Jabil(JBL) - 2024 Q2 - Quarterly Report

Item 1. Financial Statements This section presents the unaudited condensed consolidated financial statements and their detailed notes, covering balance sheets, income statements, comprehensive income, equity, and cash flows Condensed Consolidated Balance Sheets The balance sheet shows a decrease in total assets from $19,424 million as of August 31, 2023, to $17,123 million as of February 29, 2024, primarily due to a reduction in current assets, including assets held for sale. Total liabilities also decreased from $16,557 million to $14,465 million, with a corresponding decrease in total equity from $2,867 million to $2,658 million | Metric | Feb 29, 2024 (Unaudited, in millions) | Aug 31, 2023 (in millions) | Change (in millions) | | :----- | :---------------------------------- | :----------------------- | :------------------- | | Total Assets | $17,123 | $19,424 | $(2,301) | | Total Liabilities | $14,465 | $16,557 | $(2,092) | | Total Equity | $2,658 | $2,867 | $(209) | | Cash and cash equivalents | $2,566 | $1,804 | $762 | | Accounts receivable, net | $2,648 | $3,647 | $(999) | | Inventories, net | $4,821 | $5,206 | $(385) | | Assets held for sale | $0 | $1,929 | $(1,929) | | Liabilities held for sale | $0 | $1,397 | $(1,397) | Condensed Consolidated Statements of Operations For the six months ended February 29, 2024, net revenue decreased to $15,154 million from $17,769 million in the prior year period. Despite the revenue decrease, operating income significantly increased to $1,434 million from $721 million, and net income attributable to Jabil Inc. more than doubled to $1,121 million from $430 million, largely driven by a $944 million gain from the divestiture of businesses. Diluted EPS also saw a substantial increase to $8.66 from $3.14 | Metric | 3 Months Ended Feb 29, 2024 (in millions) | 3 Months Ended Feb 28, 2023 (in millions) | 6 Months Ended Feb 29, 2024 (in millions) | 6 Months Ended Feb 28, 2023 (in millions) | | :----- | :---------------------------------------- | :---------------------------------------- | :---------------------------------------- | :---------------------------------------- | | Net revenue | $6,767 | $8,134 | $15,154 | $17,769 | | Gross profit | $630 | $661 | $1,405 | $1,404 | | Operating income | $1,131 | $359 | $1,434 | $721 | | Net income attributable to Jabil Inc. | $927 | $207 | $1,121 | $430 | | Diluted EPS | $7.31 | $1.52 | $8.66 | $3.14 | | Gain from the divestiture of businesses | $(944) | $0 | $(944) | $0 | Condensed Consolidated Statements of Comprehensive Income For the six months ended February 29, 2024, comprehensive income attributable to Jabil Inc. increased to $1,121 million from $481 million in the prior year period. This increase was primarily driven by higher net income, while other comprehensive income components, such as foreign currency translation and derivative instruments, had a net zero impact compared to a positive impact in the prior year | Metric | 3 Months Ended Feb 29, 2024 (in millions) | 3 Months Ended Feb 28, 2023 (in millions) | 6 Months Ended Feb 29, 2024 (in millions) | 6 Months Ended Feb 28, 2023 (in millions) | | :----- | :---------------------------------------- | :---------------------------------------- | :---------------------------------------- | :---------------------------------------- | | Net income | $927 | $207 | $1,121 | $430 | | Total other comprehensive (loss) income | $(11) | $31 | $0 | $51 | | Comprehensive income attributable to Jabil Inc. | $916 | $238 | $1,121 | $481 | Condensed Consolidated Statements of Stockholders' Equity Total stockholders' equity decreased slightly from $2,867 million as of August 31, 2023, to $2,658 million as of February 29, 2024. This was primarily due to significant treasury stock purchases totaling $1,312 million for the six months ended February 29, 2024, partially offset by net income attributable to Jabil Inc. of $1,121 million and an increase in additional paid-in capital | Metric | Feb 29, 2024 (in millions) | Feb 28, 2023 (in millions) | Aug 31, 2023 (in millions) | | :----- | :------------------------- | :------------------------- | :------------------------- | | Total stockholders' equity, ending balances | $2,658 | $2,674 | $2,867 | | Net income attributable to Jabil Inc. (6 months) | $1,121 | $430 | N/A | | Purchases of treasury stock (6 months) | $(1,312) | $(288) | N/A | | Declared dividends (6 months) | $(21) | $(22) | N/A | Condensed Consolidated Statements of Cash Flows For the six months ended February 29, 2024, net cash provided by operating activities increased to $666 million from $580 million in the prior year. Investing activities shifted from a net cash outflow of $484 million to a net cash inflow of $1,558 million, largely due to proceeds from the divestiture of businesses. Financing activities resulted in a higher net cash outflow of $1,455 million, primarily due to increased treasury stock repurchases. Overall, cash and cash equivalents increased by $762 million, ending the period at $2,566 million | Metric | 6 Months Ended Feb 29, 2024 (in millions) | 6 Months Ended Feb 28, 2023 (in millions) | Change (in millions) | | :----- | :---------------------------------------- | :---------------------------------------- | :------------------- | | Net cash provided by operating activities | $666 | $580 | $86 | | Net cash provided by (used in) investing activities | $1,558 | $(484) | $2,042 | | Net cash used in financing activities | $(1,455) | $(371) | $(1,084) | | Net increase (decrease) in cash and cash equivalents | $762 | $(278) | $1,040 | | Cash and cash equivalents at end of period | $2,566 | $1,200 | $1,366 | | Proceeds from the divestiture of businesses, net of cash | $2,108 | $0 | $2,108 | | Payments to acquire treasury stock | $(1,325) | $(288) | $(1,037) | Notes to Condensed Consolidated Financial Statements This section provides detailed disclosures and explanations for the financial statements, covering accounting policies, specific balance sheet and income statement items, and other financial instruments and activities. Key areas include trade accounts receivable sale programs, debt, derivative instruments, equity, segment data, restructuring, income taxes, EPS, acquisitions/divestitures, and fair value measurements - The financial statements are prepared in accordance with U.S. GAAP for interim financial information and should be read in conjunction with the Annual Report on Form 10-K for the fiscal year ended August 31, 2023[22] - Results for the six months ended February 29, 2024, are not necessarily indicative of the full fiscal year[22] Note 1. Basis of Presentation This note outlines the basis for preparing the unaudited interim financial statements in accordance with U.S. GAAP - Interim financial statements are unaudited and prepared under U.S. GAAP, with all necessary adjustments included[22] - Results for the interim period are not necessarily indicative of the full fiscal year[22] Note 2. Trade Accounts Receivable Sale Programs This note details the Company's trade accounts receivable sale programs, including amounts sold, cash proceeds, and pre-tax losses - The Company sells trade accounts receivable without recourse, transferring associated risks[23] - As of February 29, 2024, maximum aggregate amount available under trade accounts receivable sale programs was $2.1 billion (plus other currencies)[24] | Metric | 3 Months Ended Feb 29, 2024 (in millions) | 3 Months Ended Feb 28, 2023 (in millions) | 6 Months Ended Feb 29, 2024 (in millions) | 6 Months Ended Feb 28, 2023 (in millions) | | :----- | :---------------------------------------- | :---------------------------------------- | :---------------------------------------- | :---------------------------------------- | | Trade accounts receivable sold | $1,818 | $2,922 | $3,854 | $6,450 | | Cash proceeds received | $1,809 | $2,914 | $3,834 | $6,432 | | Pre-tax losses on sale of receivables | $9 | $8 | $20 | $18 | Note 3. Inventories This note provides a breakdown of inventory components, including raw materials, work in process, finished goods, and reserves | Inventory Component | Feb 29, 2024 (in millions) | Aug 31, 2023 (in millions) | Change (in millions) | | :------------------ | :------------------------- | :------------------------- | :------------------- | | Raw materials | $4,445 | $4,804 | $(359) | | Work in process | $232 | $217 | $15 | | Finished goods | $198 | $243 | $(45) | | Reserve for excess and obsolete inventory | $(54) | $(58) | $4 | | Inventories, net | $4,821 | $5,206 | $(385) | Note 4. Notes Payable and Long-Term Debt This note details the Company's debt structure, borrowing capacity, and compliance with debt covenants - Total notes payable and long-term debt remained stable at approximately $2.88 billion[29][30] - The Company has $3.9 billion in available unused borrowing capacity under revolving credit facilities and $3.2 billion under its commercial paper program[29][33] - An amendment in February 2024 extended the termination dates of revolving credit facilities to January 2026 and January 2028 and added sustainability-linked interest rate adjustments[30] - The Company was in compliance with all debt covenants as of February 29, 2024 and August 31, 2023[31] Note 5. Asset-Backed Securitization Program This note describes the Company's asset-backed securitization program, including available proceeds and receivables sold - The global asset-backed securitization program's maximum available net cash proceeds increased from $600 million to $700 million in February 2024[36] - The program expires on November 25, 2024, and the Company had $15 million in available liquidity as of February 29, 2024[36][139] | Metric | 3 Months Ended Feb 29, 2024 (in millions) | 3 Months Ended Feb 28, 2023 (in millions) | 6 Months Ended Feb 29, 2024 (in millions) | 6 Months Ended Feb 28, 2023 (in millions) | | :----- | :---------------------------------------- | :---------------------------------------- | :---------------------------------------- | :---------------------------------------- | | Trade accounts receivable sold | $968 | $998 | $1,957 | $2,064 | | Cash proceeds received | $955 | $989 | $1,934 | $2,047 | | Pre-tax losses on sale of receivables | $13 | $9 | $23 | $17 | Note 6. Accrued Expenses This note provides a detailed breakdown of accrued expenses, including inventory deposits, contract liabilities, and compensation | Accrued Expense Component | Feb 29, 2024 (in millions) | Aug 31, 2023 (in millions) | Change (in millions) | | :------------------------ | :------------------------- | :------------------------- | :------------------- | | Inventory deposits | $1,699 | $1,839 | $(140) | | Contract liabilities | $976 | $886 | $90 | | Accrued compensation and employee benefits | $573 | $743 | $(170) | | Other accrued expenses | $2,300 | $2,047 | $253 | | Total Accrued expenses | $5,548 | $5,515 | $33 | - Revenue recognized from contract liabilities as of August 31, 2023, was $275 million for the six months ended February 29, 2024[38] Note 7. Postretirement and Other Employee Benefits This note outlines the net periodic benefit cost components for postretirement and other employee benefits | Net Periodic Benefit Cost Component | 3 Months Ended Feb 29, 2024 (in millions) | 3 Months Ended Feb 28, 2023 (in millions) | 6 Months Ended Feb 29, 2024 (in millions) | 6 Months Ended Feb 28, 2023 (in millions) | | :-------------------------------- | :---------------------------------------- | :---------------------------------------- | :---------------------------------------- | :---------------------------------------- | | Service cost | $5 | $4 | $10 | $8 | | Interest cost | $3 | $3 | $6 | $6 | | Expected long-term return on plan assets | $(5) | $(3) | $(9) | $(8) | | Net periodic benefit cost | $2 | $1 | $4 | $1 | - Service cost is recognized in cost of revenue, while other components are recognized in other expense[39] Note 8. Derivative Financial Instruments and Hedging Activities This note details the Company's use of derivative instruments for managing foreign currency risk and hedging activities - The Company uses forward contracts to manage foreign currency risk for anticipated revenues/expenses (cash flow hedges) and transactional exposures[40][41][43] - As of February 29, 2024, cash flow hedges had a notional amount of $167 million, and economic hedges for transactional exposure totaled $2.4 billion[41][43] - Net investment hedges totaled $377 million as of February 29, 2024, to hedge foreign currency denominated operations[45] - No interest rate swaps were outstanding as of February 29, 2024[47] | Derivative Type | 3 Months Ended Feb 29, 2024 (in millions) | 6 Months Ended Feb 29, 2024 (in millions) | | :-------------- | :---------------------------------------- | :---------------------------------------- | | Forward foreign exchange contracts (not designated as hedging instruments) - Gain on Derivatives Recognized in Net Income | $30 | $(11) | Note 9. Accumulated Other Comprehensive Income This note presents the components of accumulated other comprehensive income and expected reclassifications to earnings | AOCI Component | Balance as of Aug 31, 2023 (in millions) | Other comprehensive loss before reclassifications (6 months) | Amounts reclassified from AOCI (6 months) | Balance as of Feb 29, 2024 (in millions) | | :------------- | :--------------------------------------- | :------------------------------------------- | :---------------------------------------- | :--------------------------------------- | | Foreign Currency Translation Adjustment | $(59) | $(1) | $(2) | $(62) | | Net Investment Hedges | $(4) | $0 | $(4) | $(8) | | Derivative Instruments | $14 | $(4) | $14 | $24 | | Actuarial Gain (Loss) | $46 | $0 | $(5) | $41 | | Prior Service (Cost) Credit | $(14) | $0 | $2 | $(12) | | Total | $(17) | $(5) | $5 | $(17) | - The Company expects to reclassify $2 million into earnings during the next twelve months, primarily as a component of cost of revenue[48] Note 10. Stockholders' Equity This note details changes in stockholders' equity, including stock-based compensation, share repurchases, and common stock outstanding | Stock-Based Compensation Expense | 3 Months Ended Feb 29, 2024 (in millions) | 3 Months Ended Feb 28, 2023 (in millions) | 6 Months Ended Feb 29, 2024 (in millions) | 6 Months Ended Feb 28, 2023 (in millions) | | :------------------------------- | :---------------------------------------- | :---------------------------------------- | :---------------------------------------- | :---------------------------------------- | | Restricted stock units | $18 | $16 | $60 | $54 | | Employee stock purchase plan | $5 | $4 | $9 | $8 | | Total | $23 | $20 | $69 | $62 | - Unrecognized stock-based compensation expense for restricted stock units was $67 million with a remaining weighted-average period of 1.5 years as of February 29, 2024[51] - Common stock outstanding decreased to 122,440,607 shares as of February 29, 2024, from 131,294,422 shares as of August 31, 2023, largely due to treasury share repurchases[10][52] - The 2023 Share Repurchase Program was amended in September 2023, increasing authorization to $2.5 billion. As of February 29, 2024, $1.3 billion had been repurchased, with $1.2 billion remaining[52] Note 11. Concentration of Risk and Segment Data This note provides information on customer concentration, foreign source revenue, and financial performance by operating segment - The five largest customers accounted for approximately 39% of net revenue, and 82 customers accounted for 90% of net revenue for the six months ended February 29, 2024[53] - Foreign source revenue was 84.7% of net revenue for the six months ended February 29, 2024[58] | Segment Income | 3 Months Ended Feb 29, 2024 (in millions) | 3 Months Ended Feb 28, 2023 (in millions) | 6 Months Ended Feb 29, 2024 (in millions) | 6 Months Ended Feb 28, 2023 (in millions) | | :------------- | :---------------------------------------- | :---------------------------------------- | :---------------------------------------- | :---------------------------------------- | | EMS | $145 | $205 | $310 | $403 | | DMS | $193 | $186 | $527 | $449 | | Total segment income | $338 | $391 | $837 | $852 | | Segment Revenue | 3 Months Ended Feb 29, 2024 (in millions) | 3 Months Ended Feb 28, 2023 (in millions) | 6 Months Ended Feb 29, 2024 (in millions) | 6 Months Ended Feb 28, 2023 (in millions) | | :-------------- | :---------------------------------------- | :---------------------------------------- | :---------------------------------------- | :---------------------------------------- | | EMS | $3,331 | $4,051 | $6,923 | $8,597 | | DMS | $3,436 | $4,083 | $8,231 | $9,172 | | Total | $6,767 | $8,134 | $15,154 | $17,769 | Note 12. Restructuring, Severance and Related Charges This note details charges related to restructuring plans, including employee severance and asset write-offs, and future cost expectations | Charge Type | 3 Months Ended Feb 29, 2024 (in millions) | 3 Months Ended Feb 28, 2023 (in millions) | 6 Months Ended Feb 29, 2024 (in millions) | 6 Months Ended Feb 28, 2023 (in millions) | | :---------- | :---------------------------------------- | :---------------------------------------- | :---------------------------------------- | :---------------------------------------- | | Employee severance and benefit costs | $28 | $(4) | $123 | $36 | | Asset write-off costs | $33 | $4 | $55 | $5 | | Other costs | $8 | $0 | $18 | $4 | | Total restructuring, severance and related charges | $70 | $0 | $197 | $45 | - The 2024 Restructuring Plan, approved in September 2023, aims to realign the cost base for stranded costs from the mobility business sale and optimize the global footprint[60] - The Company expects to recognize approximately $300 million in pre-tax restructuring and other related costs over fiscal year 2024, with estimated net cash expenditures of $200 million over fiscal years 2024 and 2025[61][111] Note 13. Income Taxes This note explains the effective income tax rate and its drivers, including jurisdictional mix and divestiture gains | Tax Rate | 3 Months Ended Feb 29, 2024 | 3 Months Ended Feb 28, 2023 | 6 Months Ended Feb 29, 2024 | 6 Months Ended Feb 28, 2023 | | :------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | U.S. federal statutory income tax rate | 21.0 % | 21.0 % | 21.0 % | 21.0 % | | Effective income tax rate | 12.7 % | 27.6 % | 13.6 % | 26.6 % | - The decrease in effective income tax rate was primarily due to a change in the jurisdictional mix of earnings and the gain from the mobility business divestiture, which included $58 million of income tax expense during the three months ended February 29, 2024[63][64] Note 14. Earnings Per Share and Dividends This note presents basic and diluted earnings per share and details declared cash dividends | EPS Metric | 3 Months Ended Feb 29, 2024 | 3 Months Ended Feb 28, 2023 | 6 Months Ended Feb 29, 2024 | 6 Months Ended Feb 28, 2023 | | :--------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Basic EPS | $7.41 | $1.55 | $8.80 | $3.21 | | Diluted EPS | $7.31 | $1.52 | $8.66 | $3.14 | | Dividend Declaration Date | Dividend per Share | Total Cash Dividends Declared (in millions) | | :---------------------- | :----------------- | :------------------------------------------ | | October 19, 2023 | $0.08 | $11 | | January 25, 2024 | $0.08 | $10 | | Total (FY2024 YTD) | | $21 | Note 15. Business Acquisitions and Divestitures This note describes recent business acquisitions and the significant divestiture of the mobility business, including financial impacts - Acquired ProcureAbility Inc. for approximately $60 million in cash on November 1, 2023, adding $40 million in intangible assets and $38 million in goodwill to the DMS segment[68][69] - Completed the sale of its mobility business to BYD Electronic (International) Co. Ltd. on December 29, 2023, for approximately $2.2 billion in cash[70][72] - The divestiture resulted in a pre-tax gain of $944 million and incurred transaction and disposal costs of $61 million for the six months ended February 29, 2024[72] - The indefinite-lived 'Green Point' trade name was reclassified to a finite-lived intangible asset with a two-year useful life following the mobility business divestiture[74] Note 16. Fair Value Measurements This note outlines the fair value measurements for financial assets and liabilities, including cash equivalents and derivative instruments - Financial assets measured at fair value on a recurring basis include cash equivalents ($572 million), short-term investments ($26 million), and various derivative instruments[75] - Derivative instruments (forward foreign exchange contracts and net investment hedges) are measured at fair value using Level 2 inputs[75] - The fair values of notes payable and long-term debt are estimated based on observable market data (Level 2 inputs) for disclosure purposes, while they are carried at amortized cost[77] Note 17. Commitments and Contingencies This note addresses the Company's legal proceedings and management's assessment of their potential financial impact - The Company is party to lawsuits in the ordinary course of business[78] - Management does not believe these legal proceedings will have a material adverse effect on the Company's financial position, results of operations, or cash flows[78] Note 18. New Accounting Guidance This note discusses the impact of recently adopted and issued accounting guidance on the Company's financial statements - New accounting guidance adopted during the period did not materially impact the Company[79] - Recently issued accounting guidance is not expected to have a material impact[79] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides an overview of Jabil's business, a summary of its financial results, key performance indicators, critical accounting policies, and a detailed analysis of its results of operations, non-GAAP financial measures, acquisitions and divestitures, and liquidity and capital resources for the three and six months ended February 29, 2024. The Company reported a decrease in net revenue but a significant increase in operating income and net income, largely due to the divestiture of its mobility business Overview Jabil is a global provider of manufacturing services, operating through EMS and DMS segments, and recently divested its mobility business - Jabil provides comprehensive electronics design, production, and product management services globally[84] - The Company operates through two segments: EMS (high volume, core electronics) and DMS (engineering solutions, material sciences, healthcare)[87] - Completed the sale of its mobility business on December 29, 2023, for approximately $2.2 billion[88] - A substantial majority of net revenue (82.5% for three months, 84.7% for six months ended Feb 29, 2024) is from international operations[86] Summary of Results This section summarizes key financial results, including net revenue, operating income, net income, and diluted EPS, highlighting the impact of divestitures | Metric | 3 Months Ended Feb 29, 2024 (in millions) | 3 Months Ended Feb 28, 2023 (in millions) | 6 Months Ended Feb 29, 2024 (in millions) | 6 Months Ended Feb 28, 2023 (in millions) | | :----- | :---------------------------------------- | :---------------------------------------- | :---------------------------------------- | :---------------------------------------- | | Net revenue | $6,767 | $8,134 | $15,154 | $17,769 | | Gross profit | $630 | $661 | $1,405 | $1,404 | | Operating income | $1,131 | $359 | $1,434 | $721 | | Net income attributable to Jabil Inc. | $927 | $207 | $1,121 | $430 | | Diluted EPS | $7.31 | $1.52 | $8.66 | $3.14 | Key Performance Indicators This section analyzes key performance indicators such as sales cycle, inventory turns, and days in accounts receivable and inventory | KPI | 3 Months Ended Feb 29, 2024 | 3 Months Ended Nov 30, 2023 | 3 Months Ended Feb 28, 2023 | | :-- | :-------------------------- | :-------------------------- | :-------------------------- | | Sales cycle | 48 days | 42 days | 50 days | | Inventory turns (annualized) | 4 turns | 5 turns | 4 turns | | Days in accounts receivable | 35 days | 43 days | 41 days | | Days in inventory | 87 days | 78 days | 93 days | | Days in accounts payable | 74 days | 78 days | 84 days | - The decrease in days in accounts receivable was primarily due to the timing of collections[95] - The decrease in days in inventory and days in accounts payable from the prior year was primarily driven by improved working capital management[95] Critical Accounting Policies and Estimates This section discusses management's critical accounting policies and estimates, emphasizing the judgments required for financial statement preparation - Financial statements require management estimates and judgments, which are evaluated based on historical experience[96] - Actual results may vary from estimates under different future circumstances[96] Recent Accounting Pronouncements This section addresses the impact of new and recently issued accounting guidance on the Company's financial reporting - New accounting guidance adopted did not have a material impact[97] - Recently issued accounting guidance is not expected to have a material impact[97] Results of Operations This section details the changes in key income statement line items. Net revenue decreased significantly, but operating income and net income saw substantial increases due to the mobility business divestiture gain. Gross profit percentage improved, while operating expenses like SG&A and restructuring charges increased Net Revenue This section analyzes changes in net revenue by segment, attributing decreases to various market factors and the mobility business divestiture | Metric | 3 Months Ended Feb 29, 2024 (in millions) | 3 Months Ended Feb 28, 2023 (in millions) | Change (%) | 6 Months Ended Feb 29, 2024 (in millions) | 6 Months Ended Feb 28, 2023 (in millions) | Change (%) | | :----- | :---------------------------------------- | :---------------------------------------- | :--------- | :---------------------------------------- | :---------------------------------------- | :--------- | | Net revenue | $6,767 | $8,134 | (16.8)% | $15,154 | $17,769 | (14.7)% | - EMS segment net revenue decreased by 18% (3 months) and 20% (6 months) due to declines in 5G, wireless, cloud (consignment model transition), digital print, retail, industrial, and semi-capital equipment[100][101] - DMS segment net revenue decreased by 16% (3 months) and 10% (6 months) primarily due to the mobility business divestiture and connected devices, partially offset by automotive and transportation growth[100][101] - The mobility business divestiture was completed on December 29, 2023, for approximately $2.2 billion[102] Gross Profit This section explains the changes in gross profit and gross profit percentage, highlighting the impact of asset reclassification and product mix | Metric | 3 Months Ended Feb 29, 2024 (in millions) | 3 Months Ended Feb 28, 2023 (in millions) | 6 Months Ended Feb 29, 2024 (in millions) | 6 Months Ended Feb 28, 2023 (in millions) | | :----- | :---------------------------------------- | :---------------------------------------- | :---------------------------------------- | :---------------------------------------- | | Gross profit | $630 | $661 | $1,405 | $1,404 | | Percent of net revenue | 9.3 % | 8.1 % | 9.3 % | 7.9 % | - Gross profit percentage increased primarily due to the cessation of depreciation and amortization for long-lived assets related to the mobility divestiture (classified as held for sale) and a favorable product mix[104] Selling, General and Administrative This section details the increase in selling, general, and administrative expenses, primarily driven by higher salary-related costs | Metric | 3 Months Ended Feb 29, 2024 (in millions) | 3 Months Ended Feb 28, 2023 (in millions) | Change (in millions) | 6 Months Ended Feb 29, 2024 (in millions) | 6 Months Ended Feb 28, 2023 (in millions) | Change (in millions) | | :----- | :---------------------------------------- | :---------------------------------------- | :------------------- | :---------------------------------------- | :---------------------------------------- | :------------------- | | Selling, general and administrative | $308 | $285 | $23 | $622 | $604 | $18 | - The increase in SG&A expenses was primarily due to higher salary and salary-related expenses[105][106] Research and Development This section reviews research and development expenses, noting their consistent percentage of net revenue | Metric | 3 Months Ended Feb 29, 2024 (in millions) | 3 Months Ended Feb 28, 2023 (in millions) | 6 Months Ended Feb 29, 2024 (in millions) | 6 Months Ended Feb 28, 2023 (in millions) | | :----- | :---------------------------------------- | :---------------------------------------- | :---------------------------------------- | :---------------------------------------- | | Research and development | $10 | $8 | $20 | $17 | | Percent of net revenue | 0.1 % | 0.1 % | 0.1 % | 0.1 % | - R&D expenses remained consistent as a percentage of net revenue[107] Amortization of Intangibles This section discusses the relatively consistent amortization of intangible assets over the reporting periods | Metric | 3 Months Ended Feb 29, 2024 (in millions) | 3 Months Ended Feb 28, 2023 (in millions) | Change (in millions) | 6 Months Ended Feb 29, 2024 (in millions) | 6 Months Ended Feb 28, 2023 (in millions) | Change (in millions) | | :----- | :---------------------------------------- | :---------------------------------------- | :------------------- | :---------------------------------------- | :---------------------------------------- | :------------------- | | Amortization of intangibles | $9 | $9 | $0 | $15 | $17 | $(2) | - Amortization of intangibles remained relatively consistent[108] Restructuring, Severance and Related Charges This section details the significant increase in restructuring and severance charges due to the 2024 Restructuring Plan | Metric | 3 Months Ended Feb 29, 2024 (in millions) | 3 Months Ended Feb 28, 2023 (in millions) | Change (in millions) | 6 Months Ended Feb 29, 2024 (in millions) | 6 Months Ended Feb 28, 2023 (in millions) | Change (in millions) | | :----- | :---------------------------------------- | :---------------------------------------- | :------------------- | :---------------------------------------- | :---------------------------------------- | :------------------- | | Restructuring, severance and related charges | $70 | $0 | $70 | $197 | $45 | $152 | - Charges increased significantly due to the 2024 Restructuring Plan, which includes headcount reductions and capacity realignment following the mobility business sale[109][110] - The 2024 Restructuring Plan is expected to incur approximately $300 million in pre-tax costs over fiscal year 2024[111] Gain from the Divestiture of Businesses This section highlights the substantial pre-tax gain recorded from the divestiture of the mobility business | Metric | 3 Months Ended Feb 29, 2024 (in millions) | 3 Months Ended Feb 28, 2023 (in millions) | Change (in millions) | 6 Months Ended Feb 29, 2024 (in millions) | 6 Months Ended Feb 28, 2023 (in millions) | Change (in millions) | | :----- | :---------------------------------------- | :---------------------------------------- | :------------------- | :---------------------------------------- | :---------------------------------------- | :------------------- | | Gain from the divestiture of businesses | $(944) | $0 | $(944) | $(944) | $0 | $(944) | - A pre-tax gain of $944 million was recorded from the divestiture of the mobility business in Q2 FY24[113] Acquisition and Divestiture Related Charges This section explains the increase in charges related to transaction and disposal costs from the mobility business divestiture | Metric | 3 Months Ended Feb 29, 2024 (in millions) | 3 Months Ended Feb 28, 2023 (in millions) | Change (in millions) | 6 Months Ended Feb 29, 2024 (in millions) | 6 Months Ended Feb 28, 2023 (in millions) | Change (in millions) | | :----- | :---------------------------------------- | :---------------------------------------- | :------------------- | :---------------------------------------- | :---------------------------------------- | :------------------- | | Acquisition and divestiture related charges | $46 | $0 | $46 | $61 | $0 | $61 | - Charges increased due to transaction and disposal costs related to the mobility business divestiture[115] Other Expense This section details the increase in other expenses, primarily due to higher fees from receivable sale programs driven by interest rates | Metric | 3 Months Ended Feb 29, 2024 (in millions) | 3 Months Ended Feb 28, 2023 (in millions) | Change (in millions) | 6 Months Ended Feb 29, 2024 (in millions) | 6 Months Ended Feb 28, 2023 (in millions) | Change (in millions) | | :----- | :---------------------------------------- | :---------------------------------------- | :------------------- | :---------------------------------------- | :---------------------------------------- | :------------------- | | Other expense | $22 | $17 | $5 | $43 | $32 | $11 | - The increase in other expense was primarily due to higher fees from trade accounts receivable sale programs and global asset-backed securitization programs, driven by higher interest rates[117] Interest Expense, Net This section explains the decrease in net interest expense, primarily due to lower borrowings on credit facilities | Metric | 3 Months Ended Feb 29, 2024 (in millions) | 3 Months Ended Feb 28, 2023 (in millions) | Change (in millions) | 6 Months Ended Feb 29, 2024 (in millions) | 6 Months Ended Feb 28, 2023 (in millions) | Change (in millions) | | :----- | :---------------------------------------- | :---------------------------------------- | :------------------- | :---------------------------------------- | :---------------------------------------- | :------------------- | | Interest expense, net | $47 | $55 | $(8) | $94 | $103 | $(9) | - The decrease in interest expense was primarily due to lower borrowings on credit facilities and commercial paper program[118] Income Tax Expense This section analyzes the decrease in the effective income tax rate, influenced by jurisdictional earnings mix and the divestiture gain | Tax Rate | 3 Months Ended Feb 29, 2024 | 3 Months Ended Feb 28, 2023 | Change (%) | 6 Months Ended Feb 29, 2024 | 6 Months Ended Feb 28, 2023 | Change (%) | | :------- | :-------------------------- | :-------------------------- | :--------- | :-------------------------- | :-------------------------- | :--------- | | Effective income tax rate | 12.7 % | 27.6 % | (14.9)% | 13.6 % | 26.6 % | (13.0)% | - The decrease in effective income tax rate was primarily due to a change in the jurisdictional mix of earnings and the gain from the mobility business divestiture, which included $58 million of income tax expense during the three months ended February 29, 2024[119] Non-GAAP (Core) Financial Measures Jabil uses non-GAAP "core" financial measures, such as core operating income and core earnings, to assess operating decisions, business performance, and incentive compensation. For the six months ended February 29, 2024, core operating income decreased to $837 million from $852 million, and core earnings decreased to $556 million from $575 million, while diluted core EPS increased to $4.30 from $4.19. These measures exclude items like amortization of intangibles, stock-based compensation, restructuring charges, and gains/charges from divestitures - Non-GAAP "core" financial measures are used for operating decisions, business performance, and incentive compensation[120] | Metric | 3 Months Ended Feb 29, 2024 (in millions) | 3 Months Ended Feb 28, 2023 (in millions) | 6 Months Ended Feb 29, 2024 (in millions) | 6 Months Ended Feb 28, 2023 (in millions) | | :----- | :---------------------------------------- | :---------------------------------------- | :---------------------------------------- | :---------------------------------------- | | Operating income (U.S. GAAP) | $1,131 | $359 | $1,434 | $721 | | Core operating income (Non-GAAP) | $338 | $391 | $837 | $852 | | Net income attributable to Jabil Inc. (U.S. GAAP) | $927 | $207 | $1,121 | $430 | | Core earnings (Non-GAAP) | $213 | $256 | $556 | $575 | | Diluted earnings per share (U.S. GAAP) | $7.31 | $1.52 | $8.66 | $3.14 | | Diluted core earnings per share (Non-GAAP) | $1.68 | $1.88 | $4.30 | $4.19 | - Adjusted free cash flow for the six months ended February 29, 2024, increased to $221 million from $112 million in the prior year[123] Acquisitions and Divestitures On November 1, 2023, Jabil acquired ProcureAbility Inc. for approximately $60 million, adding to its DMS segment. On December 29, 2023, the Company completed the sale of its mobility business for approximately $2.2 billion, resulting in a pre-tax gain of $944 million and transaction costs of $61 million for the six months ended February 29, 2024. Goodwill impairment analysis was performed, and no impairment was found post-divestiture - Acquired ProcureAbility Inc. for approximately $60 million in cash on November 1, 2023, allocating $38 million to goodwill in the DMS segment[124][125] - Completed the sale of its mobility business on December 29, 2023, for approximately $2.2 billion in cash[126][128] - The divestiture resulted in a pre-tax gain of $944 million and incurred transaction and disposal costs of $61 million for the six months ended February 29, 2024[128] - No goodwill impairment was found in the reporting unit impacted by the divestiture[129] Liquidity and Capital Resources Jabil believes its liquidity sources, including $2.6 billion in cash and cash equivalents, available credit facilities, and cash flows from operations, are adequate to fund its needs for the next 12 months and beyond. The Company has $3.9 billion in unused borrowing capacity under revolving credit facilities and $1.0 billion in available liquidity under trade accounts receivable sale programs. Share repurchases under the amended 2023 program totaled $1.3 billion, with $1.2 billion remaining - Jabil believes its liquidity sources are adequate to fund capital expenditures, dividends, share repurchases, acquisitions, and working capital for the next 12 months and beyond[132] - As of February 29, 2024, the Company had $2.6 billion in cash and cash equivalents, with most foreign cash repatriable without tax expense[133] Cash and Cash Equivalents This section details the Company's cash and cash equivalents position and the repatriability of foreign cash - Cash and cash equivalents totaled $2.6 billion as of February 29, 2024[133] - Most foreign cash and cash equivalents could be repatriated to the U.S. without potential tax expense[133] Notes Payable and Credit Facilities This section outlines the Company's notes payable, long-term debt, available credit facilities, and compliance with debt covenants - Total notes payable and long-term debt was $2,878 million as of February 29, 2024[134] - $3.9 billion in available unused borrowing capacity under revolving credit facilities and $3.2 billion under commercial paper program[134] - Credit facility termination dates were extended to January 2026 and January 2028, with sustainability-linked interest rate adjustments[134] - The Company was in compliance with all debt covenants[135] Global Asset-Backed Securitization Program This section describes the Company's asset-backed securitization program, including available proceeds and compliance - Maximum available net cash proceeds under the program increased to $700 million in February 2024[139] - For the six months ended February 29, 2024, $2.0 billion of receivables were sold, yielding $1.9 billion in cash proceeds[139] - $15 million in available liquidity remained under the program as of February 29, 2024[139] - The Company was in compliance with all program covenants[140] Trade Accounts Receivable Sale Programs This section details the Company's trade accounts receivable sale programs, including available amounts and recent changes - Maximum aggregate amount available under trade accounts receivable sale programs was $2.1 billion (plus other currencies) as of February 29, 2024[141] - In April 2024, a $700 million program was terminated and a new $200 million program was entered[142] - For the six months ended February 29, 2024, $3.9 billion of receivables were sold, yielding $3.8 billion in cash proceeds[143] - $1.0 billion in available liquidity remained under these programs as of February 29, 2024[143] Cash Flows This section provides a summary of cash flows from operating, investing, and financing activities | Cash Flow Activity | 6 Months Ended Feb 29, 2024 (in millions) | 6 Months Ended Feb 28, 2023 (in millions) | Change (in millions) | | :----------------- | :---------------------------------------- | :---------------------------------------- | :------------------- | | Net cash provided by operating activities | $666 | $580 | $86 | | Net cash provided by (used in) investing activities | $1,558 | $(484) | $2,042 | | Net cash used in financing activities | $(1,455) | $(371) | $(1,084) | | Net increase (decrease) in cash and cash equivalents | $762 | $(278) | $1,040 | Operating Activities This section analyzes the net cash provided by operating activities, highlighting changes in accounts receivable and inventories - Net cash from operating activities increased for the six months ended February 29, 2024, primarily due to decreases in accounts receivable and inventories, and non-cash expenses/net income[145] - Accounts receivable decreased due to timing of collections; inventories decreased due to higher consumption and improved working capital[145] Investing Activities This section details net cash provided by investing activities, primarily driven by the mobility business divestiture proceeds - Net cash provided by investing activities was $1,558 million, primarily from proceeds of the mobility business divestiture ($2,108 million)[146][19] - Partially offset by capital expenditures and the acquisition of ProcureAbility and certain assets of Motorola Solutions Video Manufacturing[146] Financing Activities This section explains net cash used in financing activities, primarily due to debt payments and treasury stock repurchases - Net cash used in financing activities was $1,455 million, primarily due to debt payments and treasury stock repurchases[147] - Payments to acquire treasury stock totaled $1,325 million for the six months ended February 29, 2024[19][147] Capital Expenditures This section outlines anticipated capital expenditures for the current and future fiscal years - FY2024 net capital expenditures are anticipated to be 2.2% to 2.5% of net revenue[148] - Longer-term net capital expenditures are expected to be 2.0% to 2.3% of net revenue after the mobility business sale[148] Dividends and Share Repurchases This section discusses the Company's dividend policy and share repurchase program activities - The Company expects to continue declaring and paying regular quarterly dividends[149] - The 2023 Share Repurchase Program was amended to $2.5 billion in September 2023[151] - As of February 29, 2024, $1.3 billion had been repurchased under the 2023 program, with $1.2 billion remaining[151] Contractual Obligations This section notes that there have been no material changes to contractual obligations since the last fiscal year-end - No material changes to contractual obligations and commitments since August 31, 2023[152] Item 3. Quantitative and Qualitative Disclosures About Market Risk There have been no material changes in Jabil's primary risk exposures or management of market risks from those disclosed in its Annual Report on Form 10-K for the fiscal year ended August 31, 2023 - No material changes in primary risk exposures or market risk management since the August 31, 2023, Annual Report on Form 10-K[153] Item 4. Controls and Procedures Jabil's CEO and CFO concluded that the Company's disclosure controls and procedures were effective as of February 29, 2024. No material modifications to internal control over financial reporting were identified during the quarter Evaluation of Disclosure Controls and Procedures This section confirms the effectiveness of the Company's disclosure controls and procedures as assessed by management - CEO and CFO concluded that disclosure controls and procedures were effective as of February 29, 2024[154] Changes in Internal Control over Financial Reporting This section reports that no material changes to internal control over financial reporting occurred during the quarter - No material changes to internal control over financial reporting were identified for the quarter ended February 29, 2024[155] Item 1. Legal Proceedings The Company refers to Note 17 - "Commitments and Contingencies" in the Condensed Consolidated Financial Statements for information on legal proceedings, which states that the Company does not believe these will have a material adverse effect - Refer to Note 17 for details on legal proceedings[157] Item 1A. Risk Factors For information regarding risk factors, the Company refers to Part I, "Item 1A. Risk Factors" of its Annual Report on Form 10-K for the fiscal year ended August 31, 2023, and Part I of this Quarterly Report on Form 10-Q for forward-looking statements - Risk factors are detailed in the Annual Report on Form 10-K for August 31, 2023[158] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds During the three months ended February 29, 2024, Jabil repurchased 6,547,881 shares of common stock at an average price of $125.91 per share, excluding excise tax. These repurchases were part of the amended 2023 Share Repurchase Program, which had $1,176 million remaining as of February 29, 2024 | Period | Total Number of Shares Purchased | Average Price Paid per Share | Shares Purchased as Part of Publicly Announced Program | Approximate Dollar Value of Shares that May Yet Be Purchased Under the Program (in millions) | | :----- | :------------------------------- | :--------------------------- | :----------------------------------------------------- | :----------------------------------------------------------------------------------------- | | Dec 1, 2023 – Dec 31, 2023 | 1,101,820 | $117.26 | 1,101,820 | $1,871 | | Jan 1, 2024 – Jan 31, 2024 | 4,845,608 | $126.94 | 4,844,813 | $1,256 | | Feb 1, 2024 – Feb 29, 2024 | 600,453 | $133.54 | 600,453 | $1,176 | | Total | 6,547,881 | $125.91 | 6,547,086 | | - The 2023 Share Repurchase Program was amended in September 2023 to allow for repurchases up to $2.5 billion[159] Item 3. Defaults Upon Senior Securities There were no defaults upon senior securities - No defaults upon senior securities[160] Item 4. Mine Safety Disclosures This item is not applicable to the Company - Not applicable[161] Item 5. Other Information On January 15, 2024, CEO Kenneth Wilson entered into a Rule 10b5-1 Trading Plan, which terminates on the earlier of December 31, 2025, or when 32,440 shares of stock are sold, among other conditions - CEO Kenneth Wilson entered a Rule 10b5-1 Trading Plan on January 15, 2024[162] - The plan terminates by December 31, 2025, or when 32,440 shares are sold, or other conditions[162] Item 6. Exhibits This section lists the exhibits filed with the Form 10-Q, including the Registrant's Certificate of Incorporation, Bylaws, various Senior Notes, and an amendment to the Credit Agreement. It also includes certifications by the CEO and CFO and Inline XBRL financial information - Lists various corporate documents, debt instruments, and certifications filed as exhibits[164][167] - Includes Rule 13a-14(a)/15d-14(a) Certifications by CEO and CFO, and Section 1350 Certifications[164] - Financial information from the report is formatted in Inline XBRL[167] Signatures The report is signed by Kenneth S. Wilson, Chief Executive Officer, and Michael Dastoor, Chief Financial Officer, on April 5, 2024, certifying its submission - The report is signed by the Chief Executive Officer and Chief Financial Officer on April 5, 2024[170]