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. Our services enable our customers to reduce manufacturing costs, improve supply-chain management, reduce inventory obsolescence, lower transportation costs and reduce product fulfillment time. Our manufacturing and supply chain management services and solutions include innovation, design, planning, fabrication and assembly, delivery and managing the flow of resources and products. 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 serve our customers primarily through dedicated business units that combine highly automated, continuous flow manufacturing with advanced electronic design and design for manufacturability. We depend, and expect to continue to depend, upon a relatively small number of customers for a significant percentage of our net revenue, which in turn depends upon their growth, viability and financial stability. We conduct our operations in facilities that are located worldwide, including but not limited to,China ,Malaysia ,Mexico ,Singapore ,the United States andVietnam . We derived a substantial majority, 84.7% and 84.1%, of net revenue from our international operations for the three months and six months endedFebruary 28, 2021 , respectively. Our global manufacturing production sites allow customers to manufacture products simultaneously in the optimal locations for their products. Our global presence is key to assessing and executing on our business opportunities. 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 includes customers primarily in the automotive and transportation, connected devices, healthcare and packaging, and mobility industries. As ofSeptember 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. Customers within the automotive and transportation and smart home and appliances industries are now presented within the DMS segment. Prior period disclosures are restated to reflect the realignment. 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 respond appropriately as circumstances change.
COVID-19
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 thousands, except per share data): 21
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Three months ended Six months ended
February 28, February 29,
2021 2020 February 28, 2021 February 29, 2020
Net revenue $ 6,828,546 $ 6,125,083 $ 14,661,075 $ 13,630,781
Gross profit $ 569,925 $ 430,125 $ 1,204,485 $ 983,964
Operating income $ 236,350 $
90,630 $ 550,300 $ 243,409
Net income (loss) attributable to
37,139
Earnings (loss) per share-basic $ 1.01 $ (0.02) $ 2.34 $ 0.24
Earnings (loss) per share-diluted $ 0.99 $ (0.02) $ 2.30 $ 0.24
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
February 28,
2021
25 days 16 days 30 days
Inventory turns (annualized)(2) 6 turns 7 turns 5 turns
Days in accounts receivable(3) 40 days 42 days 34 days
Days in inventory(4) 65 days 55 days 70 days
Days in accounts payable(5) 81 days 80 days 74 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 was 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
February 28, 2021 , the increase in days in accounts receivable from the three
months ended February 29, 2020 was primarily due to an increase in accounts
receivable, primarily driven by higher sales and 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 February
28, 2021 , the increase in days in inventory from the prior sequential quarter
was to support expected sales levels in the third quarter of fiscal year 2021.
During the three months ended February 28, 2021 , the decrease in days in
inventory from the three months ended February 29, 2020 was primarily due to
idle capacity and supply chain constraints, largely in China due to COVID-19
during the three months ended February 29, 2020 .
(5)Days in accounts payable is calculated as accounts payable divided by cost of
revenue multiplied by 90 days. During the three months ended February 28, 2021 ,
the increase in days in accounts payable from the three months ended February
29, 2020 was primarily due to an increase for material purchases and the timing
of payments.
Critical Accounting Policies and Estimates
The preparation of our Condensed 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. 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 and "Management's Discussion
and Analysis of Financial Condition and Results of
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Operations - Critical Accounting Policies and Estimates" in our Annual Report on
Form 10-K for the fiscal year ended August 31, 2020 .
Recent Accounting Pronouncements
See Note 18 - "New Accounting Guidance" to the Condensed Consolidated Financial
Statements for a discussion of recent accounting guidance.
Results of Operations
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.
Three months ended Six months ended
February 28, February 29, February 28, February 29,
(dollars in millions) 2021 2020 Change 2021 2020 Change
Net revenue $ 6,828.5 $ 6,125.1 11.5 % $ 14,661.1 $ 13,630.8 7.6 %
Net revenue increased during the three months ended February 28, 2021 , compared
to the three months ended February 29, 2020 . Specifically, the DMS segment net
revenue increased 26% due to: (i) a 17% increase in revenues from existing
customers within our mobility business as our ability to meet customer demand
during the three months ended February 29, 2020 , was greatly diminished due to
COVID-19 containment efforts in China , (ii) a 6% increase in revenues from
existing customers within our connected devices business and (iii) a 3% increase
in revenues from existing customers in our automotive and transportation
business. The EMS segment net revenue decreased 1% primarily due to a decrease
in revenues from existing customers within our cloud business, which began
transitioning to a consignment model in fiscal year 2021.
Net revenue increased during the six months ended February 29, 2021 , compared to
the six months ended February 29, 2020 . Specifically, the DMS segment net
revenue increased 19% due to: (i) a 12% increase in revenues from existing
customers within our mobility business as our ability to meet customer demand
during the six months ended February 29, 2020 , was greatly diminished due to
COVID-19 containment efforts in China , (ii) a 5% increase in revenues from
existing customers within our connected devices business and (iii) a 2% increase
in revenues from existing customers in our automotive and transportation
business. The EMS segment net revenue decreased 3% primarily due to a decrease
in revenues from existing customers within our cloud business, which began
transitioning to a consignment model in fiscal year 2021.
The following table sets forth, for the periods indicated, revenue by segment
expressed as a percentage of net revenue:
Three months ended Six months ended
February 28, 2021 February 29, 2020 February 28, 2021 February 29, 2020
EMS 47 % 53 % 46 % 51 %
DMS 53 % 47 % 54 % 49 %
Total 100 % 100 % 100 % 100 %
The following table sets forth, for the periods indicated, foreign source revenue expressed as a percentage of net revenue:
Three months ended Six months ended
February 28, 2021 February 29, 2020 February 28, 2021 February 29, 2020
Foreign source revenue 84.7 % 82.6 % 84.1 % 82.2 %
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Gross Profit
Three months ended Six months ended
(dollars in millions) February 28, 2021 February 29, 2020 February 28, 2021 February 29, 2020
Gross profit $ 569.9 $ 430.1 $ 1,204.5 $ 984.0
Percent of net revenue 8.3 % 7.0 % 8.2 % 7.2 %
For the three months and six months ended February 28, 2021 , gross profit as a
percentage of net revenue increased as compared to the three months and six
months ended February 29, 2020 , primarily due to: (i) product mix and improved
profitability across the various businesses and (ii) a decrease in incremental
and idle labor costs associated with travel disruptions and governmental
restrictions, largely related to the COVID-19 pandemic.
Selling, General and Administrative
Three months ended Six months ended
February 29, February 28, February 29,
(dollars in millions) February 28, 2021 2020 Change 2021 2020 Change
Selling, general and
administrative $ 305.9 $ 285.0 $ 20.9 $ 608.7 $ 613.9 $ (5.2)
Selling, general and administrative expenses increased during the three months
ended February 28, 2021 , compared to the three months ended February 29, 2020 .
The increase is primarily due to: (i) a $16.6 million increase due to higher
salary and salary related expenses, partially offset by a decrease in travel
expenses due to reduced travel as result of the COVID-19 pandemic and (ii) an
$8.7 million increase in stock-based compensation expense due to a higher stock
price for awards granted during fiscal year 2021 and anticipated achievement
levels for certain performance-based stock awards. The increase is partially
offset by a $6.5 million decrease in acquisition and integration charges related
to our strategic collaboration with a healthcare company.
Selling, general and administrative expenses decreased during the six months
ended February 28, 2021 , compared to the six months ended February 29, 2020 . The
decrease is primarily due to: (i) a $20.5 million decrease in acquisition and
integration charges related to our strategic collaboration with a healthcare
company (ii) a $7.8 million decrease due to lower travel expenses related to a
reduction in travel due to the COVID-19 pandemic, partially offset by higher
salary and salary related expenses. The decrease is partially offset by (i) a
$12.0 million increase in stock-based compensation expense due to a higher stock
price for awards granted during fiscal year 2021 and anticipated achievement
levels for certain performance-based stock awards and (ii) an $11.1 million
increase in costs related to the COVID-19 pandemic for personal protection
equipment for our employees globally.
Research and Development
Three months ended Six months ended
(dollars in millions) February 28, 2021 February 29, 2020 February 28, 2021 February 29, 2020
Research and development $ 9.4 $ 11.3 $ 17.5 $ 22.1
Percent of net revenue 0.1 % 0.2 % 0.1 % 0.2 %
Research and development expenses remained relatively consistent as a percentage
of net revenue during the three months and six months ended February 28, 2021 ,
compared to the three months and six months ended February 29, 2020 .
Amortization of Intangibles
Three months ended Six months ended
February 29, February 29,
(dollars in millions) February 28, 2021 2020 Change February 28, 2021 2020 Change
Amortization of intangibles $ 11.6 $ 13.6 $ (2.0) $ 23.1 $ 29.7 $ (6.6)
Amortization of intangibles decreased during the three months and six months
ended February 28, 2021 , compared to the three months and six months ended
February 29, 2020 , primarily due to certain intangible assets that were fully
amortized during fiscal year 2020.
Restructuring, Severance and Related Charges
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Following is a summary of the Company's restructuring, severance and related
charges (in millions):
Three months ended Six months ended
February 28, February 29, February 28, February 29,
2021 2020 2021 2020
Employee severance and benefit costs
8.0$ 2.7 $ 26.8 Lease costs - 6.2 (2.9) 6.5 Asset write-off costs 4.6 9.1 4.6 25.4 Other costs (0.1) 6.3 0.5 16.2 Total restructuring, severance and related charges(1)$ 6.6 $ 29.6 $ 4.9 $ 74.9 (1)Primarily relates to the 2020 Restructuring Plan, and includes$2.5 million and$14.7 million recorded in the EMS segment,$4.0 million and$14.5 million recorded in the DMS segment and$0.1 million and$0.4 million of non-allocated charges for the three months endedFebruary 28, 2021 andFebruary 29, 2020 , respectively. Includes$(0.5) million and$32.1 million recorded in the EMS segment,$5.0 million and$39.7 million recorded in the DMS segment and$0.4 million and$3.1 million of non-allocated charges for the six months endedFebruary 28, 2021 andFebruary 29, 2020 , respectively. Except for asset write-off costs, all restructuring, severance and related charges are cash costs. See Note 12 - "Restructuring, Severance and Related Charges" to the Condensed Consolidated Financial Statements for further discussion of restructuring, severance and related charges for the 2020 Restructuring Plan. Impairment on Securities Three months ended Six months ended February 28, February 29, February 28, February 29, (dollars in millions) 2021 2020 Change 2021 2020 Change
Impairment on securities $ -
` The decrease in impairment on securities for the three months and six months endedFebruary 28, 2021 , compared to the three months and six months endedFebruary 29, 2020 is due to a non-cash impairment charge in connection with the sale of an investment in the optical networking segment during the three months endedFebruary 29, 2020 . Other (Income) Expense Three months ended Six months ended February 28, February 29, February 29, (dollars in millions) 2021 2020 Change February 28, 2021 2020 Change
Other (income) expense
$ 19.7 $ (23.2) Other (income) expense increased for the three months endedFebruary 28, 2021 , compared to the three months endedFebruary 29, 2020 , primarily due to: (i)$7.9 million related to a decrease in fees associated with lower utilization of the trade accounts receivable sales programs and (ii)$3.1 million related to lower net periodic benefit costs. The decrease is partially offset by$0.9 million arising from an increase in other expense. Other (income) expense increased during the six months endedFebruary 28, 2021 , compared to the six months endedFebruary 29, 2020 , primarily due to: (i)$15.5 million related to a decrease in fees associated with lower utilization of the trade accounts receivable sales programs, (ii)$7.0 million related to lower net periodic benefit costs and (iii)$0.7 million arising from a reduction in other expense. Interest Income Three months ended Six months ended February 28, February 29, February 28, February 29, (dollars in millions) 2021 2020 Change 2021 2020 Change Interest income$ 1.7 $ 5.3 $ (3.6) $ 3.5 $ 11.3 $ (7.8) Interest income decreased during the three months and six months endedFebruary 28, 2021 , compared to the three months and six months endedFebruary 29, 2020 , primarily due to lower interest rates on cash equivalents (investments that are readily convertible to cash with maturity dates of 90 days or less). 25 --------------------------------------------------------------------------------
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Interest Expense
Three months ended Six months ended
February 29, February 29,
(dollars in millions) February 28, 2021 2020 Change February 28, 2021 2020 Change
Interest expense $ 31.0 $ 46.2 $ (15.2) $ 63.4 $ 91.1 $ (27.7)
Interest expense decreased during the three months and six months ended February
28, 2021 , compared to the three months and six months ended February 29, 2020
due to lower interest rates and lower borrowings on our credit facilities and
commercial paper program.
Income Tax Expense
Three months ended Six months ended
February 28, 2021 February 29, 2020 Change February 28, 2021 February 29, 2020 Change
Effective income tax
rate 26.9 % 108.9 % (82.0) % 28.5 % 71.0 % (42.5) %
The effective income tax rate decreased for the three months and six months
ended February 28, 2021 , compared to the three months and six months ended
February 29, 2020 , primarily due to increased income for the three months and
six months ended February 28, 2021 , driven in part by decreased restructuring
charges in tax jurisdictions with minimal related income tax benefit.
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
reconciliations 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 indication 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 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 flow 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
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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 reconciliations of the non-GAAP financial
measures to the most directly comparable U.S. GAAP financial measures as
provided in our Condensed Consolidated Financial Statements:
Reconciliation of U.S. GAAP Financial Results to Non-GAAP Measures
Three months ended Six months ended
February 28,
2020 2021 2020
Operating income (U.S. GAAP) $ 236,350 $ 90,630 $ 550,300 $ 243,409
Amortization of intangibles 11,639 13,577 23,094 29,717
Stock-based compensation expense and related
charges 23,813 15,109 57,354 45,332
Restructuring, severance and related charges 6,626 29,604 4,911 74,855
Distressed customer charge (1) - - - 14,963
Net periodic benefit cost (2) 5,723 2,776 11,316 4,601
Business interruption and impairment charges,
net (806) - (806) -
Acquisition and integration charges (3) 1,261 7,752 3,374 23,886
Adjustments to operating income 48,256 68,818 99,243 193,354
Core operating income (Non-GAAP) $ 284,606 $ 159,448 $ 649,543 $ 436,763
Net income (loss) attributable to Jabil Inc.
(U.S. GAAP) $ 151,654 $ (3,283) $ 352,096 $ 37,139
Adjustments to operating income 48,256 68,818 99,243 193,354
Impairment on securities - 12,205 - 12,205
Net periodic benefit cost (2) (5,723) (2,776) (11,316) (4,601)
Adjustments for taxes (553) 3,091 (1,148) 3,588
Core earnings (Non-GAAP) $ 193,634 $ 78,055 $ 438,875 $ 241,685 Diluted earnings (loss) per share (
Diluted core earnings per share (Non-GAAP)
Diluted weighted average shares outstanding (U.S. GAAP) 152,975 152,058 153,051 156,171 Diluted weighted average shares outstanding (Non-GAAP) 152,975 155,714 153,051 156,171 (1)Relates to accounts receivable and inventory charges for certain distressed customers in the renewable energy sector during the six months endedFebruary 29, 2020 . (2)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.. (3)Charges related to our strategic collaboration withJohnson & Johnson Medical Devices Companies ("JJMD"). Adjusted Free Cash Flow Six months ended February 28, February 29, (in thousands) 2021 2020 Net cash provided by operating activities (U.S. GAAP) $
85,945
Acquisition of property, plant and equipment (661,153) (448,765)
Proceeds and advances from sale of property, plant and equipment 266,725
36,624
Adjusted free cash flow (Non-GAAP) $
(308,483)
Acquisitions and Expansion
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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 October 26, 2020 , under the terms of the Framework Agreement, we completed
the fourth closing of our acquisition of certain assets of JJMD. The preliminary
aggregate purchase price paid for the fourth closing was approximately $18.4
million in cash, which remains subject to certain post-closing adjustments based
on conditions within the Framework Agreement. Total assets acquired of $30.6
million and total liabilities assumed of $12.2 million were recorded at their
estimated fair values as of the acquisition date.
The acquisition of the JJMD assets was accounted for as a business combination
using the acquisition method of accounting. We are currently evaluating the fair
value of the assets and liabilities related to the fourth closing. The
preliminary estimates and measurements are, therefore, subject to change during
the measurement period for assets acquired, liabilities assumed and tax
adjustments. The results of operations were included in our condensed
consolidated financial results beginning on October 26, 2020 for the fourth
closing. We believe it is impracticable to provide pro forma information for the
acquisition of the JJMD assets.
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.
Cash and Cash Equivalents
As of February 28, 2021 , we had approximately $838.1 million 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 February 28, 2021
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:
Borrowings Total notes
under payable
4.700% 4.900% 3.950% revolving Borrowings and
Senior Senior Senior 3.600% Senior 3.000% Senior credit under credit
(in thousands) Notes Notes Notes Notes Notes facilities(1) loans facilities
Balance as of August 31, 2020 $ 498,659 $
299,300
$ -$ 350,165 $ 2,728,482 Borrowings - - - - - 379,111 - 379,111 Payments - - - - - (379,111) (109) (379,220) Other 324 120 305 276 546 - 72 1,643 Balance as of February 28, 2021$ 498,983 $
299,420
$ -$ 350,128 $ 2,730,016 Apr 23, 2021, Jan 22, 2023 and Jan Maturity DateSep 15, 2022 Jul 14, 2023 Jan 12, 2028 Jan 15, 2030 Jan 15, 2031 22, 2025Jan 22, 2025 Original Facility/ Maximum Capacity$500.0 million $300.0
million
$3.8 billion (1)$351.9 million (1)As ofFebruary 28, 2021 , we had$3.8 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. 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. 28 -------------------------------------------------------------------------------- Table of Contents 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 ofFebruary 28, 2021 andAugust 31, 2020 , we were in compliance with our debt covenants. Refer to Note 4 - "Notes Payable and Long-Term Debt" to the Condensed 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 ofFebruary 28, 2021 . 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 ofFebruary 28, 2021 . 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 three months and six months endedFebruary 28, 2021 , we sold$1.1 billion and$2.3 billion , respectively, of trade accounts receivable and we received cash proceeds of$1.1 billion and$2.3 billion , respectively. As ofFebruary 28, 2021 , we had up to$53.3 million in available liquidity under our asset-backed securitization programs. Our asset-backed securitization programs contain various financial and nonfinancial covenants. As ofFebruary 28, 2021 andAugust 31, 2020 , we were in compliance with all covenants under our asset-backed securitization programs. Refer to Note 5 - "Asset-Backed Securitization Programs" to the Condensed 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: 29
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Maximum
Amount Type of Expiration
Program (in millions)(1) Facility Date
A $ 600.0 Uncommitted December 5, 2021(2)
B $ 150.0 Uncommitted November 30, 2021
C 400.0 CNY Uncommitted August 31, 2023
D $ 150.0 Uncommitted May 4, 2023(3)
E $ 150.0 Uncommitted January 25, 2022(4)
F $ 50.0 Uncommitted February 23, 2023(5)
G $ 100.0 Uncommitted August 10, 2021(6)
H $ 100.0 Uncommitted July 21, 2021(7)
I $ 650.0 Uncommitted December 4, 2021(8)
J $ 135.0 Uncommitted April 11, 2021(9)
K 100.0 CHF Uncommitted December 5, 2021(2)
(1)Maximum amount of trade accounts receivable that may be sold under a facility
at any one time.
(2)The program will be automatically extended through December 5, 2025 unless
either party provides 30 days notice of termination.
(3)Any party may elect to terminate the agreement upon 30 days prior notice.
(4)The program will be automatically extended through January 25, 2023 unless
either party provides 30 days notice of termination.
(5)Any party may elect to terminate the agreement upon 15 days prior notice.
(6)The program will be automatically extended through August 10, 2023 unless
either party provides 30 days notice of termination.
(7)The program will be automatically extended through August 21, 2023 unless
either party provides 30 days notice of termination.
(8)The program will be automatically extended through December 5, 2024 unless
either party provides 30 days notice of termination.
(9)The program will be automatically extended through April 11, 2025 unless
either party provides 30 days notice of termination.
During the three months and six months ended February 28, 2021 , we sold $1.3
billion and $2.6 billion , respectively, of trade accounts receivable under these
programs and we received cash proceeds of $1.3 billion and $2.6 billion ,
respectively. As of February 28, 2021 , we had up to $2.0 billion in available
liquidity under our trade accounts receivable sale programs.
Capital Expenditures
For Fiscal Year 2021, we anticipate our net capital expenditures will be
approximately $800.0 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.
Cash Flows
The following table sets forth selected consolidated cash flow information (in
thousands):
Six months ended
2021 2020
Net cash provided by operating activities $ 85,945 $ 84,166
Net cash used in investing activities (447,189) (555,349)
Net cash (used in) provided by financing activities (189,255) 14,273
Effect of exchange rate changes on cash and cash equivalents (4,959) (9,688)
Net decrease in cash and cash equivalents $
(555,458)
Operating Activities
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Net cash provided by operating activities during the six months ended February
28, 2021 was primarily due to net income and a decrease in contract assets,
partially offset by: (i) an increase in inventories, accounts receivable and
prepaid expenses and other current assets and (ii) a decrease in accounts
payable, accrued expenses and other liabilities. The decrease in contract assets
is primarily due to timing of revenue recognition for over time customers. The
increase in inventories is primarily to support expected sales levels in the
third quarter of fiscal year 2021. 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 due to an increase in
forward contract assets driven by normal hedging activity. The decrease in
accounts payable, accrued expenses and other liabilities is primarily due the
timing of purchases and cash payments.
Investing Activities
Net cash used in investing activities during the six months ended February 28,
2021 consisted primarily of capital expenditures, principally to support ongoing
business in the DMS and EMS segments and expenditures in connection with the
acquisition of certain assets of JJMD and the acquisition of Ecologic, partially
offset by proceeds and advances from the sale of property, plant and equipment.
Financing Activities
Net cash used in financing activities during the six months ended February 28,
2021 was primarily due to (i) payments for debt agreements, (ii) the repurchase
of our common stock under our share repurchase authorization and (iii) the
purchase of treasury stock under employee stock plans. 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.
Contractual Obligations
During the first quarter of fiscal year 2021, we entered into new finance leases
that are primarily due in fiscal year 2023. As of February 28, 2021 , we have
$95.3 million of contractual obligations related to these new leases. As of the
date of this report, there were no other material changes outside the ordinary
course of business since August 31, 2020 to our contractual obligations and
commitments.
Dividends and Share Repurchases
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 September 2019 , the Board of Directors authorized the repurchase of up to
$600.0 million of our common stock as a part of a two-year capital allocation
framework (the "2020 Share Repurchase Program"). As of February 28, 2021 , 9.4
million shares had been repurchased for $345.9 million and $254.1 million
remains available under the 2020 Share Repurchase Program. The 2020 Share
Repurchase Program expires at the end of fiscal year 2021.
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