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Description of Business and Summary of Significant Accounting Policies | 12 Months Ended
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Aug. 31, 2017
Description of Business and Summary of Significant Accounting Policies [Abstract] |
Description of Business and Summary of Significant Accounting Policies | JABIL INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements 1. Description of Business and Summary of Significant Accounting Policies Jabil Inc. (together with its subsidiaries, herein referred to as the “Company”) is an independent provider of electronic manufacturing services and solutions. The Company provides comprehensive electronics design, production and product management services to companies in the automotive and transportation, capital equipment, consumer lifestyles and wearable technologies, computing and storage, defense and aerospace, digital home, healthcare, industrial and energy, mobility, networking and telecommunications, packaging, point of sale and printing industries. The Company’s ser vices combine a highly automated, continuous flow manufacturing approach with advanced electronic design and design for manufacturability technologies. The Company is headquartered in St. Petersburg, Florida and has manufacturing operations in the Americas, Europe, Asia and Africa. Significant accounti ng policies followed by the Co mpany are as follows: Principles of Consolidation and Basis of Presentation The consolidated financial statements include the accounts and operations of the Company, and its wholly-owned and majority-owned subsidiaries. All significant intercompany balances and transactions have been eliminated in preparing the consolidated financial statements. Use of Accounting Estimates Management is required to make estimates and assump tions during the preparation of the consolidated financial statements and accompanying notes in conformity with U.S. generally accepted accounting principles (“U.S. GAAP”). These estimates and assumptions affect the reported amounts of assets and liabiliti es and the disclosure of contingent assets and liabilities at the dates of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ materially from these estimates and assumptions. Cash and Cash Equivalents Cash equivalents consist of investments that are readily convertible to cash with original maturities of 90 days or less. A s of August 31, 2017 and 2016 there were $71.5 million and $22.4 million of cash equivalents, respectively. Accounts Receivable Accounts receivable consist of trade receivables and other miscellaneous receivables. The Company maintains an allowance for doubtful accounts for estimated losses resulting from the inability of its customers to make required payments. Bad debts are charged to this allowance after all attempts to collect the balance are exhausted. Allowances of $14.1 million and $11.1 million were recorded a s of August 31, 2017 and 2016, respectively. As the financ ial condition and circumstances of the Company’s customers change, adjustments to the allowance for doubtful accounts are made as necessary. Inventories Inventories are stated at the lower of cost or market and use a first in, first out (FIFO) method.
Property, Plant and Equipment, net |
|  | Property, plant and equipment is capitalized at cost and depreciated using the straight-line depreciation method over the
estimated useful lives of the respective assets. Estimated useful lives for major classes of depreciable assets are as follows:
|  |  |  | Asset Class |  | Estimated Useful Life |
|  |  |  | Buildings | Up to 35 years |
|  |  |  | Leasehold improvements | Shorter of lease term or useful life of the |
|  |  |  |  |  | improvement |
|  |  |  | Machinery and equipment | 2 to 10 years |
|  |  |  | Furniture, fixtures and office equipment | 5 years |
|  |  |  | Computer hardware and software | 3 to 7 years |
|  |  |  | Transportation equipment | 3 years |
Certain equipment held under capital leases is classified as property, plant and equipment and the related obligation is recorded as notes payable, long-term debt and capital lease obligations on the Consolidated Balance Sheets. Amortization of assets held under capital leases is included in depreciation expense in the Consolidated Statements of Operations. Maintenance and repairs are expensed as incurred. The cost and related accumulated depreciation of assets sold or retired is removed from the accoun ts and any resulting gain or loss is reflected in the Consolidated Statements of Operations as a component of operating income. Goodwill and Other Intangible Assets The Company accounts for goodwill in a business combination as the excess of the cost over the fair value of net assets acquired and is assigned to the reporting unit in which the acquired business will operate. The Company tests goodwill and indefinite-lived intangible assets for impairment during the fourth quarter of each fiscal year or whenever events or changes in circumstances indicate the carrying amount may not be recoverable. The recoverability of goodwi ll is measured at the reporting unit level by comparing the reporting unit’s carrying amount, including goodwill, to the fair value of the reporting unit. If the carrying amount of the reporting unit exceeds its fair value, goodwill is considered impaired and a second step is performed to measure the amount of loss, if any. The recoverability of indefinite-lived intangible assets is measured by comparing the carrying amount to the fair value. The Company determine s the fair value of its indefinite-lived intangible a ssets 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. Business combinations can also result in other intangible assets being recognized. Finite-lived intangible assets are amortized on a straight-line basis over their estimated useful life and include contractual agreeme nts and customer relationships and inte llectual property. No significant residual values are estimated for the amortizable intangible assets. Long-lived Assets Long-lived assets, such as property, plant and equipment, and finite-lived intangible assets, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset or asset group may not be recoverable. Recoverability of the asset or asset group is measured by comparing its carrying amount to the un discounted future net cash flows the asset is expected to generate. If the carrying amount of an asset or asset group is not recoverable, the Company recognizes 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 the present value of estimated future cash flows or as the appraised value. Derivative Instruments All derivative instruments are recorded gross on the Consolidated Balance Sheets at their respective fair values. The accounting for changes in the fair value of a derivative instrument depends on the intended use and designation of the derivative instrument. For derivative instruments that are designated and qualify as a fair value hedge, the gain or loss on the derivative and the offsetting gain or loss on the hedged item attributable to the hedged risk are recognized in current earning s. For derivative instruments that are designated and qualify as a cash flow hedge, the effective portion of the gain or loss on the derivative instrument is initially reported as a component of AOCI, net of tax, and is subsequently reclassified into the l ine item within the Consolidated Statements of Operations in which the hedged items are recorded in the same period in which the hedged item affects earnings. The ineffective portion of the gain or loss is recognized immediately in current earnings. For derivative instruments t hat are not designated as hedging instruments, gains and losses from changes in fair values are recognized in earnings. Cash receipts and cash payments related to derivative instruments are recorded in the same category as the cash flows from the items bei ng hedged on the Consolidated Statements of Cash Flows. Accumulated Other Comprehensive Income The following table sets forth the changes in accumulated other comprehensive income (“AOCI”), net of tax, by component during the fiscal year ended August 31, 2017 (in thousands):
|  |  |  |  | Foreign Currency Translation Adjustment (1) |  | Derivative Instruments (2) |  | Actuarial (Loss) Gain (3) |  | Prior Service Cost (3) |  | Available for Sale Securities (4) |  | Total
Balance as of August 31, 2016 | $ | 16,338 |  | $ | 7,784 |  | $ | (43,587) |  | $ | 941 |  | $ | (21,353) |  | $ | (39,877)
| Other comprehensive income (loss) before |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
|  | reclassifications |  | 35,297 |  |  | 13,434 |  |  | 8,443 |  |  | 86 |  |  | 10,611 |  |  | 67,871
| Amounts reclassified from AOCI |  | 5,947 |  |  | 8,749 |  |  | 1,929 |  |  | (138) |  |  | 10,139 |  |  | 26,626
Other comprehensive income (loss) |  | 41,244 |  |  | 22,183 |  |  | 10,372 |  |  | (52) |  |  | 20,750 |  |  | 94,497
Balance as of August 31, 2017 | $ | 57,582 |  | $ | 29,967 |  | $ | (33,215) |  | $ | 889 |  | $ | (603) |  | $ | 54,620
(1) There is no tax benefit (expense) related to the foreign currency translation adjustment components of AOCI, including reclassification adjustments, for the fiscal years ended August 31, 2017 and 2016. (2) The portions of AOCI reclassified into earnings during the fiscal years ended August 31, 2017 and 2016 for derivative instruments were primarily classified as a component of cost of revenue. The portion that is expected to be reclassifie d into earnings during the next 12 months will primarily be classified as a component of cost of revenue. The annual tax benefit (expense) for unrealized gains on derivative instruments, including reclassification adjustments, is $(1.9) million and $(4.0) million for the fiscal years ended August 31, 2017 and 2016, respectively. The accumulated tax benefit (expense) for unrealized gains on derivative instruments, including reclassification adjustments, is $13.4 million and $15.3 million for the fiscal years ended August 31, 2017 and 2016, respectively. (3) The portions of AOCI reclassified into earnings during the fiscal years ended August 31, 2017 and 2016 for actuarial gain and prior servic e cost are included in the computation of net periodic benefit pension cost. Refer to Note 10 – “Postretirement and Other Employee Benefits” for additional information. The tax benefit (expense) for actuarial gain, including reclassification adjustments, i s $(1.0) million and $0.6 million, and for prior service cost, including reclassification adjustments, is $(0.3) million and $(0.3) million for the fiscal years ended August 31, 2017 and 2016. (4) The portion of AOCI reclassified into e arnings during the fiscal year ended August 31, 2017 for available for sale securities was due to an other than temporary impairment on securities and was classified as a component of other expense. There is no tax benefit (expense) related to the available for sale securities components of AOCI, including reclassification adjustments, for the fiscal years ended August 31, 2017 and 2016. Foreign Currency Transactions For the Company’s foreign subsidiaries that use a currency other than the U.S. dollar as their functional currency, the assets and liabilities are translated at exchange rates in effect at the balance sheet date, and revenues and expenses are translated at the average exchange rate for the period. The effects of these translation adjustments are reported in accumulated other comprehensive income. Gains and losses arising from transactions denominated in a currency othe r than the functional currency of the entity involved are included in operating income. Revenue Recognition The Company derives substantially all of its revenue from production and product management services (collectively referred to as “manufacturing services”), which encompasses the act of producing tangible components that are built to customer specifications, which are then provided to the customer. The Company recognizes manufacturing services revenue when such tangible components are shipped to or the goods are received by the customer, title and risk of ownership have passed, the pri ce to the buyer is fixed or determinable and collectability is reasonably assured (net of estimated returns). The Company also derives revenue to a lesser extent from electronic design services to certain customers. Revenue from electronic design services is generally recognized upon completion and acceptance by the respective customer. Taxes collected from the Company’s customers and remitted to governmental authorities are presented within the Company’s Consolidated Statement of Operations on a net basis. The Company records shipping and handling costs reimbursed by the customer in revenue. Upfront payments from customers are recorded upon receipt as deferred income and are recognized as revenue as the related manufacturing services are provided. Stock-Based Compensation The Company recognizes stock-based compensation expense, reduced for estimated forfeitures, on a straight-line basis over the requisite service period of the award, which is generally the vesting period for outstanding stock awards. The stock-bas ed compensation expense for time-based and performance based restricted stock is measured at fair val ue on the date of grant based on the number of shares expected to vest and the quoted market price of the Company’s common stock. For restricted stock awards with performance conditions, stock-based compensation expense is originally based on the number of shares that would vest if the Company achieved 100% of the performance goal, which is the intended outcome at the grant date. Throughout the requisite service period, management monitors the probability of achievement of the performance condition. If it b ecomes probable, based on the Company’s performance, that more or less than the current estimate of the awarded shares will vest, an adjustment to stock-based compensation expense will be recognized as a change in accounting estimate in the period the prob ability changes. The stock-ba sed compensation expense for market-based restricted stock awards is measured at fair value on the date of grant. The market conditions are considered in the grant date fair value using a Monte Carlo valuation model, which uti lizes multiple input variables to determine the probability of the Company achieving the specified market conditions. Stock-based compensation expense related to an award with a market condition will be recognized over the requisite service period regardle ss of whether the market condition is satisfied, provided that the requisite service period has been completed. The Company capitalizes stock-based compensation costs related to awards granted to employees whose compensation costs are directly attributable to the cost of inventory. The Company currently expects to satisfy share-based awards with registered shares available to be issued. See Note 12 – “Stockholders’ Equity” for further discussion of stock-based compensation expense. Income Taxes Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in the tax rate is recognized in income in the period that includes the enactment date of the rate change. The Company records a valuation allowance to reduce its deferred tax assets to the amount that is more likely than not to be realized. The Company consi ders future taxable income and ongoing feasible tax planning strategies in assessing the need for the valuation allowance. Earnings Per Share The Company calculates its basic earnings per share by dividing net income attributable to Jabil Inc. by the weighted average number of shares of common stock outstanding during the period. The Company’s diluted earnings per share is calculated in a similar manner, but includes the effect of dilutive securities. The difference between the weighted average number of basic shares outstanding and the weighted average number of diluted shares outstanding is primarily due to diluti ve unvested restricted stock awards. Potential shares of common stock are excluded from the computation of diluted earnings per share when their effect would be antidilutive. Performance-based restricted stock awards are considered dilutive when the related performance criterion have been met assuming the end of the reporti ng period represents the end of the performance period. All potential shares of common are antidilutive in periods of net loss. Dilutive shares outstanding not included in the computation of earnings per share because their effect was antidilutive w ere as follows (in thousands):
|  |  |  | Fiscal Year Ended August 31, |
|  |  |  | 2017 |  | 2016 |  | 2015 |
|  | Stock options |  | ― |  |  | ― |  |  | 218 |
|  | Stock appreciation rights |  | 265 |  |  | 2,381 |  |  | 3,585 |
Fair Value of Financial Instruments The three levels of the fair-value hierarchy include: Level 1 – quoted market prices in active markets for identical assets and liabilities; Level 2 – inputs other than quoted market prices included in Level 1 that are observable for the asset or liability, either directly or indirectly; and Level 3 – unobservable inputs for the asset or liability. The carrying amounts of cash and cash equivalents, trade accounts receivable, prepaid expenses and other current a ssets, accounts payable and accrued expenses approximate fair value because of the short-term nature of these financial instruments. Refer to Note 3 – “Trade Accounts Receivable Securitization and Sale Programs”, Note 9 – “Not es Payable, Long-Term Debt and Capital Lease Obligations”, Note 10 – “Postretirement and Other Employee Benefits” and Note 14 –“Derivative Financial Instruments and Hedging Activities” for disclosure surrounding the fair value o f the Company’s deferred purchase price receivables, debt obligations, pension plan assets and derivative financial instruments, respectively. Refer to Note 2 – “Discontinued Operations” for discussion of the Company’s Senior Non-Convertibl e Cumulative Preferred Stock. The Senior Non-Convertible Cumulative Preferred Stock is valued each reporting period using unobservable inputs (Level 3 inputs) based on an interest rate lattice model and is classified as an available for sale security with an unrealized gain (loss) recorded to accumulated other comprehensive income (loss) (“AOCI”). The unobservable inputs have an immaterial impact on the fair value calculation of the Senior Non-Convertible Cumulative Preferred Stock. A s of August 31, 2017, the fair value was $49.8 million, and is included within other assets on the Consolidated Balance Sheets.

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- Definition The entire disclosure for the general note to the financial statements for the reporting entity which may include, descriptions of the basis of presentation, business description, significant accounting policies, consolidations, reclassifications, new pronouncements not yet adopted and changes in accounting principles. + References No definition available. + Details
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