XML 35 R23.htm IDEA: XBRL DOCUMENT
v3.19.1

Revenue | 6 Months Ended
--- | ---
Feb. 28, 2019
Revenue from Contract with Customer [Abstract] |
Revenue | Revenue Effective September 1, 2018, the Company adopted ASU 2014-09, Revenue Recognition (Topic 606). The new standard is a comprehensive new revenue recognition model that requires the Company to recognize revenue in a manner which depicts the transfer of goods or services to its customers at an amount that reflects the consideration the Company expects to receive in exchange for those goods or services. Prior to the adoption of the new standard, the Company recognized substantially all of its revenue from contracts with customers at a point in time, which was generally when the goods were shipped to or received by the customer, title and risk of ownership had passed, the price to the buyer was fixed or determinable and collectability was reasonably assured (net of estimated returns). Under the new standard, the Company will recognize revenue over time for the majority of its contracts with customers which will result in revenue for those customers being recognized earlier than under the previous guidance. Revenue for all other contracts with customers will continue to be recognized at a point in time, similar to recognition prior to the adoption of the standard. Additionally, the new standard impacts the Company’s accounting for certain fulfillment costs, which include upfront costs to prepare for manufacturing activities that are expected to be recovered. Under the new standard, such upfront costs will be recognized as an asset and amortized on a systematic basis consistent with the pattern of the transfer of control of the products or services to which to the asset relates. The Company adopted ASU 2014-09 using the modified retrospective method by applying the guidance to all open contracts upon adoption and recorded a cumulative effect adjustment as of September 1, 2018, net of tax, of $42.6 million. No adjustments have been made to prior periods. Following is a summary of the cumulative effect adjustment (in thousands):
| Balance as of August 31, 2018 |  | Adjustments due to adoption of ASU 2014-09 |  | Balance as of September 1, 2018
Assets |  |  |  |  |
Contract assets (1) | $ | — |  |  | $ | 591,616 |  |  | $ | 591,616 |
Inventories, net (1) | $ | 3,457,706 |  |  | $ | (461,271 | ) |  | $ | 2,996,435 |
Prepaid expenses and other current assets (1)(2) | $ | 1,141,000 |  |  | $ | (37,271 | ) |  | $ | 1,103,729 |
Deferred income taxes (1)(2) | $ | 218,252 |  |  | $ | (8,325 | ) |  | $ | 209,927 |
Liabilities |  |  |  |  |
Contract liabilities(2)(3) | $ | — |  |  | $ | 690,142 |  |  | $ | 690,142 |
Deferred income(2)(3)(4) | $ | 691,365 |  |  | $ | (691,365 | ) |  | $ | — |
Other accrued expenses (3)(4) | $ | 1,000,979 |  |  | $ | 40,392 |  |  | $ | 1,041,371 |
Deferred income taxes(1) | $ | 114,385 |  |  | $ | 2,977 |  |  | $ | 117,362 |
Equity |  |  |  |  |
Retained earnings (1)(2) | $ | 1,760,097 |  |  | $ | 42,602 |  |  | $ | 1,802,699 |
(1) | Differences primarily relate to the timing of revenue recognition for over time customers and certain balance sheet reclassifications.
(2) | Differences primarily relate to the timing of recognition and recovery of fulfillment costs and certain balance sheet reclassifications.
(3) | Included within accrued expenses on the Condensed Consolidated Balance Sheets.
(4) | Differences included in contract liabilities as of September 1, 2018.
Significant Judgments The Company is one of the leading providers of worldwide manufacturing services and solutions. The Company provides comprehensive electronics design, production and product management services to companies in various industries and end markets. 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 products that are built to customer specifications, which are then provided to the customer. The Company generally enters into manufacturing service contracts with its customers that provide the framework under which business will be conducted and customer purchase orders will be received for specific quantities and with predominantly fixed pricing. As a result, the Company considers its contract with a customer to be the combination of the manufacturing service contract and the purchase order, or any agreements or other similar documents. The majority of our manufacturing service contracts relate to manufactured products which have no alternative use and for which the Company has an enforceable right to payment for the work completed to date. As a result, revenue is recognized over time when or as the Company transfers control of the promised products or services (known as performance obligations) to its customers. For certain other contracts with customers that do not meet the over time revenue recognition criteria, transfer of control occurs at a point in time which generally occurs upon delivery and transfer of risk and title to the customer. Most of our contracts have a single performance obligation as the promise to transfer the individual manufactured product or service is capable of being distinct and is distinct within the context of the contract. For the majority of customers, performance obligations are satisfied over time based on the continuous transfer of control as manufacturing services are performed and are generally completed in less than one year. The Company also derives revenue to a lesser extent from electronic design services to certain customers. Revenue from electronic design services is generally recognized over time as the services are performed. For the Company’s over time customers, it believes the measure of progress which best depicts the transfer of control is based on costs incurred to date, relative to total estimated cost at completion (i.e., an input method). This method is a faithful depiction of the transfer of goods or services because it results in the recognition of revenue on the basis of our to-date efforts in the satisfaction of a performance obligation relative to the total expected efforts in the satisfaction of the performance obligation. The Company believes that the use of an input method best depicts the transfer of control to the customer, which occurs as we incur costs on our contracts. The transaction price of each performance obligation is generally based upon the contractual stand-alone selling price of the product or service. Certain contracts with customers include variable consideration, such as rebates, discounts, or returns. The Company recognizes estimates of this variable consideration that are not expected to result in a significant revenue reversal in the future, primarily based on the most likely level of consideration to be paid to the customer under the specific terms of the underlying programs. 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 and are excluded from the transaction price. The Company has elected to account for shipping and handling activities related to contracts with customers as costs to fulfill the promise to transfer the goods. Accordingly, the Company records customer payments of shipping and handling costs as a component of net revenue, and classifies such costs as a component of cost of revenue. The following table presents the effect of the adoption of the new revenue guidance on the Condensed Consolidated Balance Sheets as of February 28, 2019 (in thousands):
|  | February 28, 2019
|  | As reported |  | Balance without the adoption of ASU 2014-09
Assets |  |  |  |
Contract assets (1) |  | $ | 832,889 |  |  | $ | — |
Inventories, net (1) |  | $ | 3,248,273 |  |  | $ | 3,943,077 |
Prepaid expenses and other current assets (1)(2) |  | $ | 532,223 |  |  | $ | 537,801 |
Deferred income taxes (1)(2) |  | $ | 194,015 |  |  | $ | 198,444 |
Liabilities |  |  |  |
Contract liabilities(2)(3) |  | $ | 583,300 |  |  | $ | — |
Deferred income(2)(3)(4) |  | $ | — |  |  | $ | 571,149 |
Other accrued expenses (3)(4) |  | $ | 1,620,683 |  |  | $ | 1,616,750 |
Deferred income taxes(1) |  | $ | 117,547 |  |  | $ | 113,426 |
Equity |  |  |  |
Retained earnings (1)(2) |  | $ | 1,966,100 |  |  | $ | 1,858,227 |
(1) | Differences primarily relate to the timing of revenue recognition for over time customers and certain balance sheet reclassifications.
(2) | Differences primarily relate to the timing of recognition and recovery of fulfillment costs and certain balance sheet reclassifications.
(3) | Included within accrued expenses on the Condensed Consolidated Balance Sheets.
(4) | Differences included in contract liabilities as of September 1, 2018.
The following table presents the effect of the adoption of the new revenue guidance on the Consolidated Statement of Operations for the three months and six months ended February 28, 2019 (in thousands):
| Three months ended |  | Six months ended
| February 28, 2019 |  | February 28, 2019
| As reported |  | Balance without the adoption of ASU 2014-09 |  | As reported |  | Balance without the adoption of ASU 2014-09
Net revenue (1) | $ | 6,066,990 |  |  | $ | 5,985,439 |  |  | $ | 12,573,265 |  |  | $ | 12,229,174 |
Cost of revenue (2) | $ | 5,612,116 |  |  | $ | 5,556,714 |  |  | $ | 11,598,741 |  |  | $ | 11,317,170 |
Operating income | $ | 153,983 |  |  | $ | 127,835 |  |  | $ | 370,693 |  |  | $ | 308,174 |
Income tax expense | $ | 33,219 |  |  | $ | 36,867 |  |  | $ | 74,032 |  |  | $ | 76,783 |
Net income | $ | 67,607 |  |  | $ | 37,811 |  |  | $ | 191,681 |  |  | $ | 126,411 |
(1) | Differences primarily relate to the timing of revenue recognition for over-time customers and to the recovery of fulfillment costs.
(2) | Differences primarily relate to the timing of cost recognition for over-time customers and the recognition of fulfillment costs.
The following table presents the Company’s revenues disaggregated by segment (in thousands):
| Three months ended |  | Six months ended
| February 28, 2019 |  | February 28, 2019
| EMS |  | DMS |  | Total |  | EMS |  | DMS |  | Total
Timing of transfer |  |  |  |  |  |  |  |  |  |  |
Point in time | $ | 836,863 |  |  | $ | 1,464,832 |  |  | $ | 2,301,695 |  |  | $ | 1,257,524 |  |  | $ | 3,566,483 |  |  | $ | 4,824,007 |
Over time | $ | 2,967,864 |  |  | $ | 797,431 |  |  | $ | 3,765,295 |  |  | $ | 6,050,306 |  |  | $ | 1,698,952 |  |  | $ | 7,749,258 |
Total | $ | 3,804,727 |  |  | $ | 2,262,263 |  |  | $ | 6,066,990 |  |  | $ | 7,307,830 |  |  | $ | 5,265,435 |  |  | $ | 12,573,265 |
Contract Balances Timing of revenue recognition may differ from the timing of invoicing to customers. The Company records an asset when revenue is recognized prior to invoicing a customer (“contract assets”) while a liability is recognized when a customer pays an invoice prior to the Company transferring control of the goods or services (“contract liabilities”). Amounts recognized as contract assets are generally transferred to receivables in the succeeding quarter due to the short-term nature of the manufacturing cycle. Contract assets are classified separately on the Condensed Consolidated Balance Sheets and transferred to receivables when right to payment becomes unconditional. The Company reviews contract assets for impairment whenever events or changes in circumstances indicate that the carrying amount of the asset may not be recoverable after considering factors such as the age of the balances and the financial stability of the customer. No impairment costs related to contract assets were recognized during the six months ended February 28, 2019.
Revenue recognized during the six months ended February 28, 2019 that was included in the contract liability balance as of September 1, 2018 was $267.0 million. Fulfillment Costs The Company capitalizes costs incurred to fulfill its contracts that i) relate directly to the contract or anticipated contracts, ii) are expected to generate or enhance the Company’s resources that will be used to satisfy the performance obligation under the contract, and iii) are expected to be recovered through revenue generated from the contract. Prior to the adoption of the new guidance, unless explicit reimbursement contracts existed, these costs were expensed as incurred. Capitalized fulfillment costs are amortized to cost of revenue as the Company satisfies the related performance obligations under the contract with approximate lives ranging from 1-3 years. These costs, which are included in prepaid expenses and other current assets and other assets on the Consolidated Balance Sheets, generally represent upfront costs incurred to prepare for manufacturing activities. The Company assesses the capitalized fulfillment costs for impairment at the end of each reporting period. The Company will recognize an impairment loss to the extent the carrying amount of the capitalized costs exceeds the recoverable amount. Recoverability is assessed by considering the capitalized fulfillment costs in relation to the forecasted profitability of the related manufacturing performance obligations. As of February 28, 2019, capitalized costs to fulfill are $51.1 million. Amortization of $19.9 million and no impairment costs related to fulfillments costs were recognized during the six months ended February 28, 2019.
Remaining Performance Obligations The Company applied the practical expedient and did not disclose the value of unsatisfied performance obligations for contracts with an original expected length of one year or less.

X
- References No definition available. + Details
Name: | us-gaap_RevenueFromContractWithCustomerAbstract
Namespace Prefix: | us-gaap_
Data Type: | xbrli:stringItemType
Balance Type: | na
Period Type: | duration

X
- Definition The entire disclosure of revenue from contract with customer to transfer good or service and to transfer nonfinancial asset. Includes, but is not limited to, disaggregation of revenue, credit loss recognized from contract with customer, judgment and change in judgment related to contract with customer, and asset recognized from cost incurred to obtain or fulfill contract with customer. Excludes insurance and lease contracts. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 606 -URI http://asc.fasb.org/topic&trid=49130388 Reference 2: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -URI http://asc.fasb.org/topic&trid=2122369 + Details
Name: | us-gaap_RevenueFromContractWithCustomerTextBlock
Namespace Prefix: | us-gaap_
Data Type: | nonnum:textBlockItemType
Balance Type: | na
Period Type: | duration