements.
COVID-19
The COVID-19 pandemic, which began to impact us in January 2020, has continued
to affect our business and the businesses of our customers and suppliers into
our fiscal fourth quarter. Travel and business operation restrictions arising
from virus containment efforts of governments around the world have continued to
impact our operations in Asia, Europe and the Americas. With the exception of
certain jurisdictions, essential activity exceptions from these restrictions
have allowed us to continue to operate. Nevertheless, virus containment efforts
during the fiscal year ended August 31, 2020, led to a disruption in operations
and certain facility or intermittent business closures in areas such as China,
Malaysia, India, Mexico and California, which resulted in additional direct
costs and a reduction in revenue in certain end markets.
Our first priority has been the health and safety of our employees and so we
have incurred additional costs in order to procure the necessary equipment,
including face masks, thermometers, hand sanitizers and personal protection
equipment, to keep our employees safe. We have implemented risk-mitigation
activities including travel restrictions, social distancing practices,
additional cleaning procedures within our facilities, contact tracing, COVID-19
testing, restricting the number of visitors to our sites and requiring employees
and visitors to have their temperatures taken and wear masks when they are at
our sites. During the fiscal year ended August 31, 2020, we incurred
approximately $141.9 million in direct costs associated with the COVID-19
outbreak, primarily due to incremental and idle labor costs leading to a
reduction in factory utilization as a result of the travel disruptions and
governmental restrictions and the procurement of personal protection equipment
for our employees globally. This increase in costs was partially offset by
governmental subsidies, such as lower payroll taxes or social insurance in
certain countries, related to COVID-19 incentives.
Additionally, certain of the Company's suppliers were similarly impacted by the
COVID-19 pandemic, leading to supply chain constraints, including difficulty
sourcing materials necessary to fulfill customer production requirements and
challenges in transporting completed products to our end customers.
We have implemented efforts across the organization to enhance our financial
position, increase liquidity and reduce costs. During the fiscal year ended
August 31, 2020, we added incremental short-term committed revolving credit
agreements of $625.0 million. We also issued $600.0 million of 10-year Senior
Notes in July 2020, which was used to: (i) pay $400.0 million of Senior Notes
due in December 2020 and (ii) increase our cash on hand.
In addition, we have taken aggressive steps to reduce expenses, including
suspending base salary increases for Fiscal Year 2021. Our Chief Executive
Officer, Chief Financial Officer and other executive vice presidents will reduce
their base salaries by 25% from June 1, 2020 through November 30, 2020 and will
forego any bonus that would otherwise be due to them under Jabil's Fiscal Year
2020 short-term incentive program. Members of Jabil's Board of Directors will
also reduce by 25% their annual cash retainers that would otherwise be payable
during the period from June 1, 2020 through November 30, 2020.
In order to further decrease operating expenses and better align with the needs
of the business, we have reduced our worldwide workforce and implemented
voluntary early retirement programs. In connection with reducing our worldwide
workforce, we incurred $56.6 million of severance and benefit costs during the
fiscal year ended August 31, 2020. Following this reduction in headcount, we
expect annual savings beginning in Fiscal Year 2021 of approximately $40.0
million to $50.0 million. We continue to focus on prioritizing spending related
to future business.
We do not expect any material impairments or adjustments to the fair value of
our assets as a result of the COVID-19 pandemic. In addition, we completed our
annual impairment test for goodwill and indefinite-lived intangible assets
during the fourth quarter of fiscal year 2020 and determined there was no
impairment of our goodwill, intangible assets or long-lived assets.
Our performance is subject to global economic conditions, as well as their
impacts on levels of consumer spending and the production of goods. These
current conditions are significantly impacted by COVID-19, have had a negative
impact on our results of operations during the fiscal year ended August 31, 2020
and will continue to have a negative impact on our operations over the next
fiscal year and likely beyond.
Summary of Results
The following table sets forth, for the periods indicated, certain key operating
results and other financial information (in thousands, except per share data):

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                                              Fiscal Year Ended August 31,
                                          2020            2019            2018
Net revenue                           $ 27,266,438    $ 25,282,320    $ 22,095,416
Gross profit                          $  1,930,813    $  1,913,401    $  1,706,792
Operating income                      $    499,846    $    701,356    $    542,153
Net income attributable to Jabil Inc. $     53,912    $    287,111    $     86,330
Earnings per share - basic            $       0.36    $       1.85    $       0.50
Earnings per share - diluted          $       0.35    $       1.81    $       0.49


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, 2020   May 31, 2020   February 29, 2020   November 30, 2019
Sales cycle(1)                          16 days        27 days             30 days             23 days
Inventory turns (annualized)(2)         6 turns        5 turns             5 turns             6 turns
Days in accounts receivable(3)          35 days        37 days             34 days             43 days
Days in inventory(4)                    56 days        67 days             70 days             57 days
Days in accounts payable(5)             75 days        77 days             74 days             77 days
                                                          Three Months Ended
                                August 31, 2019   May 31, 2019   February 28, 2019   November 30, 2018
Sales cycle(1)                          19 days        27 days             25 days             16 days
Inventory turns (annualized)(2)         6 turns        6 turns             6 turns             6 turns
Days in accounts receivable(3)          38 days        39 days             38 days             38 days
Days in inventory(4)                    58 days        64 days             65 days             60 days
Days in accounts payable(5)             77 days        76 days             78 days             82 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

May 31, 2020 and November 30, 2019, the increase in days in accounts

receivable from the prior sequential quarter was primarily due to an

increase in accounts receivable, primarily driven by higher sales and

timing of collections. During the three months ended February 29, 2020, the

decrease in days in accounts receivable from the prior sequential quarter


      is primarily driven by lower sales and the timing of collections in the
      second quarter.

(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, 2020, May 31, 2020 and August 31, 2019, the decrease in days in

inventory from the prior sequential quarter was primarily due to increased

sales activity during the quarter. During the three months ended February

29, 2020, the increase in days in inventory from the prior sequential

quarter is primarily driven by idle capacity and supply chain constraints,

largely in China due to COVID-19. During the three months ended February

28, 2019, days in inventory increased from the prior sequential quarter to

support anticipated ramps and expected sales levels in the second half of

fiscal year 2019 and due to the acquisition of certain assets of Johnson &


      Johnson Medical Devices Companies ("JJMD") facilities at the end of
      February.


(5)   Days in accounts payable is calculated as accounts payable divided by cost
      of revenue multiplied by 90 days. During the three months ended May 31,

2019, the decrease in days in accounts payable from the prior sequential


      quarter was primarily due to timing of purchases and cash payments for
      purchases during the quarter. During the three months ended February 28,

2019, the decrease in days in accounts payable from the prior sequential


      quarter was primarily due



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to lower materials purchases during the quarter and timing of purchases and cash
payments for purchases during the quarter.
Critical Accounting Policies and Estimates
The preparation of our Consolidated Financial Statements and related disclosures
in conformity with U.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.
Certain contracts with customers include variable consideration, such as
periodic cost of materials adjustments, rebates, discounts, or returns. We
recognize estimates of this variable consideration that are not expected to
result in a significant revenue reversal in the future, primarily based on the
most likely level of consideration to be paid to the customer under the specific
terms of the underlying programs.
Allowance for Doubtful Accounts
We maintain an allowance for doubtful accounts related to receivables not
expected to be collected from our customers. This allowance is based on
management's assessment of specific customer balances after considering the age
of receivables and financial stability of the customer. If there is an adverse
change in the financial condition and circumstances of our customers, or if
actual defaults are higher than provided for, an addition to the allowance may
be necessary.
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 review property, plant and equipment and amortizable intangible assets for
impairment whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable. Recoverability of property,
plant and equipment is measured by comparing its carrying value to the
undiscounted projected cash flows that the asset(s) or asset group(s) are
expected to generate. If the carrying amount of an asset or an asset group is
not recoverable, we recognize an impairment loss based on the excess of the
carrying amount of the long-lived asset or asset group over its respective fair
value, which is generally determined as either the present value of estimated
future cash flows or the appraised value. The impairment analysis is based on
significant assumptions of future results made by management, including revenue
and cash flow projections. Circumstances that may lead to impairment of
property, plant and equipment include unforeseen decreases in future performance
or industry demand and the restructuring of our operations resulting from a
change in our business strategy or adverse economic conditions.
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.

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We perform a goodwill impairment analysis using the two-step method 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. We
determine the fair value of our reporting units based on an average weighting of
both projected discounted future results and the use of comparative market
multiples. If the carrying amount of the reporting unit exceeds its fair value,
goodwill is considered impaired and a second test is performed to measure the
amount of loss, if any.
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.
We determine the fair value of our indefinite-lived intangible assets
principally based on a variation of the income approach, known as the relief
from royalty method. 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 test for goodwill and indefinite-lived
intangible assets during the fourth quarter of fiscal year 2020 and determined
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 test. Significant judgments inherent in this analysis
included assumptions regarding appropriate revenue and operating income growth
rates, discount rates and royalty rates.



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.

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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 ended August 31, 2019 for the results of operations
discussion for the fiscal year ended August 31, 2019 compared to the fiscal year
ended August 31, 2018.
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) 2020 2019 2018 2020 vs. 2019 2019 vs. 2018
Net revenue $ 27,266.4 $ 25,282.3 $ 22,095.4 7.8 % 14.4 %

2020 vs. 2019
Net revenue increased during the fiscal year ended August 31, 2020 compared to
the fiscal year ended August 31, 2019. Specifically, the EMS segment revenues
increased 8% primarily due to (i) a 10% increase in revenues from existing
customers within our cloud business and (ii) a 2% increase in revenues from
existing customers within our capital equipment business. The increase is
partially offset by (i) a 3% decrease from existing customers within our
networking and telecommunications business and (ii) a 1% decrease in revenues
from existing customers within our print and retail business. DMS segment
revenues increased 8% due to an 11% increase in revenues from new and existing
customers in our healthcare business. The increase is partially offset by a 3%
decrease in revenue from customers within our edge devices and accessories
businesses.
During fiscal year 2021, we expect lower revenue than fiscal year 2020 as
approximately $1.0 billion in components that we procure and integrate for our
cloud business will shift from a purchase and resale model to a consignment
service model. As a result of this transition, 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:
Fiscal Year Ended August 31,
2020 2019 2018
EMS 61 % 61 % 56 %
DMS 39 % 39 % 44 %
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,
                          2020          2019         2018

Foreign source revenue 82.6 % 87.7 % 91.7 %

Gross Profit


                            Fiscal Year Ended August 31,

(dollars in millions) 2020 2019 2018 Gross profit

$ 1,930.8     $ 1,913.4     $ 1,706.8
Percent of net revenue       7.1 %         7.6 %         7.7 %


2020 vs. 2019

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Gross profit as a percentage of net revenue decreased for the fiscal year ended
August 31, 2020 compared to the fiscal year ended August 31, 2019, primarily due
to an increase of $108.8 million in incremental and idle labor costs associated
with travel disruptions and governmental restrictions, largely related to the
COVID-19 outbreak. This increase in costs was partially offset by governmental
subsidies, such as lower payroll taxes or social insurance in certain countries,
related to COVID-19 incentives.
Additionally, gross profit as a percent of revenue decreased for the EMS segment
largely due to product mix. The decrease was partially offset by an increase in
the DMS segment due to improved profitability across the various businesses.
Selling, General and Administrative
                                Fiscal Year Ended August 31,

Change


(dollars in millions)        2020            2019           2018         2020 vs. 2019       2019 vs. 2018
Selling, general and
administrative           $   1,174.7     $  1,111.3     $  1,050.7     $          63.4     $          60.6


2020 vs. 2019
Selling, general and administrative expenses increased during the fiscal year
ended August 31, 2020 compared to the fiscal year ended August 31, 2019. The
increase is predominantly due to (i) $33.1 million in costs related to the
COVID-19 outbreak, including personal protection equipment for our employees
globally, (ii) a $41.6 million increase in salary and salary related expenses
and other costs primarily due to our strategic collaboration with a healthcare
company and (iii) a $21.7 million increase in stock-based compensation expense
due to a higher stock price for awards granted during fiscal year 2020. The
increase is partially offset by (i) a $20.5 million decrease in acquisition and
integration charges related to our strategic collaboration with a healthcare
company and (ii) a $12.5 million decrease due to lower salary and salary related
expense across the Company and lower travel expenses related to the pandemic.
Research and Development
                              Fiscal Year Ended August 31,
(dollars in millions)        2020           2019         2018
Research and development $    44.1       $    42.9     $ 38.5
Percent of net revenue         0.2 %           0.2 %      0.2 %


2020 vs. 2019
Research and development expenses remained consistent as a percent of net
revenue during the fiscal year ended August 31, 2020 compared to the fiscal year
ended August 31, 2019.
Amortization of Intangibles
                                   Fiscal Year Ended August 31,                          Change
(dollars in millions)           2020            2019           2018

2020 vs. 2019 2019 vs. 2018 Amortization of intangibles $ 55.5 $ 31.9 $ 38.5 $ 23.6 $ (6.6 )




2020 vs. 2019
Amortization of intangibles increased during the fiscal year ended August 31,
2020 compared to the fiscal year ended August 31, 2019 primarily driven by
amortization related to the Nypro trade name, which was reclassified to a
definite-lived intangible asset during fiscal year 2019 as a result of our
decision that the indefinite-lived trade name of $72.5 million acquired during
the acquisition of Nypro would be phased out by 2023. As such, this trade name
was assigned a four-year estimated useful life and is being amortized on an
accelerated basis.
Restructuring, Severance and Related Charges
Following is a summary of our restructuring, severance and related charges:

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                                                         Fiscal Year Ended August 31,
 (dollars in millions)                            2020(2)          2019(3)          2018(3)
Employee severance and benefit costs           $       94.0     $       16.0     $       16.3
Lease costs                                             7.7                -              1.6
Asset write-off costs                                  32.9             (3.6 )           16.2
Other costs                                            22.0             13.5              2.8
Total restructuring, severance and related
charges(1)                                     $      156.6     $       25.9     $       36.9

(1) Includes $61.9 million, $21.5 million and $16.3 million recorded in the EMS

segment, $75.6 million, $2.6 million and $16.6 million recorded in the DMS

segment and $19.1 million, $1.8 million and $4.0 million of non-allocated


      charges for the fiscal years ended August 31, 2020, 2019 and 2018,
      respectively. Except for asset write-off costs, all restructuring,
      severance and related charges are cash settled.


(2)   As the Company continues to optimize its cost structure and improve

operational efficiencies, $56.6 million of employee severance and benefit


      costs was incurred in connection with a reduction in the worldwide
      workforce during the fiscal year ended August 31, 2020. The remaining
      amount primarily relates to the 2020 Restructuring Plan.

(3) Primarily relates to the 2017 Restructuring Plan, which was complete as of

August 31, 2019.

2020 Restructuring Plan
On September 20, 2019, our Board of Directors formally approved a restructuring
plan to realign our global capacity support infrastructure, particularly in our
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 our intention only
and restructuring decisions, and the timing of such decisions, at certain
locations are still subject to consultation with our employees and their
representatives.

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 2020 Restructuring Plan, once complete, is expected to yield annualized cost
savings beginning in fiscal year 2021 of approximately $40.0 million. During
fiscal year 2020, we realized cost savings of approximately $25.0 million.
See Note 14 - "Restructuring, Severance and Related Charges" to the Consolidated
Financial Statements for further discussion of restructuring, severance and
related charges for the 2020 Restructuring Plans.

Loss on Securities
Fiscal Year Ended August 31, Change
(dollars in millions) 2020 2019 2018


2020 vs. 2019       2019 vs. 2018
Loss on securities     $      48.6     $     29.6     $         -      $          19.0     $          29.6


2020 vs. 2019
The increase in loss on securities during the fiscal year ended August 31, 2020
compared to the fiscal year ended August 31, 2019, is due to: (i) an impairment
charge of $36.4 million during the fiscal year ended August 31, 2020, related to
our investment in the Senior Non-Convertible Preferred Stock of iQor Holdings,
Inc. ("iQor") as a result of iQor's bankruptcy filing; (ii) an impairment charge
of $12.2 million during the fiscal year ended August 31, 2020, in connection
with the sale of an investment in the optical networking segment; partially
offset by (iii) a $29.6 million due to the restructuring of securities during
the fiscal year ended August 31, 2019 due to the exchange of preferred stock of
iQor in association with iQor's previously announced sale of its international
logistics and product service assets.
Other Expense
                        Fiscal Year Ended August 31,                               Change
(dollars in
millions)         2020              2019              2018           2020 vs. 2019       2019 vs. 2018
Other
expense     $         31.2     $        53.8     $        37.6      $        (22.6 )   $          16.2



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2020 vs. 2019
Other expense decreased during the fiscal year ended August 31, 2020 compared to
the fiscal year ended August 31, 2019, primarily due to: (i) an $18.2 million
decrease in fees associated with the utilization of trade accounts receivable
sales programs during fiscal year 2020 and fees incurred for the amended and new
asset-backed securitization programs in fiscal year 2019 and (ii) a $14.6
million decrease driven primarily by the expected return on plan assets and
actuarial gain related to the Company's pension plans. The decrease was
partially offset by $7.3 million of costs incurred during the fiscal year ended
August 31, 2020 as a result of the early redemption of the 5.250% Senior Notes
due 2020.
Interest Income
Fiscal Year Ended August 31, Change
(dollars in
millions) 2020 2019 2018 2020 vs. 2019 2019 vs. 2018
Interest
income $ 14.6 $ 21.5 $ 17.8 $ (6.9 ) $ 3.7

2020 vs. 2019
Interest income decreased during the fiscal year ended August 31, 2020 compared
to the fiscal year ended August 31, 2019, due to lower interest rates, partially
offset by increased interest income on cash equivalents (investments that are
readily convertible to cash with maturity dates of 90 days or less).
Interest Expense
Fiscal Year Ended August 31, Change
(dollars in
millions) 2020 2019 2018 2020 vs. 2019 2019 vs. 2018
Interest
expense $ 173.9 $ 188.7 $ 149.0 $ (14.8 ) $ 39.7

2020 vs. 2019
Interest expense decreased during the fiscal year ended August 31, 2020,
compared to the fiscal year ended August 31, 2019, due to lower interest rates,
partially offset by additional borrowings on our credit facilities, commercial
paper program and senior debt issuances.
Income Tax Expense
Fiscal Year Ended August 31,

Change


                              2020            2019           2018         2020 vs. 2019     2019 vs. 2018
Effective income tax rate      78.2 %          35.8 %          76.6 %

42.4 % (40.8 )%




2020 vs. 2019
The effective income tax rate increased for the fiscal year ended August 31,
2020, compared to the fiscal year ended August 31, 2019, primarily due to: (i)
lower income before income tax for the fiscal year ended August 31, 2020, driven
in part by increased restructuring charges with minimal related tax benefit;
(ii) a $21.2 million income tax expense associated with the re-measurement of
deferred tax assets related to the extension of a non-U.S. tax incentive
recorded during the fiscal year ended August 31, 2020; and (iii) a $19.1 million
income tax benefit related to the Tax Cuts and Jobs Act of 2017 (the "Tax Act")
adjustments for the fiscal year ended August 31, 2019.
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
with U.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

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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 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 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 plus cash receipts on sold receivables 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 U.S. GAAP financial measures as
provided in our Consolidated Financial Statements:

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Reconciliation of U.S. GAAP Financial Results to Non-GAAP Measures


                                                       Fiscal Year Ended August 31,
(in thousands, except for per share data)           2020           2019

2018


Operating income (U.S. GAAP)                    $  499,846     $  701,356     $  542,153
Amortization of intangibles                         55,544         31,923

38,490


Stock-based compensation expense and related
charges                                             83,084         61,346

98,511

Restructuring, severance and related charges(1) 156,586 25,914


      36,902
Distressed customer charge(2)                       14,963          6,235         32,710
Net periodic benefit cost(3)                        16,078              -              -
Business interruption and impairment charges,
net(4)                                               5,785         (2,860 )

11,299


Acquisition and integration charges(5)              32,167         52,697

8,082


Adjustments to operating income                    364,207        175,255

225,994


Core operating income (Non-GAAP)                $  864,053     $  876,611     $  768,147
Net income attributable to Jabil Inc. (U.S.
GAAP)                                           $   53,912     $  287,111     $   86,330
Adjustments to operating income                    364,207        175,255        225,994
Loss on securities(6)                               48,625         29,632              -
Net periodic benefit cost(3)                       (16,078 )            -              -
Adjustment for taxes(7)                             (1,093 )      (18,633 )      146,206
Core earnings (Non-GAAP)                        $  449,573     $  473,365     $  458,530
Diluted earnings per share (U.S. GAAP)          $     0.35     $     1.81     $     0.49
Diluted core earnings per share (Non-GAAP)      $     2.90     $     2.98     $     2.62
Diluted weighted average shares outstanding
(U.S. GAAP and Non-GAAP)                           155,274        158,647        175,044





(1)   As the Company continues to optimize its cost structure and improve

operational efficiencies, $56.6 million of employee severance and benefit

costs was incurred in connection with a reduction in the worldwide

workforce during fiscal year 2020. The remaining amount primarily relates

to the 2020 Restructuring Plan.

(2) Relates to accounts receivable and inventory charges for certain distressed

customers in the: (i) renewable energy sector during fiscal year 2020 and

(ii) networking and consumer wearables sectors during fiscal years 2019 and

2018.

(3) Following the adoption of Accounting Standards Update 2017-07, Compensation

- Retirement Benefits (Topic 715) ("ASU 2017-07"), pension service cost is

recognized in cost of revenue and all other components of net periodic

benefit cost, including return on plan assets, are presented in other

expense. We are reclassifying the pension components in other expense to

core operating income as we assess operating performance, inclusive of all

components of net periodic benefit cost, with the related revenue. There is

no impact to core earnings or diluted core earnings per share for this

adjustment.

(4) Charges for the fiscal year ended August 31, 2020, relate to a flood that

impacted our facility in Huangpu, China. Charges, net of insurance proceeds

of $2.9 million and $24.9 million, for the fiscal years ended August 31,

2019 and 2018, respectively, relate to costs associated with damage from


      Hurricane Maria, which impacted our operations in Cayey, Puerto Rico.

(5) Charges related to our strategic collaboration with Johnson & Johnson

Medical Devices Companies ("JJMD").

(6) Relates to: (i) an impairment of an investment with iQor and the sale of an

investment in the optical networking segment during fiscal year 2020 and

(ii) a restructuring of securities loss on the exchange of an investment


      with iQor during fiscal year 2019.


(7)   The fiscal year ended August 31, 2019 includes a $13.3 million income tax

benefit for the effects of the Tax Act recorded during the three months

ended November 30, 2018. The fiscal year ended August 31, 2018 includes a

$142.3 million provisional estimate to account for the effects of the Tax
      Act.


Adjusted Free Cash Flow
                                                         Fiscal Year Ended August 31,
 (in thousands)                                     2020          2019 (1)           2018
Net cash provided by (used in) operating
activities (U.S. GAAP)                          $ 1,257,275     $ 1,193,066     $ (1,105,448 )
Cash receipts on sold receivables                         -          96,846

2,039,298


Acquisition of property, plant and equipment       (983,035 )    (1,005,480 )     (1,036,651 )
Proceeds and advances from sale of property,
plant and equipment                                 186,655         218,708

350,291


Adjusted free cash flow (Non-GAAP)              $   460,895     $   503,140     $    247,490

(1) In fiscal year 2019, the adoption of Accounting Standards Update ("ASU")

2016-15, "Classification of Certain Cash Receipts and Cash Payments"

resulted in a reclassification of cash flows from operating activities to

investing activities for cash receipts for the deferred purchase price


       receivable on asset-backed securitization transactions. The adoption of
       this standard does not reflect a change in the underlying business or

activities. The effects of this change are applied retrospectively to all

prior periods.




Quarterly Results (Unaudited)
The following table sets forth certain unaudited quarterly financial information
for the 2020 and 2019 fiscal years. 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.

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Fiscal Year 2020                                             Three Months Ended
(in thousands, except for per                                                                  November 30,
share data)                        August 31, 2020      May 31, 2020     February 29, 2020         2019
Net revenue                      $       7,300,015     $  6,335,642     $       6,125,083     $  7,505,698
Gross profit(1)                            490,701          456,148               430,125          553,839
Operating income(1)(2)(3)(4)               197,053           59,384                90,630          152,779
Net income (loss)(1)(2)(3)(4)(5)            68,909          (50,263 )              (2,581 )         40,714
Net income (loss) attributable
to Jabil Inc.(1)(2)(3)(4)(5)     $          67,731     $    (50,958 )   $          (3,283 )   $     40,422
Earnings (loss) per share
attributable to the stockholders
of Jabil Inc.
Basic                            $            0.45     $      (0.34 )   $           (0.02 )   $       0.26
Diluted                          $            0.44     $      (0.34 )   $           (0.02 )   $       0.26


Fiscal Year 2019                                            Three Months Ended
(in thousands, except for per                                              February 28,     November 30,
share data)                        August 31, 2019       May 31, 2019          2019             2018
Net revenue                      $       6,573,453     $    6,135,602     $  6,066,990     $   6,506,275
Gross profit(1)                            495,078            443,799          454,874           519,650
Operating income(1)(4)                     189,745            140,918          153,983           216,710
Net income(1)(4)(5)(6)                      53,761             44,032           67,607           124,074
Net income attributable to Jabil
Inc.(1)(4)(5)(6)                 $          52,675     $       43,482     $     67,354     $     123,600
Earnings per share attributable
to the stockholders of Jabil
Inc.
Basic                            $            0.34     $         0.28     $       0.44     $        0.77
Diluted                          $            0.34     $         0.28     $       0.43     $        0.76

(1) Includes a distressed customer charge of $15.0 million and $6.2 million


      during the three months ended November 30, 2019 and August 31, 2019,
      respectively.

(2) Includes direct costs related to the COVID-19 pandemic of $21.5 million,

$67.4 million and $53.0 million for the three months ended August 31, 2020,

May 31, 2020, and February 29, 2020, respectively.

(3) Includes employee severance and benefit costs incurred in connection with a

reduction in the worldwide workforce of $4.3 million and $52.3 million for

the three months ended August 31, 2020 and May 31, 2020, respectively.

(4)Includes acquisition and integration charges related to our strategic collaboration with JJMD as follows (in millions):


                                                               Three Months

Ended


                               August 31, 2020       May 31, 2020       February 29, 2020       November 30, 2019
Acquisition and integration
charges                       $            2.2     $          6.1     $               7.8     $              16.1
                                                               Three Months Ended
                               August 31, 2019       May 31, 2019       February 28, 2019       November 30, 2018


Acquisition and integration
charges                       $           17.6     $         13.4     $              12.8     $               8.9

(5) Relates to: (i) an impairment of an investment with iQor during the three

months ended August 31, 2020 and the sale of an investment in the optical

networking segment during the three months ended February 29, 2020 and (ii)

a restructuring of securities loss on the exchange of an investment with

iQor during the three months ended August 31, 2019.

(6) Includes $13.3 million of income tax benefit for the three months ended

November 30, 2018 related to the Tax Act.




Acquisitions and Expansion
During fiscal year 2018, the Company and JJMD entered into a Framework Agreement
to form a strategic collaboration and expand our existing relationship. The
strategic collaboration expands our medical device manufacturing portfolio,
diversification and capabilities.
On February 25, 2019 and April 29, 2019, under the terms of the Framework
Agreement, we completed the initial and second closings, respectively, of our
acquisition of certain assets of JJMD. The aggregate purchase price paid for
both the initial and second closings was approximately $167.4 million in cash.
For the initial and second closings, total assets acquired of $173.5 million and
total liabilities assumed of $6.1 million were recorded at their estimated fair
values as of the acquisition dates.

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On September 30, 2019, under the terms of the Framework Agreement, the Company
completed the third closing of its acquisition of certain assets of JJMD. The
aggregate purchase price paid for the third closing was approximately $113.1
million in cash. For the third closing, total assets acquired of $196.2 million,
including $80.7 million in contract assets, $34.0 million in inventory and $56.0
million in goodwill, and total liabilities assumed of $83.1 million, including
$73.5 million of pension obligations, were recorded at their estimated fair
values as of the acquisition date. There were no intangible assets identified in
this acquisition and the goodwill is primarily attributable to the assembled
workforce. The majority of the goodwill is currently not expected to be
deductible for income tax purposes.
The acquisitions of the JJMD assets have been accounted for as separate business
combinations for each closing using the acquisition method of accounting. The
results of operations were included in the Company's consolidated financial
results beginning on February 25, 2019 for the initial closing, April 29, 2019
for the second closing and September 30, 2019 for the third closing. The Company
believes it is impracticable to provide pro forma information for the
acquisitions of the JJMD assets.
Refer to Note 16 - "Business Acquisitions" to the Consolidated Financial
Statements for further discussion.

Liquidity and Capital Resources
We believe that our level of liquidity sources, which includes available
borrowings under our revolving credit facilities and commercial paper program,
additional proceeds available under our asset-backed securitization programs and
under our uncommitted trade accounts receivable sale programs, cash on hand,
funds provided by operations and the 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 and our working capital requirements for the next 12 months. We
continue to assess our capital structure and evaluate the merits of redeploying
available cash.
Certain of our trade accounts receivable sale programs expire or are subject to
termination provisions within the 2020 calendar year. While we expect to renew
such trade accounts receivable sale programs, market conditions, including the
implications of the COVID-19 pandemic, at the time our current programs expire
may create challenges in doing so, such as incurring a higher cost of capital.
Cash and Cash Equivalents
As of August 31, 2020, we had approximately $1.4 billion in cash and cash
equivalents. As our growth remains predominantly outside of the United States, a
significant portion of such cash and cash equivalents are held by our foreign
subsidiaries. Most of our cash and cash equivalents as of August 31, 2020 could
be repatriated to the United States without potential tax expense.
Notes Payable and Credit Facilities
Following is a summary of principal debt payments and debt issuance for our
notes payable and credit facilities:

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                                                                                                                                        Borrowings                                                                 Total notes
                                                                                                                                          under                                                                      payable
                5.625%             4.700%              4.900%              3.950%              3.600%             3.000%                revolving                     Borrowings                Borrowings             and
(in             Senior             Senior              Senior              Senior              Senior             Senior                  credit                         under                     under             credit
thousands)      Notes               Notes               Notes               Notes             Notes(1)           Notes(2)          facilities(3)(4)(5)        commercial paper program(5)        loans(3)          facilities
Balance as
of
August 31,
2018       $      397,995     $       497,350     $       298,814     $       494,208     $            -     $            -     $                -           $                 -             $       830,332     $   2,518,699
Borrowings              -                   -                   -                   -                  -                  -             11,985,978                             -                           -        11,985,978
Payments                -                   -                   -                   -                  -                  -            (11,985,259 )                           -                     (25,134 )     (12,010,393 )
Other                 891                 654                 243                 617                  -                  -                   (719 )                           -                         495             2,181
Balance as
of
August 31,
2019              398,886             498,004             299,057             494,825                  -                  -                      -                             -                     805,693         2,496,465
Borrowings              -                   -                   -                   -            499,165            595,668             11,094,561                       237,661                     350,000        12,777,055
Payments         (399,555 )                 -                   -                   -                  -                  -            (11,094,561 )                    (237,661 )                  (806,437 )     (12,538,214 )
Other                 669                 655                 243                 615             (4,409 )           (5,506 )                    -                             -                         909            (6,824 )
Balance as
of
August 31,
2020       $            -     $       498,659     $       299,300     $       495,440     $      494,756     $      590,162     $                -           $                 -             $       350,165     $   2,728,482
Maturity                                                                                                                        Apr 23, 2021, Jan 22, 2023
Date       Dec 15, 2020       Sep 15, 2022        Jul 14, 2023        Jan 12, 2028        Jan 15, 2030       Jan 15, 2031       and Jan 22, 2025(3)(4)(5)                (5)                 Jan 22, 2025(3)
Original
Facility/
Maximum                                                                                                                                    $3.7                                                   $351.9

Capacity $400.0 million $500.0 million $300.0 million $500.0 million $500.0 million $600.0 million billion(3)(4)(5)

                    (5)                    million(3)

(1) On January 15, 2020, we issued $500.0 million of publicly registered 3.600%


      Senior Notes due 2030 (the "3.600% Senior Notes"). The net proceeds from
      the offering were used for the repayment of term loan indebtedness.

(2) On July 13, 2020, the Company issued $600.0 million of publicly registered

3.000% Senior Notes due 2031 (the "3.000% Senior Notes"). The net proceeds

from the offering were used for general corporate purposes, including to

redeem the $400.0 million aggregate principal amount of our 5.625% Senior

Notes due 2020 and pay the applicable "make-whole" premium.

(3) On January 22, 2020, we entered into a senior unsecured credit agreement

which provides for: (i) a Revolving Credit Facility in the initial amount


      of $2.7 billion, of which $700.0 million expires on January 22, 2023 and
      $2.0 billion expires on January 22, 2025 and (ii) a $300.0 million Term

Loan Facility which expires on January 22, 2025, (collectively the "Credit

Facility"). Interest and fees on the Credit Facility advances are based on

our non-credit enhanced long-term senior unsecured debt rating as

determined by Standard & Poor's Ratings Service, Moody's Investors Service

and Fitch Ratings. In connection with our entry into the Credit Facility,

we terminated our amended and restated five-year credit agreement dated

November 8, 2017 and the credit agreement dated August 24, 2018.




During the fiscal year ended August 31, 2020, the interest rates on the
Revolving Credit Facility ranged from 1.2% to 4.3% and the Term Loan Facility
ranged from 1.6% to 2.9%. Interest is charged at a rate equal to (a) for the
Revolving Credit Facility, either 0.000% to 0.450% above the base rate or 0.975%
to 1.450% above the Eurocurrency rate and (b) for the Term Loan Facility, either
0.125% to 0.750% above the base rate or 1.125% to 1.750% above the Eurocurrency
rate. The base rate represents the greatest of: (i) Citibank, N.A.'s prime rate,
(ii) 0.50% above the federal funds rate, and (iii) 1.0% above one-month LIBOR,
but not less than zero. The Eurocurrency rate represents adjusted LIBOR or
adjusted CDOR, as applicable, for the applicable interest period, but not less
than zero. Fees include a facility fee based on the revolving credit commitments
of the lenders and a letter of credit fee based on the amount of outstanding
letters of credit.
Additionally, our foreign subsidiaries have various additional credit facilities
that finance their future growth and any corresponding working capital needs.
(4)   On April 24, 2020, we entered into an unsecured 364-day revolving credit

agreement up to an initial aggregate amount of $375.0 million, which was

increased to $425.0 million on May 29, 2020 (the "364-Day Revolving Credit


      Agreement"). The 364-Day Revolving Credit Agreement expires on April 23,
      2021. Interest and fees on the 364-Day



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Revolving Credit Agreement advances are based on our non-credit enhanced long-term senior unsecured debt rating as determined by Standard & Poor's Ratings Service, Moody's Investors Service and Fitch Ratings.



As of August 31, 2020, no draws were made on the 364-Day Revolving Credit
Agreement. Interest is charged at a rate equal to either (i) 0.450%, 0.525% or
0.800% above the base rate or (ii) 1.450%, 1.525% or 1.800% above the Eurodollar
rate. The base rate represents the greatest of: (i) Mizuho's base rate,
(ii) 0.50% above the federal funds rate, and (iii) 1.0% above one-month LIBOR,
subject to a floor of 0.75%. The Eurodollar rate represents adjusted LIBOR for
the applicable interest period, subject to a floor of 0.75%. Fees include a
facility fee based on the revolving credit commitments of the lenders.
(5)   As of August 31, 2020, we had $3.7 billion in available unused borrowing

capacity under our revolving credit facilities. The Revolving Credit

Facility under the Credit Facility acts as the back-up facility for

commercial paper outstanding, if any. We have a borrowing capacity of up to

$1.8 billion under our commercial paper program.




In the ordinary course of business, we have letters of credit and surety bonds
with banks and insurance companies outstanding of $120.3 million as of
August 31, 2020. Unused letters of credit were $94.0 million as of August 31,
2020. 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 the SEC 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 of August 31, 2020 and 2019, 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
We continuously sell designated pools of trade accounts receivable, at a
discount, under our foreign asset-backed securitization program and our 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 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 August 31, 2020.
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 August 31,
2020.
Following is a summary of our asset-backed securitization programs and key
terms:
                         Maximum Amount of               Expiration
                Net Cash Proceeds (in millions)(1)          Date


North American $                              390.0  November 22, 2021
Foreign        $                              400.0  September 30, 2021





(1)  Maximum amount available at any one time.


In connection with our asset-backed securitization programs, during the fiscal
year ended August 31, 2020, we sold $4.3 billion of trade accounts receivable
and we received cash proceeds of $4.3 billion. As of August 31, 2020, we had up
to $49.0 million in available liquidity under our asset-backed securitization
programs.
Our asset-backed securitization programs contain various financial and
nonfinancial covenants. As of August 31, 2020 and 2019, we were in compliance
with all covenants under our asset-backed securitization programs. Refer to Note
8 - "Asset-Backed Securitization Programs" to the Consolidated Financial
Statements for further details on the programs.
Trade Accounts Receivable Sale Programs

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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:
              Maximum
              Amount                Type of        Expiration
Program  (in millions)(1)          Facility           Date
A       $            600.0        Uncommitted   December 5, 2020  (2)
B       $            150.0        Uncommitted   November 30, 2020 (3)
C                    400.0  CNY   Uncommitted     August 31, 2023
D       $            150.0        Uncommitted   May 4, 2023       (4)
E       $            150.0        Uncommitted    January 25, 2021 (5)
F       $             50.0        Uncommitted   February 23, 2023 (6)
G       $            100.0        Uncommitted   August 10, 2021   (7)
H       $            100.0        Uncommitted   July 21, 2021     (8)
I       $            650.0        Uncommitted   December 4, 2020  (9)
J       $            135.0        Uncommitted   April 11, 2021    (10)
K                    100.0  CHF   Uncommitted   December 5, 2020  (2)





(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