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The accompanying unaudited Condensed Consolidated Financial Statements have been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) necessary to present fairly the information set forth therein have been included. The accompanying unaudited Condensed Consolidated Financial Statements should be read in conjunction with the Consolidated Financial Statements and footnotes included in the Annual Report on Form 10-K of the Company for the fiscal year ended August 31, 2019. Results for the nine months ended May 31, 2020 are not necessarily an indication of the results that may be expected for the full fiscal year ending August 31, 2020.

The full impact on the Company’s business and results of operations related to COVID-19 depends on future developments and cannot be fully predicted. The Company has considered all information available as of the date of these financial statements and is not aware of any circumstances that would result in an update to its estimates or judgments, or any adjustment to the carrying value of its assets or liabilities. Estimates are dependent on certain events and may change as future events occur or additional information becomes available and thus actual results could differ materially from these estimates and judgments.

The Company regularly sells designated pools of high credit quality trade accounts receivable under uncommitted trade accounts receivable sale programs to unaffiliated financial institutions without recourse. As these accounts receivable are sold without recourse, the Company does not retain the associated risks following the transfer of such accounts receivable to the respective financial institutions. The Company continues servicing the receivables sold and in exchange receives a servicing fee under each of the trade accounts receivable sale programs. Servicing fees related to each of the trade accounts receivable sale programs recognized during the three months and nine months ended May 31, 2020 and 2019 were not material. The Company does not record a servicing asset or liability on the Condensed Consolidated Balance Sheets as the Company estimates that the fee it receives to service these receivables approximates the fair market compensation to provide the servicing activities.

Transfers of the receivables under the trade accounts receivable sale programs are accounted for as sales and, accordingly, net receivables sold under the trade accounts receivable sale programs are excluded from accounts receivable on the Condensed Consolidated Balance Sheets and are reflected as cash provided by operating activities on the Condensed Consolidated Statements of Cash Flows.

The following is a summary of the trade accounts receivable sale programs with unaffiliated financial institutions where the Company may elect to sell receivables and the unaffiliated financial institution may elect to purchase, at a discount, on an ongoing basis:

Program	Maximum Amount (in millions)(1)					Type of Facility		Expiration Date
A	$	600.0				Uncommitted		December 5, 2020(2)
B	$	150.0				Uncommitted		November 30, 2020(3)
C	800.0			CNY		Uncommitted		June 30, 2020
D	$	150.0				Uncommitted		May 4, 2023(4)
E	$	50.0				Uncommitted		August 25, 2020
F	$	150.0				Uncommitted		January 25, 2021(5)
G	$	50.0				Uncommitted		February 23, 2023(6)
H	$	100.0				Uncommitted		August 10, 2020(7)
I	$	100.0				Uncommitted		July 21, 2020(8)
J	$	650.0				Uncommitted		December 4, 2020(9)
K	$	135.0				Uncommitted		April 11, 2021(10)
L	100.0			CHF		Uncommitted		December 5, 2020(2)

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(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 each year through December 5, 2025 unless either party provides 30 days’ notice of termination.

(3)	The program will automatically extend for one year at each expiration date unless either party provides 10 days’ notice of termination.

(4)	Any party may elect to terminate the agreement upon 30 days’ prior notice.

(5)	The program will be automatically extended through January 25, 2023 unless either party provides 30 days’ notice of termination.

(6)	Any party may elect to terminate the agreement upon 15 days’ prior notice.

(7)	The program will be automatically extended through August 10, 2023 unless either party provides 30 days’ notice of termination.

(8)	The program will be automatically extended through August 21, 2023 unless either party provides 30 days’ notice of termination.

(9)	The program will be automatically extended each year through December 5, 2024 unless either party provides 30 days’ notice of termination.

(10)	The program will be automatically extended each year through April 11, 2025 unless either party provides 30 days’ notice of termination.

In connection with the trade accounts receivable sale programs, the Company recognized the following (in millions):

	Three months ended								Nine months ended
	May 31, 2020				May 31, 2019				May 31, 2020				May 31, 2019
Trade accounts receivable sold	$	2,162			$	1,548			$	6,325			$	5,101
Cash proceeds received	$	2,158			$	1,541			$	6,311			$	5,079
Pre-tax losses on sale of receivables(1)	$	4			$	7			$	14			$	22

(1)	Recorded to other expense within the Condensed Consolidated Statement of Operations.

Inventories consist of the following (in thousands):

	May 31, 2020				August 31, 2019
Raw materials	$	2,524,454			$	2,310,081
Work in process	412,834				468,217
Finished goods	425,894				314,258
Reserve for excess and obsolete inventory	(79,481		)		(69,553		)
Inventories, net	$	3,283,701			$	3,023,003

Effective September 1, 2019, the Company adopted Accounting Standards Update No. 2016-02 (“ASU 2016-02”), Leases (Topic 842) using the modified retrospective approach and also elected to apply the package of practical expedients, which among other things, allows entities to maintain the historical lease classification for existing leases. The Company has lease agreements that contain both lease and non-lease components. For lease agreements entered into or reassessed after the adoption of ASU 2016-02, the Company has elected the practical expedient to combine lease and non-lease components for building and real estate leases.

The Company primarily has leases for buildings and real estate with lease terms ranging from 1 year to 36 years. Leases for other classes of assets are not significant. For any leases with an initial term in excess of 12 months, the Company determines whether an arrangement is a lease at contract inception by evaluating if the contract conveys the right to use and control the specific property or equipment. Certain lease agreements contain purchase or renewal options. These options are included in the lease term when it is reasonably certain that the Company will exercise that option. Generally, the Company's lease agreements do not contain material residual value guarantees or material restrictive covenants.

Right-of-use assets represent the right to use an underlying asset for the lease term and lease liabilities represent an obligation to make lease payments arising from the lease. Right-of-use assets and lease liabilities are recognized based on the

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present value of future lease payments over the lease term at the lease commencement date. When determining the present value of future payment, the Company uses the incremental borrowing rate when the implicit rate is not readily determinable. Any payment deemed probable under residual value guarantees is included in lease payments. Any variable payments, other than those that depend on an index or rate, are excluded from right-of-use assets and lease liabilities.

Leases with an initial term of 12 months or less are not recorded as right-of-use assets and lease liabilities in the Consolidated Balance Sheet. Lease expense for these leases is recognized on a straight-line basis over the lease term.

Upon adoption of ASU 2016-02, the Company recorded $414.6 million and $437.5 million of right-of-use assets and lease liabilities, respectively, related to its existing operating lease portfolio. The accounting for the Company's finance leases remained substantially unchanged and balances were not significant on the adoption date. The adoption of this standard did not have a material impact on the Consolidated Statements of Operations or the Consolidated Statements of Cash Flows.

The following table sets forth the amount of lease assets and lease liabilities included on the Company's Condensed Consolidated Balance Sheets, as of the period indicated (in thousands):

		Financial Statement Line Item		May 31, 2020
Assets
Operating lease assets (1)		Operating lease right-of-use assets		$	377,540
Finance lease assets (2)		Property, plant and equipment, net		149,956
Total lease assets				$	527,496
Liabilities
Current
Operating lease liabilities		Current operating lease liabilities		$	102,284
Finance lease liabilities		Accrued expenses		7,047
Non-current
Operating lease liabilities		Non-current operating lease liabilities		311,939
Finance lease liabilities		Other liabilities		155,546
Total lease liabilities				$	576,816

(1)	Net of accumulated amortization of $72.3 million.

(2)	Net of accumulated amortization of $11.0 million.

The following table is a summary of expenses related to leases included on the Company's Condensed Consolidated Statements of Operations, for the periods indicated (in thousands):

	Three months ended				Nine months ended
	May 31, 2020				May 31, 2020
Operating lease cost	$	28,472			$	84,018
Finance lease cost
Amortization of leased assets	1,445				4,026
Interest on lease liabilities	1,250				3,693
Other	3,526				7,709
Net lease cost(1)	$	34,693			$	99,446

(1)	Lease costs are primarily recognized in cost of revenue.

The following table is a summary of the weighted-average remaining lease terms and weighted-average discount rates of the Company's leases, as of the period indicated:

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	May 31, 2020
	Weighted-average remaining lease term		Weighted-average discount rate
Operating leases	5.5 years		3.21	%
Finance leases	6.0 years		4.32	%

The following table sets forth other supplemental information related to the Company's lease portfolio (in thousands):

	Nine months ended
	May 31, 2020
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows for operating leases(1)	$	83,427
Operating cash flows for finance leases(1)	3,693
Financing activities for finance leases(2)	4,451
Non-cash right-of-use assets obtained in exchange for new lease liabilities:
Operating leases	82,552
Finance leases	111,591

(1)	Included in accounts payable, accrued expenses and other liabilities in Operating Activities of the Company's Condensed Consolidated Statements of Cash Flows.

(2)	Included in payments toward debt agreements in Financing Activities of the Company's Condensed Consolidated Statements of Cash Flows.

The future minimum lease payments under operating and finance leases as of May 31, 2020 were as follows (in thousands):

Twelve months ended May 31,	Operating Leases(1)				Finance Leases				Total
2020	$	112,866			$	11,964			$	124,830
2021	88,654				12,354				101,008
2022	68,909				11,783				80,692
2023	56,144				11,917				68,061
2024	41,127				43,059				84,186
Thereafter	92,130				98,846				190,976
Total minimum lease payments	$	459,830			$	189,923			$	649,753
Less: Interest	(45,607		)		(27,330		)		(72,937		)
Present value of lease liabilities	$	414,223			$	162,593			$	576,816

(1)	Excludes $43.4 million of payments related to leases signed but not yet commenced. Additionally, certain leases signed but not yet commenced contain residual value guarantees and purchase options not deemed probable.

As disclosed in the Company’s Form 10-K for the fiscal year ended August 31, 2019, the future minimum lease payments of non-cancelable operating leases prior to the adoption of ASU 2016-02 were as follows (in thousands):

Fiscal Year Ending August 31,	Amount
2020	$	118,312
2021	102,915
2022	84,729
2023	63,206
2024	51,091
Thereafter	182,932
Total minimum lease payments	$	603,185

Total operating lease expense prior to the adoption of ASU 2016-02 was approximately $125.4 million, $130.2 million and $117.2 million for fiscal years 2019, 2018 and 2017, respectively.

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Notes payable and long-term debt outstanding as of May 31, 2020 and August 31, 2019 are summarized below (in thousands): 

		Maturity Date		May 31, 2020				August 31, 2019
5.625% Senior Notes		Dec 15, 2020		$	399,555			$	398,886
4.700% Senior Notes		Sep 15, 2022		498,496				498,004
4.900% Senior Notes		Jul 14, 2023		299,239				299,057
3.950% Senior Notes		Jan 12, 2028		495,286				494,825
3.600% Senior Notes(1)		Jan 15, 2030		494,616				—
Borrowings under credit facilities(2)(3)(4)		Apr 23, 2021, Jan 22, 2023 and Jan 22, 2025		—				—
Borrowings under loans(2)		Jan 22, 2025		300,138				805,693
Total notes payable and long-term debt				2,487,330				2,496,465
Less current installments of notes payable and long-term debt				399,737				375,181
Notes payable and long-term debt, less current installments				$	2,087,593			$	2,121,284

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(1)	On January 15, 2020, the Company issued $500.0 million of publicly registered 3.600% Senior Notes due 2030 (the “3.600% Senior Notes”). The net proceeds from the offering were used for the repayment of term loan indebtedness.

(2)

On January 22, 2020, the Company entered into a senior unsecured credit agreement which provides for: (i) a Revolving Credit Facility in the initial amount of $2.7 billion, of which $700.0 million expires on January 22, 2023 and $2.0 billion expires on January 22, 2025 and (ii) a $300.0 million Term Loan Facility which expires on January 22, 2025, (collectively the “Credit Facility”). Interest and fees on the Credit Facility advances are based on the Company’s non-credit enhanced long-term senior unsecured debt rating as determined by Standard & Poor’s Ratings Service, Moody’s Investors Service and Fitch Ratings. In connection with the Company’s entry into the Credit Facility, the Company terminated the Company’s amended and restated five-year credit agreement dated November 8, 2017 and the credit agreement dated August 24, 2018.

During the nine months ended May 31, 2020, the interest rates on the Revolving Credit Facility ranged from 1.2% to 4.3% and the Term Loan Facility ranged from 1.6% to 3.5%. Interest is charged at a rate equal to (a) for the Revolving Credit Facility, either 0.000% to 0.450% above the base rate or 0.975% to 1.450% above the Eurocurrency rate and (b) for the Term Loan Facility, either 0.125% to 0.750% above the base rate or 1.125% to 1.750% above the Eurocurrency rate. The base rate represents the greatest of: (i) Citibank, N.A.’s prime rate, (ii) 0.50% above the federal funds rate, and (iii) 1.0% above one-month LIBOR, but not less than zero. The Eurocurrency rate represents adjusted LIBOR or adjusted CDOR, as applicable, for the applicable interest period, but not less than zero. Fees include a facility fee based on the revolving credit commitments of the lenders and a letter of credit fee based on the amount of outstanding letters of credit.

(3)

On April 24, 2020, the Company entered into an unsecured 364-day revolving credit agreement up to an initial aggregate amount of $375.0 million, which was increased to $425.0 million on May 29, 2020 (the “364-Day Revolving Credit Agreement”). The 364-Day Revolving Credit Agreement expires on April 23, 2021. Interest and fees on the 364-Day Revolving Credit Agreement advances are based on the Company’s non-credit enhanced long-term senior unsecured debt rating as determined by Standard & Poor’s Ratings Service, Moody’s Investors Service and Fitch Ratings.

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

(4)	As of May 31, 2020, the Company has $3.7 billion in available unused borrowing capacity under its revolving credit facilities. The Revolving Credit Facility under the Credit Facility acts as the back-up facility for commercial paper outstanding, if any. The Company has a borrowing capacity of up to $1.8 billion under its commercial paper program.

Debt Covenants

Borrowings under the Company’s debt agreements are subject to various covenants that limit the Company’s ability to: incur additional indebtedness, sell assets, effect mergers and certain transactions, and effect certain transactions with subsidiaries and affiliates. In addition, the revolving credit facilities and the 4.900% Senior Notes contain debt leverage and interest coverage covenants. The Company is also subject to certain covenants requiring the Company to offer to repurchase the 5.625%, 4.700%, 4.900%, 3.950% or 3.600% Senior Notes upon a change of control. As of May 31, 2020 and August 31, 2019, the Company was in compliance with its debt covenants.

Fair Value

The Company continuously sells designated pools of trade accounts receivable, at a discount, under its foreign asset-backed securitization program and its North American asset-backed securitization program to special purpose entities, which in turn sell certain of the foreign asset-backed receivables to an unaffiliated financial institution and a conduit administered by an unaffiliated financial institution and certain of the North American asset-backed receivables to conduits administered by an unaffiliated financial institution on a monthly basis.

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The Company continues servicing the receivables sold and in exchange receives a servicing fee under each of the asset-backed securitization programs. Servicing fees related to each of the asset-backed securitization programs recognized during the three months and nine months ended May 31, 2020 and 2019 were not material. The Company does not record a servicing asset or liability on the Condensed Consolidated Balance Sheets as the Company estimates that the fee it receives to service these receivables approximates the fair market compensation to provide the servicing activities.

Transfers of the receivables under the asset-backed securitization programs are accounted for as sales and, accordingly, net receivables sold under the asset-backed securitization programs are excluded from accounts receivable on the Condensed Consolidated Balance Sheets and are reflected as cash provided by operating activities on the Condensed Consolidated Statements of Cash Flows.

The special purpose entity in the foreign asset-backed securitization program is a separate bankruptcy-remote entity whose assets would be first available to satisfy the creditor claims of the unaffiliated financial institution. The Company is deemed the primary beneficiary of this special purpose entity as the Company has both the power to direct the activities of the entity that most significantly impact the entity’s economic performance and the obligation to absorb losses or the right to receive the benefits that could potentially be significant to the entity from the transfer of the trade accounts receivable into the special purpose entity. Accordingly, the special purpose entity associated with the foreign asset-backed securitization program is included in the Company’s Condensed Consolidated Financial Statements. As of May 31, 2020, the special purpose entity has liabilities for which creditors do not have recourse to the general credit of the Company (primary beneficiary). The liabilities cannot exceed the maximum amount of net cash proceeds under the foreign asset-backed securitization program.

The foreign asset-backed securitization program contains a guarantee of payment by the special purpose entity, in an amount approximately equal to the net cash proceeds under the program. No liability has been recorded for obligations under the guarantee as of May 31, 2020.

The special purpose entity in the North American asset-backed securitization program is a wholly-owned subsidiary of the Company and is included in the Company’s Condensed Consolidated Financial Statements. Certain unsold receivables covering the maximum amount of net cash proceeds available under the North American asset-backed securitization program are pledged as collateral to the unaffiliated financial institution as of May 31, 2020.

Following is a summary of the asset-backed securitization programs and key terms:    

	Maximum Amount of Net Cash Proceeds (in millions)(1)(2)				Expiration Date
North American	$	390.0			November 22, 2021
Foreign	$	400.0			September 30, 2021

(1)	Maximum amount available at any one time.

(2)	As of May 31, 2020, the Company had up to $136.6 million in available liquidity under its asset-backed securitization programs.

In connection with the asset-backed securitization programs, the Company recognized the following (in millions):

	Three months ended								Nine months ended
	May 31, 2020				May 31, 2019				May 31, 2020				May 31, 2019(3)
Trade accounts receivable sold	$	948			$	1,036			$	3,205			$	2,864
Cash proceeds received(1)	$	944			$	1,029			$	3,189			$	2,845
Pre-tax losses on sale of receivables(2)	$	4			$	7			$	16			$	19

(1)	The amounts primarily represent proceeds from collections reinvested in revolving-period transfers.

(2)	Recorded to other expense within the Condensed Consolidated Statements of Operations.

(3)	Excludes $650.3 million of trade accounts receivable sold, $488.1 million of cash and $13.9 million of net cash received prior to the amendment of the foreign asset-backed securitization program and under the previous North American asset-backed securitization program which occurred during the first quarter of fiscal year 2019.

The asset-backed securitization programs require compliance with several covenants. The North American asset-backed securitization program covenants include compliance with the interest ratio and debt to EBITDA ratio of the five-year

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unsecured credit facility entered into on January 22, 2020 (the “Credit Facility”). The foreign asset-backed securitization program covenants include limitations on certain corporate actions such as mergers and consolidations. As of May 31, 2020 and August 31, 2019, the Company was in compliance with all covenants under the asset-backed securitization programs.

Accrued expenses consist of the following (in thousands):

	May 31, 2020				August 31, 2019
Contract liabilities(1)	$	463,773			$	511,329
Accrued compensation and employee benefits	609,905				600,907
Other accrued expenses	2,173,299				1,877,908
Accrued expenses	$	3,246,977			$	2,990,144

(1)	Revenue recognized during the nine months ended May 31, 2020 and 2019 that was included in the contract liability balance as of September 1, 2019 and 2018 was $260.9 million and $350.9 million, respectively.

Postretirement Benefits

Net Periodic Benefit Cost

The following table provides information about the net periodic benefit cost for all plans for the three months and nine months ended May 31, 2020 and 2019 (in thousands):

	Three months ended								Nine months ended
	May 31, 2020				May 31, 2019				May 31, 2020				May 31, 2019
Service cost (1)	$	6,701			$	381			$	17,802			$	965
Interest cost (2)	755				987				2,327				2,742
Expected long-term return on plan assets (2)	(3,741		)		(1,344		)		(10,316		)		(4,026		)
Recognized actuarial loss (2)	225				203				674				616
Amortization of prior service credit (2)	(11		)		(11		)		(33		)		(34		)
Net periodic benefit cost	$	3,929			$	216			$	10,454			$	263

(1)	Service cost is recognized in cost of revenue in the Condensed Consolidated Statement of Operations.

(2)	Components are recognized in other expense in the Condensed Consolidated Statement of Operations.

Acquired Plan

As a result of the third closing of the JJMD acquisition, the Company assumed a pension obligation for employees in Switzerland (the “Switzerland plan”). The Switzerland plan, which is a qualified defined benefit pension plan, provides benefits based on average employee earnings over an approximately 8 years service period preceding retirement and length of employee service. The Company’s policy is to contribute amounts sufficient to meet minimum funding requirements as set forth in Switzerland employee benefit and tax laws plus such additional amounts as are deemed appropriate by the Company.

The following tables provide information only related to the Switzerland plan as of the acquisition date, September 30, 2019, and are preliminary estimates.

Benefit Obligation and Plan Assets

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The benefit obligations, plan assets and the funded status of the Switzerland plan as of September 30, 2019 are as follows (in thousands):

	September 30, 2019
Ending projected benefit obligation	$	(404,297	)
Ending fair value of plan assets	$	330,793
Unfunded status	$	(73,504	)

Cash Flows

The Company expects to make cash contributions between $9.9 million and $12.1 million to its Switzerland pension plan during fiscal year 2020. The estimated future benefit payments, which reflect expected future service, are as follows (in thousands):

Fiscal Year Ended August 31,	Amount
2020	$	25,693
2021	22,572
2022	20,908
2023	19,140
2024	17,995
2025 through 2029	86,337

Accumulated Benefit Obligation

The following table provides information for the Switzerland plan with an accumulated benefit obligation as of September 30, 2019 (in thousands):

	September 30, 2019
Projected benefit obligation	$	(404,297	)
Accumulated benefit obligation	$	(394,427	)
Fair value of plan assets	$	330,793

The Company is directly and indirectly affected by changes in certain market conditions. These changes in market conditions may adversely impact the Company’s financial performance and are referred to as market risks. The Company, where deemed appropriate, uses derivatives as risk management tools to mitigate the potential impact of certain market risks. The primary market risks managed by the Company through the use of derivative instruments are foreign currency risk and interest rate risk.

Foreign Currency Risk Management

Forward contracts are put in place to manage the foreign currency risk associated with the anticipated foreign currency denominated revenues and expenses. A hedging relationship existed with an aggregate notional amount outstanding of $389.7 million and $334.1 million as of May 31, 2020 and August 31, 2019, respectively. The related forward foreign exchange contracts have been designated as hedging instruments and are accounted for as cash flow hedges. The forward foreign exchange contract transactions will effectively lock in the value of anticipated foreign currency denominated revenues and expenses against foreign currency fluctuations. The anticipated foreign currency denominated revenues and expenses being hedged are expected to occur between June 1, 2020 and May 31, 2021.

In addition to derivatives that are designated as hedging instruments and qualify for hedge accounting, the Company also enters into forward contracts to economically hedge transactional exposure associated with commitments arising from trade accounts receivable, trade accounts payable, fixed purchase obligations and intercompany transactions denominated in a currency other than the functional currency of the respective operating entity. The aggregate notional amount of these outstanding contracts as of May 31, 2020 and August 31, 2019, was $2.6 billion and $2.5 billion, respectively.

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Refer to Note 17 – “Fair Value Measurements” for the fair values and classification of the Company’s derivative instruments.

The gains and losses recognized in earnings due to hedge ineffectiveness and the amount excluded from effectiveness testing were not material for all periods presented and are included as components of net revenue, cost of revenue and selling, general and administrative expense, which are the same line items in which the hedged items are recorded.

The following table presents the losses and gains from forward contracts recorded in the Condensed Consolidated Statements of Operations for the periods indicated (in thousands):

Derivatives Not Designated as Hedging Instruments Under ASC 815		Location of (Loss) Gain on Derivatives Recognized in Net Income		Amount of (Loss) Gain Recognized in Net Income on Derivatives
				Three months ended								Nine months ended
				May 31, 2020				May 31, 2019				May 31, 2020				May 31, 2019
Forward foreign exchange contracts(1)		Cost of revenue		$	(36,955	)		$	(33,476	)		$	(3,436	)		$	9,332

(1)

For the three months and nine months ended May 31, 2020, the Company recognized $36.9 million and $0.4 million, respectively, of foreign currency gains in cost of revenue, which are offset by the losses from the forward foreign exchange contracts. During the three months ended May 31, 2019, the Company recognized $28.3 million of foreign currency gains in cost of revenue, which are offset by the losses from the forward foreign exchange contracts. During the nine months ended May 31, 2019, the Company recognized $24.3 million of foreign currency losses in cost of revenue, which are offset by the gains from the forward foreign exchange contracts.

Interest Rate Risk Management

The Company periodically enters into interest rate swaps to manage interest rate risk associated with the Company’s borrowings.

Cash Flow Hedges

The following table presents the interest rate swaps outstanding as of May 31, 2020, which have been designated as hedging instruments and accounted for as cash flow hedges:

Interest Rate Swap Summary	Hedged Interest Rate Payments		Aggregate Notional Amount (in millions)				Effective Date		Expiration Date (1)
Forward Interest Rate Swap
Anticipated Debt Issuance	Fixed		$	200.0			Oct 22, 2018		Dec 15, 2020	(2)
Interest Rate Swaps
Debt obligations	Variable		$	550.0			Aug 24, 2018 and Oct 11, 2018		Aug 24, 2020 and Aug 31, 2020	(3)

(1)	The contracts will be settled with the respective counterparties on a net basis at the expiration date for the forward interest rate swap and at each settlement date for the interest rate swaps.

(2)	If the anticipated debt issuance occurs before December 15, 2020, the contracts will be terminated simultaneously with the debt issuance.

(3)	The Company pays interest based upon a fixed rate as agreed upon with the respective counterparties and receives variable rate interest payments based on the one-month and three-month LIBOR for borrowings under the Credit Facility and certain other debt obligations. Of the amount hedged, $350.0 million expires on August 24, 2020 and $200.0 million expires on August 31, 2020.

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The following table sets forth the changes in accumulated other comprehensive (loss) income (“AOCI”), net of tax, by component for the nine months ended May 31, 2020 (in thousands):

	Foreign Currency Translation Adjustment				Derivative Instruments				Actuarial Loss				Prior Service Cost				Available for Sale Securities				Total
Balance as of August 31, 2019	$	(14,298	)		$	(39,398	)		$	(28,033	)		$	(608	)		$	(457	)		(82,794		)
Other comprehensive (loss) income before reclassifications	(43,010		)		(21,391		)		—				—				(21,563		)		(85,964		)
Amounts reclassified from AOCI	—				19,355				—				—				—				19,355
Other comprehensive (loss) income(1)	(43,010		)		(2,036		)		—				—				(21,563		)		(66,609		)
Balance as of May 31, 2020	$	(57,308	)		$	(41,434	)		$	(28,033	)		$	(608	)		$	(22,020	)		$	(149,403	)

(1)	Amounts are net of tax, which are immaterial.

The following table sets forth the amounts reclassified from AOCI into the Condensed Consolidated Statements of Operations, and the associated financial statement line item, net of tax, for the periods indicated (in thousands):

				Three months ended								Nine months ended
Comprehensive Income Components		Financial Statement Line Item		May 31, 2020				May 31, 2019				May 31, 2020				May 31, 2019
Realized losses (gains) on derivative instruments:(1)
Foreign exchange contracts		Cost of revenue		$	16,451			$	(1,298	)		$	20,648			$	17,248
Interest rate contracts		Interest expense		(431		)		(430		)		(1,293		)		(1,290		)
Total amounts reclassified from AOCI(2)				$	16,020			$	(1,728	)		$	19,355			$	15,958

(1)	The Company expects to reclassify $4.4 million into earnings during the next twelve months, which will primarily be classified as a component of cost of revenue.

(2)	Amounts are net of tax, which are immaterial for the three months and nine months ended May 31, 2020 and 2019.

The Company recognized stock-based compensation expense within selling, general and administrative expense as follows (in thousands):

	Three months ended								Nine months ended
	May 31, 2020				May 31, 2019				May 31, 2020				May 31, 2019
Restricted stock units	$	14,299			$	12,592			$	54,783			$	41,247
Employee stock purchase plan	2,583				1,914				7,431				6,205
Total	$	16,882			$	14,506			$	62,214			$	47,452

As of May 31, 2020, the shares available to be issued under the 2011 Stock Award and Incentive Plan were 10,519,566.

Restricted Stock Units

Certain key employees have been granted time-based, performance-based and market-based restricted stock unit awards (“restricted stock units”). The time-based restricted stock units generally vest on a graded vesting schedule over three years. The performance-based restricted stock units generally vest on a cliff vesting schedule over three years and up to a maximum of 150%, depending on the specified performance condition and the level of achievement obtained. The performance-based restricted stock units have a vesting condition that is based upon the Company’s cumulative adjusted core earnings per share during the performance period. The market-based restricted stock units generally vest on a cliff vesting schedule over three years and up to a maximum of 200%, depending on the specified performance condition and the level of achievement obtained.

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The market-based restricted stock units have a vesting condition that is tied to the Company’s total shareholder return based on the Company’s stock performance in relation to the companies in the Standard and Poor’s (S&P) Super Composite Technology Hardware and Equipment Index excluding the Company. During the nine months ended May 31, 2020 and 2019, the Company awarded approximately 1.1 million and 1.6 million time-based restricted stock units, respectively, 0.3 million and 0.4 million performance-based restricted stock units, respectively and 0.3 million and 0.4 million market-based restricted stock units, respectively.

The following represents the stock-based compensation information for the period indicated (in thousands):

	Nine months ended
	May 31, 2020
Unrecognized stock-based compensation expense—restricted stock units	$	54,394
Remaining weighted-average period for restricted stock units expense	1.4 years

Common Stock Outstanding

The following represents the common stock outstanding for the periods indicated:

	Three months ended						Nine months ended
	May 31, 2020			May 31, 2019			May 31, 2020			May 31, 2019
Common stock outstanding:
Beginning balances	151,407,526			152,878,329			153,520,380			164,588,172
Shares issued upon exercise of stock options	—			—			56,999			11,348
Shares issued under employee stock purchase plan	—			(215	)		595,717			692,110
Vesting of restricted stock	13,234			73,095			2,252,846			1,979,022
Purchases of treasury stock under employee stock plans	(2,808	)		(24,322	)		(619,931	)		(489,158	)
Treasury shares purchased(1)	(843,916	)		—			(5,231,975	)		(13,854,607	)
Ending balances	150,574,036			152,926,887			150,574,036			152,926,887

(1)	In September 2019, the Company’s Board of Directors authorized the repurchase of up to $600.0 million of the Company’s common stock as part of a two-year capital allocation framework (the “2020 Share Repurchase Program”). As of May 31, 2020, 5.2 million shares had been repurchased for $188.9 million and $411.1 million remains available under the 2020 Share Repurchase Program.

Concentration of Risk

Sales of the Company’s products are concentrated among specific customers. During the nine months ended May 31, 2020, the Company’s five largest customers accounted for approximately 47% of its net revenue and 72 customers accounted for approximately 90% of its net revenue. Sales to these customers were reported in the Electronics Manufacturing Services (“EMS”) and Diversified Manufacturing Services (“DMS”) operating segments.

The Company procures components from a broad group of suppliers. Some of the products manufactured by the Company require one or more components that are available from only a single source.

Segment Data

Net revenue for the operating segments is attributed to the segment in which the service is performed. An operating segment’s performance is evaluated based on its pre-tax operating contribution, or segment income. Segment income is defined as net revenue less cost of revenue, segment selling, general and administrative expenses, segment research and development expenses and an allocation of corporate manufacturing expenses and selling, general and administrative expenses. Segment income does not include amortization of intangibles, stock-based compensation expense and related charges, restructuring, severance and related charges, distressed customer charges, acquisition and integration charges, impairment on securities, loss on disposal of subsidiaries, settlement of receivables and related charges, impairment of notes receivable and related charges,

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restructuring of securities loss, goodwill impairment charges, business interruption and impairment charges, net, income (loss) from discontinued operations, gain (loss) on sale of discontinued operations, other expense (excluding certain components of net periodic benefit cost), interest income, interest expense, income tax expense or adjustment for net income (loss) attributable to noncontrolling interests. Transactions between operating segments are generally recorded at amounts that approximate those at which we would transact with third parties.

The following table presents the Company’s revenues disaggregated by segment (in thousands):

	Three months ended
	May 31, 2020												May 31, 2019
	EMS				DMS				Total				EMS				DMS				Total
Timing of transfer
Point in time	$	963,512			$	1,380,477			$	2,343,989			$	699,825			$	1,156,213			$	1,856,038
Over time	2,949,416				1,042,237				3,991,653				3,288,664				990,900				4,279,564
Total	$	3,912,928			$	2,422,714			$	6,335,642			$	3,988,489			$	2,147,113			$	6,135,602

	Nine months ended
	May 31, 2020												May 31, 2019
	EMS				DMS				Total				EMS				DMS				Total
Timing of transfer
Point in time	$	3,340,992			$	4,391,837			$	7,732,829			$	1,957,349			$	4,722,696			$	6,680,045
Over time	8,819,442				3,414,152				12,233,594				9,338,970				2,689,852				12,028,822
Total	$	12,160,434			$	7,805,989			$	19,966,423			$	11,296,319			$	7,412,548			$	18,708,867

The following table sets forth operating segment information (in thousands):

	Three months ended								Nine months ended
	May 31, 2020				May 31, 2019				May 31, 2020				May 31, 2019
Segment income and reconciliation of income before income tax
EMS	$	102,372			$	130,869			$	291,902			$	303,618
DMS	69,712				54,896				316,945				326,866
Total segment income	$	172,084			$	185,765			$	608,847			$	630,484
Reconciling items:
Amortization of intangibles	(13,178		)		(7,610		)		(42,895		)		(23,033		)
Stock-based compensation expense and related charges	(16,882		)		(14,506		)		(62,214		)		(47,452		)
Restructuring, severance and related charges	(69,150		)		(9,340		)		(144,005		)		(16,182		)
Distressed customer charge	—				—				(14,963		)		—
Business interruption and impairment charges, net(1)	(4,574		)		—				(4,574		)		2,860
Acquisition and integration charges	(6,119		)		(13,391		)		(30,005		)		(35,066		)
Impairment on securities	—				—				(12,205		)		—
Other expense (net of periodic benefit cost)	(8,399		)		(14,084		)		(32,673		)		(39,391		)
Interest income	1,864				6,758				13,144				15,897
Interest expense	(41,873		)		(50,514		)		(132,967		)		(139,326		)
Income before income tax	$	13,773			$	83,078			$	145,490			$	348,791

⁽¹⁾Charges for the three and nine months ended May 31, 2020, relate to a flood that impacted our facility in Huangpu, China. Charges, net of insurance proceeds of $2.9 million for the nine months ended May 31, 2019, relate to business interruption and asset impairment costs associated with damage from Hurricane Maria, which impacted our operations in Cayey, Puerto Rico.

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As of May 31, 2020, the Company operated in 31 countries worldwide. Sales to unaffiliated customers are based on the Company location that maintains the customer relationship and transacts the external sale. The following tables set forth external net revenue, net of intercompany eliminations, and long-lived asset information where individual countries represent a material portion of the total (in thousands):

`

	Three months ended								Nine months ended
	May 31, 2020				May 31, 2019				May 31, 2020				May 31, 2019
External net revenue:
Singapore	$	1,470,283			$	1,324,901			$	4,717,568			$	5,232,505
Mexico	1,165,154				1,200,555				3,510,110				3,248,757
China	1,140,270				1,261,707				3,263,591				3,779,162
Malaysia	378,106				427,858				1,374,335				1,221,819
Vietnam	222,477				196,443				651,255				516,801
Other	908,906				892,812				2,966,952				2,690,987
Foreign source revenue	5,285,196				5,304,276				16,483,811				16,690,031
U.S.	1,050,446				831,326				3,482,612				2,018,836
Total	$	6,335,642			$	6,135,602			$	19,966,423			$	18,708,867

		May 31, 2020				August 31, 2019
Long-lived assets:
China		$	1,490,313			$	1,579,904
Mexico		393,079				418,641
Malaysia		223,618				154,386
Switzerland		219,290				158
Singapore		145,249				156,028
Taiwan		115,436				123,608
Vietnam		109,371				85,728
Hungary		100,568				85,809
Other		451,396				462,261
Long-lived assets related to foreign operations		3,248,320				3,066,523
U.S.		1,159,594				1,146,335
Total		$	4,407,914			$	4,212,858

Following is a summary of the Company’s restructuring, severance and related charges (in thousands):

	Three months ended								Nine months ended
	May 31, 2020(2)				May 31, 2019(3)				May 31, 2020(2)				May 31, 2019(3)
Employee severance and benefit costs	$	56,891			$	6,513			$	83,684			$	15,460
Lease costs	402				(50		)		6,870				(41		)
Asset write-off costs	6,253				(343		)		31,678				(3,555		)
Other costs	5,604				3,220				21,773				4,318
Total restructuring, severance and related charges(1)	$	69,150			$	9,340			$	144,005			$	16,182

(1)

Includes $23.7 million and $7.6 million recorded in the EMS segment, $29.3 million and $0.0 million recorded in the DMS segment and $16.2 million and $1.7 million of non-allocated charges for the three months ended May 31, 2020 and 2019, respectively. Includes $55.8 million and $12.3 million recorded in the EMS segment, $69.0 million and $2.1 million recorded in the DMS segment and $19.2 million and $1.8 million of non-allocated charges for the nine months

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ended May 31, 2020 and 2019, respectively. Except for asset write-off costs, all restructuring, severance and related charges are cash costs.

(2)

As the Company continues to optimize its cost structure and improve operational efficiencies, $52.3 million of employee severance and benefit costs was incurred in connection with a reduction in the worldwide workforce during the three and nine months ended May 31, 2020. The Company’s liability associated with the worldwide workforce reduction is $50.9 million as of May 31, 2020. The remaining amount primarily relates to the 2020 Restructuring Plan.

(3)	Primarily relates to the 2017 Restructuring Plan.

2020 Restructuring Plan

On September 20, 2019, the Company’s Board of Directors formally approved a restructuring plan to realign the Company’s global capacity support infrastructure, particularly in the Company’s mobility footprint in China, in order to optimize organizational effectiveness. This action includes headcount reductions and capacity realignment (the “2020 Restructuring Plan”). The 2020 Restructuring Plan reflects the Company’s intention only and restructuring decisions, and the timing of such decisions, at certain locations are still subject to consultation with the Company’s employees and their representatives.

The Company expects to recognize approximately $85.0 million in pre-tax restructuring and other related costs over the course of the Company’s fiscal year 2020. This information will be subject to the finalization of timetables for the transition of functions, consultation with employees and their representatives as well as the statutory severance requirements of the particular jurisdictions impacted, and the amount and timing of the actual charges may vary due to a variety of factors. The Company’s estimates for the charges discussed above exclude any potential income tax effects.

The table below summarizes the Company’s liability activity, primarily associated with the 2020 Restructuring Plan

(in thousands):

	Employee Severance and Benefit Costs				Lease Costs				Asset Write-off Costs				Other Related Costs				Total
Balance as of August 31, 2019(1)	$	3,162			$	1,980			$	—			$	789			$	5,931
Restructuring related charges	31,421				6,870				31,678				312				70,281
Asset write-off charge and other non-cash activity	(140		)		(5,639		)		(31,678		)		5				(37,452		)
Cash payments	(24,086		)		(739		)		—				(650		)		(25,475		)
Balance as of May 31, 2020	$	10,357			$	2,472			$	—			$	456			$	13,285

(1)	Balance as of August 31, 2019 primarily relates to the 2017 Restructuring Plan.

Effective Income Tax Rate

The U.S. federal statutory income tax rate and the Company's effective income tax rate are as follows:

	Three months ended						Nine months ended
	May 31, 2020			May 31, 2019			May 31, 2020			May 31, 2019
U.S. federal statutory income tax rate	21.0	%		21.0	%		21.0	%		21.0	%
Effective income tax rate	465.0	%		47.0	%		108.3	%		32.4	%

The effective income tax rate increased for the three months and nine months ended May 31, 2020, compared to the three months and nine months ended May 31, 2019, primarily due to: (i) decreased income for the three months and nine months ended May 31, 2020, driven in part by increased restructuring charges with minimal related tax benefit; (ii) a $21.2 million income tax expense associated with the re-measurement of deferred tax assets related to an extension of a non-U.S. tax incentive recorded during the three months ended May 31, 2020; and (iii) adjustments related to the Tax Cuts and Jobs Act of 2017 (the “Tax Act”) for the nine months ended May 31, 2019, including a $13.3 million income tax benefit recorded during the three months ended November 30, 2018.

The effective tax rate differed from the U.S. federal statutory rate of 21.0% during the three months and nine months ended May 31, 2020 and 2019, primarily due to: (i) losses in tax jurisdictions with existing valuation allowances; (ii) tax

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incentives granted to sites in Brazil, China, Malaysia, Singapore and Vietnam; (iii) a $21.2 million income tax expense associated with the re-measurement of deferred tax assets related to an extension of a non-U.S. tax incentive recorded during the three months ended May 31, 2020; and (iv) adjustments to amounts previously recorded for the Tax Act for the nine months ended May 31, 2019.

Earnings Per Share

The Company calculates its basic earnings per share by dividing net income attributable to the Company by the weighted average number of common shares 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 dilutive unvested restricted stock units and dilutive stock appreciation rights.

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 units are considered dilutive when the related performance criteria have been met assuming the end of the reporting period represents the end of the performance period. All potential shares of common stock are antidilutive in periods of net loss. Potential shares of common stock not included in the computation of earnings per share because their effect would have been antidilutive or because the performance criterion was not met were as follows (in thousands):

	Three months ended						Nine months ended
	May 31, 2020			May 31, 2019			May 31, 2020			May 31, 2019
Restricted stock units	3,717			1,345			3,379			1,338
Employee stock purchase plan	57			—			92			—
Stock appreciation rights	5			—			28			—

Dividends

The following table sets forth cash dividends declared by the Company to common stockholders during the nine months ended May 31, 2020 and 2019 (in thousands, except for per share data):

	Dividend Declaration Date		Dividend per Share				Total of Cash Dividends Declared				Date of Record for Dividend Payment		Dividend Cash Payment Date
Fiscal Year 2020:	October 17, 2019		$	0.08			$	12,647			November 15, 2019		December 2, 2019
	January 23, 2020		$	0.08			$	12,517			February 14, 2020		March 4, 2020
	April 15, 2020		$	0.08			$	12,452			May 15, 2020		June 3, 2020
Fiscal Year 2019:	October 18, 2018		$	0.08			$	13,226			November 15, 2018		December 3, 2018
	January 24, 2019		$	0.08			$	12,706			February 15, 2019		March 1, 2019
	April 18, 2019		$	0.08			$	12,681			May 15, 2019		June 3, 2019

During fiscal year 2018, the Company and Johnson & Johnson Medical Devices Companies (“JJMD”) entered into a Framework Agreement to form a strategic collaboration and expand its existing relationship. The strategic collaboration expands the Company’s medical device manufacturing portfolio, diversification and capabilities.

On February 25, 2019 and April 29, 2019, under the terms of the Framework Agreement, the Company completed the initial and second closings, respectively, of its acquisition of certain assets of JJMD. The aggregate purchase price paid for the initial and second closings was approximately $167.4 million in cash. For the initial and second closings, total assets acquired of $173.5 million and total liabilities assumed of $6.1 million were recorded at their estimated fair values as of the acquisition dates.

On September 30, 2019, under the terms of the Framework Agreement, the Company completed the third closing of its acquisition of certain assets of JJMD. The preliminary aggregate purchase price paid for the third closing was approximately $111.8 million in cash, which remains subject to certain post-closing adjustments based on conditions within the Framework

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Agreement. For the third closing, total assets acquired of $199.7 million, including $83.2 million in contract assets, $35.1 million in inventory and $70.4 million in goodwill, and total liabilities assumed of $87.9 million, including $73.5 million of pension obligations, were recorded at their estimated fair values as of the acquisition date. There were no intangible assets identified in this acquisition and the goodwill is primarily attributable to the assembled workforce. The majority of the goodwill is currently not expected to be deductible for income tax purposes.

The acquisition of the JJMD assets have been accounted for as separate business combinations for each closing using the acquisition method of accounting. The Company is currently evaluating the fair values of the assets and liabilities related to the third closing of these business combinations. 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 the Company’s condensed consolidated financial results beginning on February 25, 2019 for the initial closing, April 29, 2019 for the second closing and September 30, 2019 for the third closing. The Company believes it is impracticable to provide pro forma information for the acquisition of the JJMD assets.

Fair Value Measurements on a Recurring Basis

The following table presents the fair value of the Company's financial assets and liabilities measured at fair value by hierarchy level on a recurring basis as of the periods indicated:

(in thousands)		Fair Value Hierarchy		May 31, 2020				August 31, 2019
Assets:
Cash and cash equivalents:
Cash equivalents		Level 1	(1)	$	38,259			$	27,804
Prepaid expenses and other current assets:
Short-term investments		Level 1		16,860				14,088
Forward foreign exchange contracts:
Derivatives designated as hedging instruments (Note 9)		Level 2	(2)	6,277				904
Derivatives not designated as hedging instruments (Note 9)		Level 2	(2)	7,210				6,878
Other assets:
Senior Non-Convertible Preferred Stock		Level 3	(3)	14,400				33,102
Liabilities:
Accrued expenses:
Forward foreign exchange contracts:
Derivatives designated as hedging instruments (Note 9)		Level 2	(2)	$	4,403			$	15,999
Derivatives not designated as hedging instruments (Note 9)		Level 2	(2)	38,004				55,391
Interest rate swaps:
Derivatives designated as hedging instruments (Note 9)		Level 2	(4)	3,357				5,918
Forward interest rate swaps:
Derivatives designated as hedging instruments (Note 9)		Level 2	(4)	50,923				—
Other liabilities:
Forward interest rate swaps:
Derivatives designated as hedging instruments (Note 9)		Level 2	(4)	—				35,045

(1)	Consist of investments that are readily convertible to cash with original maturities of 90 days or less.

(2)	The Company’s forward foreign exchange contracts are measured on a recurring basis at fair value, based on foreign currency spot rates and forward rates quoted by banks or foreign currency dealers.

(3)	The Senior Non-Convertible Preferred Stock is valued each reporting period using unobservable inputs based on a discounted cash flow model and is classified as an available for sale debt security with any unrealized loss recorded to AOCI. As of May 31, 2020 and August 31, 2019, the unobservable inputs have an immaterial impact on the fair value calculation.

(4)	Fair value measurements are based on the contractual terms of the derivatives and use observable market-based inputs. The interest rate swaps are valued using a discounted cash flow analysis on the expected cash flows of each derivative using observable inputs including interest rate curves and credit spreads.

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Assets Held for Sale

The following table presents the assets held for sale (in thousands):

		May 31, 2020				August 31, 2019
(in thousands)		Carrying Amount				Carrying Amount
Assets held for sale (1)		$	30,120			$	—

(1)	The fair value of assets held for sale exceeds the carrying value. As a result, no impairment has been recorded for assets held for sale as of May 31, 2020.

Fair Value of Financial Instruments

The carrying amounts of cash and cash equivalents, trade accounts receivable, prepaid expenses and other current assets, accounts payable and accrued expenses approximate fair value because of the short-term nature of these financial instruments. The carrying amounts of borrowings under credit facilities and under loans approximates fair value as interest rates on these instruments approximates current market rates.

Notes payable and long-term debt is carried at amortized cost; however, the Company estimates the fair values of notes payable and long-term debt for disclosure purposes. The following table presents the carrying amounts and fair values of the Company's notes payable and long-term debt, by hierarchy level as of the periods indicated:

				May 31, 2020								August 31, 2019
(in thousands)		Fair Value Hierarchy		Carrying Amount				Fair Value				Carrying Amount				Fair Value
Notes payable and long-term debt: (Note 5)
5.625% Senior Notes		Level 2	(1)	$	399,555			$	408,876			$	398,886			$	416,000
4.700% Senior Notes		Level 2	(1)	498,496				527,065				498,004				525,890
4.900% Senior Notes		Level 3	(2)	299,239				317,323				299,057				318,704
3.950% Senior Notes		Level 2	(1)	495,286				515,755				494,825				509,845
3.600% Senior Notes		Level 2	(1)	494,616				491,515				—				—

(1)	The fair value estimates are based upon observable market data.

(2)	This fair value estimate is based on the Company’s indicative borrowing cost derived from discounted cash flows.

The Company is party to certain lawsuits in the ordinary course of business. The Company does not believe that these proceedings, individually or in the aggregate, will have a material adverse effect on the Company’s financial position, results of operations or cash flows.

Recently Adopted Accounting Guidance

During fiscal year 2016, the FASB issued a new accounting standard revising lease accounting, which requires the Company to recognize right-of-use assets and lease liabilities on the Consolidated Balance Sheet and disclose key information regarding leasing arrangements. The accounting standard became effective for the Company in the first quarter of fiscal year 2020. Refer to Note 4 - “Leases” to the Condensed Consolidated Financial Statements for further details.

During fiscal year 2017, the FASB issued a new accounting standard to improve the financial reporting of hedging relationships to better portray the economic results of an entity’s risk management activities by simplifying the application of hedge accounting and improving the related disclosures in its financial statements. This guidance became effective for the Company beginning in the first quarter of fiscal year 2020. The guidance was applied using a modified retrospective approach.

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The adoption of this standard did not have a material impact on the Company’s Consolidated Financial Statements; however, the impact on future periods will depend on the facts and circumstances of future transactions.

Recently Issued Accounting Guidance

During fiscal year 2016, the FASB issued an accounting standard, which replaces the existing incurred loss impairment methodology with a methodology that reflects expected credit losses and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. This guidance is effective for the Company beginning in the first quarter of fiscal year 2021. This guidance must be applied using a modified retrospective or prospective transition method, depending on the area covered by this accounting standard. The Company is currently assessing the impact this new standard may have on its Consolidated Financial Statements.

During fiscal year 2018, the FASB issued a new accounting standard which aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software. This guidance is effective for the Company beginning in the first quarter of fiscal year 2021. The Company is currently assessing the impact this new standard may have on its Consolidated Financial Statements.

During the third quarter of fiscal year 2020, the FASB issued a new accounting standard which provides guidance in accounting for contracts, hedging relationships, and other transactions that reference U.S. dollar LIBOR or another reference rate expected to be discontinued because of reference rate reform. The amendments in this update are elective and were effective for the Company immediately upon issuance. The Company is currently assessing the impact of the transition from U.S. dollar LIBOR to alternative reference rates but does not expect this new standard to have a material impact on its Consolidated Financial Statements.

Recently issued accounting guidance not discussed above is not applicable or did not have, or is not expected to have, a material impact to the Company.

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(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 May 31, 2020 and November 30, 2019, the increase in days in accounts receivable from the prior sequential quarter was primarily due to an increase in accounts receivable, primarily driven by higher sales and timing of collections. During the three months ended February 29, 2020, the decrease was primarily driven by lower sales and the timing of collections in the second quarter.

(4)

Days in inventory is calculated as inventory and contract assets divided by cost of revenue multiplied by 90 days. During the three months ended May 31, 2020, the decrease was primarily due to increased sales activity during the quarter. During the three months ended February 29, 2020, the increase was primarily driven by idle capacity and supply chain constraints, largely in China due to COVID-19.

(5)	Days in accounts payable is calculated as accounts payable divided by cost of revenue multiplied by 90 days.

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(1)

Includes $23.7 million and $7.6 million recorded in the EMS segment, $29.3 million and $0.0 million recorded in the DMS segment and $16.2 million and $1.7 million of non-allocated charges for the three months ended May 31, 2020 and 2019, respectively. Includes $55.8 million and $12.3 million recorded in the EMS segment, $69.0 million and $2.1 million recorded in the DMS segment and $19.2 million and $1.8 million of non-allocated charges for the nine months ended May 31, 2020 and 2019, respectively. Except for asset write-off costs, all restructuring, severance and related charges are cash costs.

(2)

As the Company continues to optimize its cost structure and improve operational efficiencies, $52.3 million of employee severance and benefit costs was incurred in connection with a reduction in the worldwide workforce during the three and nine months ended May 31, 2020. The Company’s liability associated with the worldwide workforce reduction is $50.9 million as of May 31, 2020. The remaining amount primarily relates to the 2020 Restructuring Plan.

(3)	Primarily relates to the 2017 Restructuring Plan.

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(1)	As the Company continues to optimize its cost structure and improve operational efficiencies, $52.3 million of employee severance and benefit costs was incurred in connection with a reduction in the worldwide workforce during the three and nine months ended May 31, 2020.

(2)	Charges relate to accounts receivable and inventory charges for certain distressed customers primarily in the renewable energy sector.

(3)

Following the adoption of Accounting Standards Update 2017-07, Compensation - Retirement Benefits (Topic 715) (“ASU 2017-07”), pension service cost is recognized in cost of revenue and all other components of net periodic benefit cost, including return on plan assets, are presented in other expense.  We are reclassifying the pension components in other expense to core operating income as we assess operating performance, inclusive of all components of net periodic benefit cost, with the related revenue. There is no impact to core earnings or diluted core earnings per share for this adjustment.

(4)	Charges for the three and nine months ended May 31, 2020, relate to a flood that impacted our facility in Huangpu, China. Charges, net of insurance proceeds of $2.9 million for the nine months ended May 31, 2019, relate to business interruptions and asset impairment costs associated with damage from Hurricane Maria, which impacted our operations in Cayey, Puerto Rico.

(5)	Charges related to our strategic collaboration with Johnson & Johnson Medical Devices Companies (“JJMD”).

(6)	The nine months ended May 31, 2019 includes a $13.3 million income tax benefit for the effects of the Tax Act recorded during the three months ended November 30, 2018.

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(1)

In fiscal year 2019, the adoption of Accounting Standards Update ("ASU") 2016-15, "Classification of Certain Cash Receipts and Cash Payments" resulted in a reclassification of cash flows from operating activities to investing activities for cash receipts for the deferred purchase price receivable on asset-backed securitization transactions. The adoption of this standard does not reflect a change in the underlying business or activities. The effects of this change are applied retrospectively to all prior periods.

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(1)	On January 15, 2020, we issued $500.0 million of publicly registered 3.600% Senior Notes due 2030 (the “3.600% Senior Notes”). The net proceeds from the offering were used for the repayment of term loan indebtedness.

(2)

On January 22, 2020, we entered into a senior unsecured credit agreement which provides for: (i) a Revolving Credit Facility in the initial amount of $2.7 billion, of which $700.0 million expires on January 22, 2023 and $2.0 billion expires on January 22, 2025 and (ii) a $300.0 million Term Loan Facility which expires on January 22, 2025, (collectively the “Credit Facility”). Interest and fees on the Credit Facility advances are based on our non-credit enhanced long-term senior unsecured debt rating as determined by Standard & Poor’s Ratings Service, Moody’s Investors Service and Fitch Ratings. In connection with our entry into the Credit Facility, we terminated our amended and restated five-year credit agreement dated November 8, 2017 and the credit agreement dated August 24, 2018.

(3)

On April 24, 2020, we entered into an unsecured 364-day revolving credit agreement up to an initial aggregate amount of $375.0 million, which was increased to $425.0 million on May 29, 2020 (the “364-Day Revolving Credit Agreement”). The 364-Day Revolving Credit Agreement expires on April 23, 2021. Interest and fees on the 364-Day Revolving Credit Agreement advances are based on our non-credit enhanced long-term senior unsecured debt rating as determined by Standard & Poor’s Ratings Service, Moody’s Investors Service and Fitch Ratings.

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(4)	As of May 31, 2020, we had $3.7 billion in available unused borrowing capacity under our revolving credit facilities. The Revolving Credit Facility under the Credit Facility acts as the back-up facility for commercial paper outstanding, if any. We have a borrowing capacity of up to $1.8 billion under our commercial paper program.

(1)	Maximum amount available at any one time.

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(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 each year through December 5, 2025 unless either party provides 30 days notice of termination.

(3)	The program will automatically extend for one year at each expiration date unless either party provides 10 days notice of termination.

(4)	Any party may elect to terminate the agreement upon 30 days prior notice.

(5)	The program will be automatically extended through January 25, 2023 unless either party provides 30 days notice of termination.

(6)	Any party may elect to terminate the agreement upon 15 days prior notice.

(7)	The program will be automatically extended through August 10, 2023 unless either party provides 30 days notice of termination.

(8)	The program will be automatically extended through August 21, 2023 unless either party provides 30 days notice of termination.

(9)	The program will be automatically extended each year through December 5, 2024 unless either party provides 30 days notice of termination.

(10)	The program will be automatically extended each year through April 11, 2025 unless either party provides 30 days notice of termination.

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(1)	Represents the estimated company contributions to the funded Switzerland plan during fiscal year 2020. These future payments are not recorded on the Condensed Consolidated Balance Sheets but will be recorded as incurred. Refer to Note 8 - Postretirement and other Employee Benefits for further discussion of the assumed postretirement benefit obligation.

(2)	The amount payable after five years includes $75.1 million in purchase requirements at the end of the respective leases.

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(1)	The purchases include amounts that are attributable to shares surrendered to us by employees to satisfy, in connection with the vesting of restricted stock unit awards and the exercise of stock appreciation rights, their tax withholding obligations.

(2)	In September 2019, our Board of Directors authorized the repurchase of up to $600.0 million of our common stock as publicly announced in a press release on September 24, 2019 (the “2020 Share Repurchase Program”).

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